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REG - Antofagasta PLC - Preliminary Results for the full year to 31.12.21

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RNS Number : 3988C  Antofagasta PLC  22 February 2022

 

NEWS RELEASE, 22 FEBRUARY 2022

 

PRELIMINARY RESULTS FOR THE

YEAR ENDED 31 DECEMBER 2021

Strong EBITDA and balance sheet

 

Antofagasta plc CEO Iván Arriagada said: "Antofagasta ended the year on a
strong footing, generating revenues of $7.5 billion, reflecting the high
copper prices during the year, and increasing our EBITDA by 77% to a record of
$4.8 billion, yielding an EBITDA margin of 65%. These results illustrate our
performance as a reliable and responsible copper producer with the operational
and financial strength and balance sheet to deliver on our promises.

"Our mines and plants performed as planned and we can be proud of our
achievements, regardless of the challenges of the year including COVID-19 and
continued drought conditions in central Chile. Thanks to our team's commitment
and motivation, we have been able to continue operating safely while
contributing to the national economy in Chile and supporting local
communities, socially and economically.

"We have made excellent progress on unlocking the embedded growth options in
our portfolio with identified key brownfield developments and incremental
growth within our asset portfolio. The expansion of Los Pelambres is now 68%
complete and the desalination plant remains on track for completion in H2
2022.   The Chloride Leach project at Zaldívar was completed in January
2022 and at Centinela, pre-stripping advanced over the year at the Esperanza
Sur pit ready for mining ore for processing in the first half of 2022.

"Climate change remains a key focus for Antofagasta, and we have expanded our
capital allocation framework to include climate risk factors and have set
environmental commitments to significantly reduce our continental water
consumption and emissions by 2025. By then around 90% of our water use will be
sea or recirculated water and our GHG emissions will have reduced by our
target of 30%.  We also have clear social commitments to our workers and our
communities to make our mines safer and greener

"Following the successful performance of the Company and considering our
robust balance sheet and the continued strong copper price, the Board has
declared a final dividend of 118.9 cents per share. This brings the total
dividend for the year to 142.5 cents per share, equivalent to a pay-out ratio
of 100% and an increase of 161% on 2020.

HIGHLIGHTS

Financial performance

·      Revenue for the full year was $7,470 million, 46% higher than in
2020 reflecting a 47% increase in copper realised prices

·      EBITDA((1)) was $4,836 million, 77% higher than the previous year
on higher revenue, partially offset by higher operating costs

·      EBITDA margin((2)) increased to 64.7% from 53.4% in 2020

·      Cost and Competitiveness Programme (CCP) generated benefits of
$131 million, above the original target of $100 million

·      Profit before tax including exceptional items increased by 146%
to $3,477 million

·      Cash flow from operations was $4,508 million, 85% higher than in
2020 due to higher EBITDA

·      Strong balance sheet with net cash of $540 million at the end of
2021, an improvement of $622 million from the net debt position at the end of
2020

·      Capital expenditure increased to $1,778 million((3)), $470
million higher than in 2020 with increased capital expenditure on the Los
Pelambres Expansion project, Centinela's Esperanza Sur pit and higher mine
development expenditure at Centinela

·      Underlying earnings per share from continuing operations and
excluding exceptional items((1)) of 142.5 cents, an increase of 161% compared
to 2020 with higher EBITDA partly offset by higher non-controlling interests
and tax

·      Exceptional items after tax for the year were a cost of $87
million, following the impairment of the Company's holding in Twin Metals and
the recognition of previously unrecognised deferred tax assets

·      Earnings per share from continuing and discontinued operations
including exceptional items were 130.9 cents, 155% higher than in 2020

·      Final dividend of 118.9 cents per share declared, bringing the
total dividend for the year to 142.5 cents per share, equal to 100% of
underlying earnings per share

 

Operating performance (as previously announced)

·      Safety remains our top priority. Regrettably there was a fatal
accident at Los Pelambres involving a contractor in July 2021. A full
investigation was carried out and all lessons learned have now been fully
implemented

·      Copper production for the full year was 721,500 tonnes, 1.7%
lower than last year mainly on expected higher grades at Centinela
Concentrates and record plant throughput, offset by expected lower grades and
lower throughput at Los Pelambres due to water supply restrictions resulting
from the continuing drought affecting central Chile

·      Gold production was above guidance at 252,200 ounces, 23.6%
higher than in 2020 on higher grades at Centinela

·      Molybdenum production in 2021 was 10,500 tonnes, 16.7% lower than
in 2020 and within guidance

·      Cash costs before by-product credits((1)) for the full year were
$1.79/lb, 23c/lb higher than last year due to the stronger Chilean peso (4%),
higher input costs, especially energy and diesel prices, and lower production

·      Net cash costs((1)) for 2021 were $1.20/lb, below guidance and
5.3% higher than in 2020 due to higher cash costs before by-product credits,
partially offset by the 17c/lb increase in by-products credits on increased
gold production and realised molybdenum prices

 

2022 Guidance (as previously announced)

·      Group production in 2022 is expected to be 660-690,000 tonnes of
copper, 170-190,000 ounces of gold and 8,500-10,000 tonnes of molybdenum. The
copper and gold production reflect lower expected grades at Centinela
Concentrates and the temporarily reduced throughput at Los Pelambres because
of the continued drought

·      Cash costs in 2022 before and after by-product credits are
expected to be $2.00/lb and $1.55/lb respectively reflecting increased input
costs, especially sulphuric acid at our cathode operations, and lower
production at the Group's two lowest cost operations, namely Los Pelambres,
which is temporarily limited by water supply restrictions, and lower grades at
Centinela Concentrates, partly offset by CCP savings. By-product credits are
also expected to decrease as gold and molybdenum production falls

·      Capital expenditure in 2022 is expected to be $1.7-1.9
billion((3)) as sustaining and mine development expenditure increase for the
year to approximately $1.0 billion, and development expenditure continues on
the Los Pelambres Expansion project and at Centinela, including the ongoing
study and review work on the second concentrator. The final estimated capital
expenditure to complete the Los Pelambres Expansion remains under review due
primarily to COVID-19 which has impacted input and logistics costs, and
project workers' absenteeism

 

 

 YEAR ENDING 31 DECEMBER                                                      2021     2020     %
 Revenue                                                               $m     7,470.1  5,129.3  45.6
 EBITDA((1))                                                           $m     4,836.2  2,739.2  76.6
 EBITDA margin((1, 2))                                                 %      64.7%    53.4%    21.2
 Profit before tax (including exceptional items)                       $m     3,477.1  1,413.1  146.1
 Underlying earnings per share((1)) (continuing operations excluding   cents  142.5    54.7     160.5
 exceptional items)
 Earnings per share (continuing and discontinued operations including  cents  130.9    51.3     155.2
 exceptional items)
 Dividend per share                                                    cents  142.5    54.7     160.5
 Cash flow from operations (continuing and discontinued)               $m     4,507.7  2,431.1  85.4
 Capital expenditure((3))                                              $m     1,777.5  1,307.4  36.0
 Net (cash)/debt at period end((1))                                    $m     (540.5)  82.0     -
 Average realised copper price                                         $/lb   4.37     2.98     46.6
 Copper sales                                                          kt     725.6    738.5    (1.7)
 Gold sales                                                            koz    244.7    199.6    22.6
 Molybdenum sales                                                      kt     10.4     12.5     (16.8)
 Cash costs before by-product credits((1))                             $/lb   1.79     1.56     14.7
 Net cash costs((1))                                                   $/lb   1.20     1.14     5.3

Note: The financial results are unaudited and prepared in accordance with
UK-adopted International Accounting Standards, unless otherwise noted below.

(1)     Non IFRS measures. Refer to the alternative performance measures
on page 64 of this preliminary results announcement

(2)     Calculated as EBITDA/Revenue. If Associates and JVs revenue is
included the EBITDA margin was 61.1% in 2021 and 50.3% in 2020.

(3)     On a cash basis

 

A recording and copy of the 2021 Full Year Results presentation is available
for download from the Company's website www.antofagasta.co.uk
(http://www.antofagasta.co.uk) .

 

There will be a Q&A video conference call at 13:30pm GMT today hosted by
Iván Arriagada - Chief Executive Officer, Mauricio Ortiz - Chief Financial
Officer and René Aguilar, Vice President - Corporate Affairs and
Sustainability.  Participants can join the conference call here
(https://us02web.zoom.us/webinar/register/WN_F7qmP-TxRWioCy-WzvnPeA) .

 

 

 Investors - London                                                                  Media - London
 Andrew Lindsay      alindsay@antofagasta.co.uk (mailto:alindsay@antofagasta.co.uk)  Carole Cable      antofagasta@brunswickgroup.com (mailto:antofagasta@brunswickgroup.com)
 Telephone           +44 20 7808 0988                                                Telephone         +44 20 7404 5959
 Rosario Orchard     rorchard@antofagasta.co.uk (mailto:rorchard@antofagasta.co.uk)
 Telephone           +44 20 7808 0988                                                Media - Santiago
                                                                                     Pablo Orozco      porozco@aminerals.cl (mailto:porozco@aminerals.cl)
                                                                                     Carolina Pica     cpica@aminerals.cl (mailto:cpica@aminerals.cl)
                                                                                     Telephone         +56 2 2798 7000

 

Register on our website to receive our email alerts
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     Twitter (https://twitter.com/AntofagastaPLC)      LinkedIn (https://www.linkedin.com/company/antofagasta-plc)

 

2021 FINANCIAL HIGHLIGHTS

Revenue in 2021 was $7,470 million, 46% higher than in 2020 reflecting the
higher copper and molybdenum realised prices, 47% and 98% respectively, and
higher gold sales volumes, partially offset by lower copper and molybdenum
sales volumes.

EBITDA increased by 77% to $4,836 million on higher revenue, partially offset
by higher operating costs, which increased by 10%.

Profit before tax including exceptional items was $3,477.1 million, 146%
higher than in 2020 reflecting the higher EBITDA and net finance income.

Earnings per share from continuing operations excluding exceptional items for
the year were 142.5 cents, an increase of 87.8 cents or 161% compared with
2020 on higher EBITDA partly offset by higher non-controlling interests and
tax.

Earnings per share from continuing operations including exceptional items for
the year were 130.9 cents, reflecting the impact of exceptional losses of 11.6
cents, and were an increase of 155% compared to 2020.

Cash flow from continuing operations was $4,507 million, a $2,076 million
increase compared to 2020 due to higher EBITDA.

 

SUSTAINABILITY

Safety and health

Antofagasta prioritises the safety and wellbeing of its people.

We deeply regret that a contractor lost his life in July 2021 at Los Pelambres
while operating a bulldozer in the open pit. We conducted a thorough
investigation into the tragic death, communicated these learnings across the
organisation and have incorporated the findings into our safety management
system.

Given that our safety management system prioritises eliminating fatalities,
the Group focus is on high potential incidents (HPIs), and we are using this
measure as our key lead indicator of safety performance. In 2021, the Group
recorded 65 HPIs, 24% less than the previous year, with improvements seen in
both our Mining and Transport divisions.

The Group's Lost Time Injury Frequency Rate (LTIFR) was 1.34 per million hours
worked, higher than in 2020, mainly due to an increase in low-potential
incidents at our operations, significantly increased construction activity at
our development projects, and routine train operation and maintenance tasks in
our Transport division.

COVID-19

The control of COVID-19 infection at our operations continued to be a priority
during 2021, especially in the first half of the year when the second wave of
infections peaked in Chile. We have focused on encouraging both vaccination
and adherence to preventive controls among employees and contractors.

In coordination with the authorities, we offered vaccinations at our mine
sites. By the end of the year, at least 97% of our employees, contractors and
sub-contractors were fully vaccinated, a higher rate than the national
average.

Communities

Antofagasta seeks to build sustainable long-term relations with the
communities near its operations, anchored in proactive and transparent
dialogue. The benefits of this engagement for both the communities and the
Group are measured to assess its impact. The Company has implemented a
bottom-up approach to ensure that local communities participate in the
selection of our social investment projects through our Somos Choapa (We are
Choapa) and Diálogos para el Desarrollo (Dialogues for Development)
engagement mechanisms in the Choapa Province and the Antofagasta Region,
respectively. The initiatives implemented are focused on education,
digitalisation, health, water, entrepreneurship, local suppliers, sports and
civil infrastructure. In 2021 $48 million were invested in community
programmes.

 

Some of the programmes implemented in 2021 were:

·    Enred (Connected) programme was launched to provide rural communities
in the surrounding communities with the infrastructure, connectivity, tools
and skills to take part in the Digital Age.

·    In the Antofagasta Region, the Company actively participates in the
Antofagasta Mining Cluster, a public-private alliance that seeks to foster the
Region's economic development. The efforts are focused on human capital
creation and the development of innovative local suppliers.

·    In 2021 the scholarship programme supported 394 young people from the
Choapa Province undertaking technical and/or university studies.

·    Los Pelambres actively partners with local communities, the Regional
Government and local universities to address problems of water scarcity in the
region. Los Pelambres has been supporting local communities with training and
technical assistance for the design, construction and maintenance of
infrastructure of water systems and working with the government and the
government agency CORFO, focused on studying and implementing solutions for
both the short term and the long term.

The Company set-up a Covid Support Fund in 2020 whose focus is on healthcare
and prevention, economic reactivation and relief measures for local
communities, in close coordination with local authorities. Similar to our
regular social programmes, many initiatives were implemented jointly with
local foundations. Funding was increased in 2021 by a further $6 million,
doubling the original amount committed in 2020.

Diversity and inclusion

The Group's Diversity and Inclusion Strategy seeks to increase the
participation and retention of women in the workforce. This is reflected in
the recruitment and selection strategies, the promotion of inclusive
workspaces and the zero-tolerance policy on sexual harassment. In 2021, 98
female employees took part in career development programmes and women
represented 82% of the 197 new apprentices.

 

During the year, Antofagasta increased the proportion of women in its
workforce to 17.4%, exceeding the target one year early, of doubling the
participation of women by the end of 2022 compared to the baseline of 8.6% at
the beginning of 2018.

Climate Change and emission targets

At Antofagasta, we see climate change as one of the greatest challenges facing
the world today and are committed to being part of the solution. As a copper
producer, we have a clear role to play in supplying a metal that is a critical
input for so many low-carbon technologies - from electromobility to the
generation of renewable energy - where we expect demand to continue to
increase.

After meeting the 2018-2022 GHG emissions reduction target in 2020, the
Company announced two new greenhouse gas (GHG) reduction targets as part of
its Climate Change Strategy and its wider commitment to operate sustainably as
a leading copper producer.

The first target is to reduce the Company's Scope 1 and Scope 2 GHG emissions
by 30%, or 730,000 tonnes of CO(2)e by 2025, relative to 2020.

The second, longer-term, target is to achieve carbon neutrality by 2050, in
line with Chile's own national target, or earlier if suitable technologies are
developed.

These targets are supported by the gradual conversion of our operations to
electricity generated solely from renewable sources, which we will complete in
2022. At the same time, we are working to reduce and, ultimately, eliminate
the use of diesel at our mining operations through initiatives that include an
Electromobility Plan and a portfolio of energy efficiency initiatives.

In 2019, we committed to implementing the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD) and, having published a TCFD
Progress Report in September, we are reporting against the recommendations in
this year's Annual Report. The TCFD framework has already proved useful in
helping us integrate risk management for climate change into our planning
cycles but, above all, it serves as a transparent and credible way of
informing stakeholders about the expected impact of different climate
scenarios on our business.

Water

One of the clear impacts of climate change is the 12-year drought in central
Chile, including the Choapa Valley where our Los Pelambres operation is
located in one of the most impacted areas.  Several years ago, we took the
decision to build a sea water desalination plant for Los Pelambres and the
first stage of this project, with an output of 400 litres per second, is due
to start operation in the second half of 2022. We are also planning to double
its capacity as soon as the necessary permitting is obtained, and we expect
the plant will be operating at its expanded capacity in 2025.

Our Centinela and Antucoya operations in the north of Chile already use sea
water almost exclusively. As a result, we expect raw or desalinated seawater
and reused or recycled water to account for 90% of the operational water use
of all our mining operations by 2025.

In 2018, Zaldívar submitted an Environmental Impact Assessment (EIA), which
included an application to extend its water permit from 2025 to 2031 and the
mining lease. This has involved government agencies reviewing the application
and a consultation process with the indigenous community, led by the
environmental authority. The final stages of the review are expected to be
completed in H1 2022.

If the relevant permits are not extended, this is likely to be considered as
an indicator of a potential impairment, requiring a full impairment assessment
to be carried out.

Zaldívar's updated mine life now extends to 2036. Looking beyond this date,
field work and studies are underway on further extending the life of the mine
by exploiting the primary sulphide ore body that lies below the current ore
reserves. Water planning beyond the extension to 2031 is being evaluated as
part of these studies.

 

PRODUCTION AND CASH COSTS

During the year, copper production was 721,500 tonnes, 1.7% lower compared to
2020, mainly on expected higher grades at Centinela Concentrates and record
plant throughput, offset by expected lower grades and lower throughput at Los
Pelambres due to water supply restrictions resulting from the continuing
drought in central Chile.

Gold production was 252,200 ounces, 23.6% higher than in 2020 on expected
higher grades at Centinela.

Molybdenum production was 10,500 tonnes, 16.7% lower compared to 2020.

The Transport division transported 6.7 million tonnes during 2021, 4.0% higher
than in 2020.

Cash costs before by-product credits were $1.79/lb, 14.7% higher than last
year due the stronger Chilean peso (4%), higher energy and diesel prices, and
lower production. Net cash costs for the full year were $1.20/lb, below
guidance and 5.3% higher than in 2020 due to higher cash costs before
by-product credits partially offset by the 17c/lb increase in by-products
credits on increased gold production and realised molybdenum price.

 

COST AND COMPETITIVENESS PROGRAMME

The Group's Cost and Competitiveness Programme outperformed the target of $100
million generating benefits of $131 million during the year, of which $72
million reflected costs savings and $59 million reflected the value of
productivity improvements.

The Group has built a portfolio of initiatives focused on reducing cash
expenditure by optimising and negotiating third party services and increasing
productivity in terms of greater throughputs and recoveries. These initiatives
help the Group mitigate cost pressures, particularly this year, with the
temporary impact of reduced production and increases in industry-wide input
prices.

 

EXPLORATION AND EVALUATION COSTS

Exploration and evaluation costs increased by $18 million to $103 million,
mainly as a result of a higher level of activity particularly on exploration
in Chile.

 

NET FINANCE EXPENSE

Net finance income for the year was $16 million compared to a net financial
expense of $103 million in 2020. This was mainly due to the foreign exchange
impact of the retranslation of Chilean peso denominated assets and
liabilities, the decrease in the carrying value of provisions and a
corresponding credit recognised in other finance items.

 

TAXATION

The effective tax rate for the period was 36.5% before exceptional items and
35.7% after exceptional items, which compares with 36.6% and 37.3%
respectively in 2020.

The income tax expense for the year excluding exceptional items was $1,333
million, an increase of 144% as a result of higher profits before tax. Income
tax paid during the year was $777 million compared to $320 million in 2020, a
143% increase.

 

EXCEPTIONAL ITEMS

In January 2022, the US federal government cancelled two of Twin Metals's
mining leases overturning a previous decision in 2019 to renew the leases,
which form a significant proportion of the mineral resources contained within
Twin Metals's current project plan. Twin Metals believes it has a valid legal
right to the mining leases and a strong case to defend its legal rights.
Although the Group intends to pursue validation of those rights, considering
the time and uncertainty related to any legal action to challenge the
government decisions, it has been decided to fully impair the $178 million
carrying value of the project.

During 2021 there was an exceptional item of $91 million which reflects the
recognition of a deferred tax asset at Antucoya, due to the increased
consensus copper price forecasts resulting in higher forecast taxable profits.

 

CAPITAL EXPENDITURE AND DEPRECIATION & AMORTISATION

Capital expenditure in 2021 was $1,778 million, including $336 million of
(mining) sustaining capital expenditure, $503 million mine development and
$883 million growth expenditure. This was an increase of $470 million on 2020
with increased expenditure on the Los Pelambres Expansion project and
Centinela's Esperanza Sur pit, and higher mine development expenditure at
Centinela. Further information is included in the Review of Operations below.

Depreciation and amortisation was $1,079 million, an increase of $30 million
compared to 2020.

 

NET DEBT

Net cash was $540 million at the end of the period, $622 million higher than
at the end of 2020 as a result of the higher EBITDA, with $634 million of net
borrowings repaid during the period.

 

DIVIDENDS

The Board has declared a final dividend for 2021 of 118.9 cents per share,
which together with the interim dividend of 23.6 cents per share amounts to a
total dividend of 142.5 cents per share. This is equal to a 100% pay-out ratio
of underlying net earnings and is consistent with the Company's dividend
policy.

PROPOSED MINING ROYALTY

The Chilean lower house of Congress approved a new mining royalty in May,
which is now being debated in the Senate. The Senate has not been restricted
to the specific terms of the proposal presented by the lower house and it
received evidence from a much broader base of interested parties including
academics and mining industry representatives.

In January 2022 the Senate Mining and Energy Committee published its proposal
for the new mining royalty which was less onerous than the original proposal
made by the lower house. This proposal will be debated in the Senate before
returning to the lower house and proceeding through several further
legislative steps that are required before a final bill is approved by both
houses.

 

CONSTITUTIONAL CONVENTION

A Constitutional Convention was elected in May 2021 and has until July 2022 to
develop a new constitutional text. The new constitution will then be put to a
national referendum for approval or rejection.

 

MINERAL RESOURCES

The Company has discovered a significant greenfield manto type deposit in the
coastal belt of the Antofagasta Region. The initial inferred resource of the
Cachorro deposit is 142 million tonnes, with a copper grade of 1.2%, and
represents just part of the potential resource. The resource is located near
existing infrastructure. Further drilling will be carried out during 2022.

 

CUPROCHLOR-T®

During 2021, we continued with a large-scale pilot programme to validate our
in-house patented primary sulphides leaching technology (Cuprochlor-T®). We
conducted industrial-scale trials using a 40,000-tonne heap at Centinela. The
results were consistent with previous test work, giving recoveries of 70%
after approximately 200 days.

This new technology will potentially unlock value from previously uneconomic
mineral resources. It could bring forward the profitable processing of ore
otherwise scheduled to be mined in many years' time or that was previously
considered to be uneconomic.

 

REKO DIQ PROJECT'S ARBITRATION

In July 2019 the World Bank Group's International Centre for Settlement of
Investment Disputes (ICSID) awarded $5.8 billion in damages (compensation
and accumulated interest as at the date of the award), plus costs and
post-award interest to Tethyan Copper Company Pty Limited (Tethyan), a joint
venture held equally by the Company and Barrick Gold Corporation, in relation
to an arbitration claim filed against the Islamic Republic of Pakistan
(Pakistan) following the unlawful denial of a mining lease for the Reko Diq
project in Pakistan in 2011.

In November 2019, Pakistan requested that ICSID annul the award. In March
2020, ICSID appointed a committee to consider Pakistan's request for
annulment and a hearing on Pakistan's annulment application took place in May
2021. The committee is expected to issue a decision on Pakistan's annulment
application in the coming months.

In March 2021, Pakistan applied to ICSID for revision of the award and in
April the ICSID tribunal that issued the award was reconstituted to consider
Pakistan's revision application. Tethyan has filed an application to dismiss
Pakistan's revision application as being manifestly meritless.

Tethyan is permitted to enforce 50% of the award plus accrued interest on the
condition that any amounts collected through enforcement of the award must be
put into escrow and returned if the award is annulled or if Pakistan's
revision application is successful. Tethyan continues to take steps to enforce
the award in accordance with these conditions.

The proceeds of the award will only be recognised in Antofagasta's financial
statements once they are received by the Company.

 

FUTURE GROWTH

The Group has a pipeline of embedded growth projects which it is currently
advancing through a disciplined process of project evaluation making full use
of its significant mineral resource base.

During 2021, development of the Los Pelambres Expansion project was impacted
by COVID-19 and construction at the concentrator site was temporarily
suspended in May. Construction of the desalination plant continued according
to plan.

Following the delay in 2020 to the start of construction of the Esperanza Sur
pit and the Zaldívar Chloride Leach projects, work progressed according to
plan during 2021, despite ongoing COVID restrictions.

All projects are proceeding with fully integrated COVID-19 health protocols in
place. These are expected to continue during 2022, but as a managed health
risk, consistent with the high levels of vaccination achieved in Chile. The
Zaldívar Chloride Leach project was completed in January 2022 and the Los
Pelambres desalination plant and Esperanza Sur will be completed in 2022. The
concentrator expansion at Los Pelambres will be completed in early 2023.

 

COPPER MARKET

The year started with the continued upward trend in the copper price seen in
the second half of 2020, with the price reaching a peak of $4.86/lb in May.
This was an all-time high and for the rest of the year the copper price
stabilised, trading in a range above $4.20/lb. This has continued into 2022.

Due to strong copper demand growth in 2021 and the limited capacity of copper
supply to respond quickly, exchange stocks have dropped to their lowest level
since 2008, ending the year at less than 0.6 weeks of consumption. This has
consolidated the price at historically high levels and moved the copper
forward curve into backwardation, where the uncertainty of having enough
copper for prompt delivery leads to the cash price being higher than the
forward price, reflecting exceptionally tight availability.

This situation is expected to ease during the second half of 2022, when
several major greenfield and brownfield projects are scheduled to come into
production. However, we expect part, or all of the additional production will
be offset by continued falling grades, COVID, political instability, water
restrictions, communities' unrest, and logistical and supply constraints.

Looking further ahead, the outlook for copper remains positive, thanks to the
continued decarbonisation of industrial activity and the growth of the clean
energy sector and electromobility. Demand is expected to grow more slowly
during 2022 than in 2021, but still at a high rate of about 2.5-3.0%,
requiring an additional 600 to 700,000 tonnes of refined copper per year.

Over the year the LME copper price averaged $4.23/lb, 51% higher than
in 2020.

 

2022 GUIDANCE

As previously announced, Group production for 2022 is expected to be
660-690,000 tonnes of copper, 170-190,000 ounces of gold and 8,500-10,000
tonnes of molybdenum. The copper and gold production reflect lower expected
grades at Centinela Concentrates and throughput reduced at Los Pelambres to
below plant capacity to reduce water usage until the desalination plant is
completed in H2 2022.

Group cash costs in 2022 before and after by-product credits are expected to
be $2.00/lb and $1.55/lb respectively, impacted by higher input costs and the
temporary lower plant throughput at Los Pelambres due to water supply
restrictions which will reduce production until the start-up of the
desalinated water supply system in H2 2022.

Capital expenditure in 2022 is expected to be $1.7-1.9 billion, as sustaining
and mine development expenditure increase for the year to approximately $1.0
billion, and development expenditure continues on the Los Pelambres Expansion
project and at Centinela. The final estimated capital expenditure to complete
the Los Pelambres Expansion remains under review due primarily to COVID-19
impacts.

 

REVIEW OF OPERATIONS

LOS PELAMBRES

2021 Performance

Operating Performance

There has been a worsening drought at Los Pelambres for 12 years, but this
year, for the first time and despite strict water management protocols, the
water shortage impacted copper production.

EBITDA was $2,526 million, compared with $1,663 million in 2020, reflecting
higher copper and molybdenum realised prices, offset by lower copper and gold
sales volumes and higher operating costs.

Production

Copper production for the year decreased by 9.7% to 324,700 tonnes, mainly due
to the lower throughput due to water optimisation and expected lower copper
grade. Molybdenum production in 2021 was 9,200 tonnes, 1,700 tonnes lower than
in 2020 as a result of the lower throughput, grades and recoveries. Gold
production was 53,200 ounces, 11.9% lower than the previous year.

Costs

Cash costs before by-product credits at $1.59/lb were 25.2%, or 32c/lb, higher
than in 2020, reflecting the lower production due to water restrictions, the
stronger Chilean peso and higher input prices. Net cash costs for the full
year were $0.89/lb, or 9.9% lower than in 2020 due to higher by-product prices
as Los Pelambres benefits from the sale of gold, molybdenum and silver.

Capital expenditure

Capital expenditure during 2021 was $880 million, including $219 million on
sustaining and $575 million on growth projects.

As at the end of 2021 the Los Pelambres Expansion project was 68% complete
(design, procurement and construction). Currently, the final estimated project
costs are under review, considering the impact of COVID-19, higher input and
logistics costs and project worker absenteeism.

Outlook for 2022

The forecast production for 2022 is 290-300,000 tonnes of copper, 6.5-7,500
tonnes of molybdenum and 40-50,000 ounces of gold. Lower production is due to
temporary water supply restrictions which are expected to end once the
desalinated water supply system is commissioned in H2 2022.

Cash costs before by-product credits are forecast to be approximately $1.75/lb
and net cash costs $1.25/lb, as throughput is temporarily reduced because of
the drought.

 

CENTINELA

2021 Performance

Operating Performance

Centinela had a very solid year in 2021 with increased production and lower
costs with higher sulphide ore grades and increased throughput.

EBITDA at Centinela was $1,919 million, compared with $912 million in 2020, on
higher copper and gold sales volumes and higher copper realised prices, partly
offset by higher unit costs.

Production

Copper production was 274,200 tonnes, 11.1% higher than in 2020 due to higher
grades and increased throughput at Centinela Concentrates, which operated
consistently at, or above, design capacity for the full year.

Production of copper in concentrate was 185,400 tonnes, 20.7% higher than in
2020, reflecting expected higher ore grades and throughput above the design
capacity of 105,000 tonnes of ore per day. Copper cathode production during
the year was 88,800 tonnes, 4.8% lower than in 2020 mainly due to expected
lower grades and recoveries, despite higher throughput and consistently higher
performance at all the plants.

Gold production was 199,000 ounces, 38.5% higher than in 2020, due to higher
throughput and grades. Molybdenum production was 1,300 tonnes on decreased
grades.

Costs

Cash costs before by-product credits in 2021 were $1.87/lb, 2c/lb higher than
in 2020 as the impact of higher copper production was offset by the stronger
Chilean peso and higher input costs.

By-product credits were 74c/lb, 16c/lb higher than in 2020 due to higher gold
production and the improved molybdenum price.

Net cash costs for the year were $1.13/lb, 11.0% lower than in 2020.

Capital expenditure

Capital expenditure was $792 million, including $394 million on mine
development and $308 million on development capital expenditure, which
includes the Esperanza Sur pit project and new autonomous trucks.

Outlook for 2022

Production is forecast at 245-255,000 tonnes of copper, 130-140,000 ounces of
gold and 2-2,500 tonnes of molybdenum. Copper production will decrease
compared to 2020 as grades fall at Centinela Concentrates to an expected
0.50%, before increasing again in 2023.

Cash costs before by-product credits are forecast to be approximately $2.30/lb
and net cash costs $1.60/lb.

 

ANTUCOYA

2021 Performance

Operating Performance

Antucoya continued to improve its operational reliability and consistency
during the year with daily ore throughput increasing by 12.5% compared to
2020.

EBITDA was $337 million compared with $166 million in 2020, reflecting higher
sales volumes and realised prices, partially offset by higher operating costs.

Production

Antucoya produced 78,600 tonnes, 0.9% lower than last year due to higher
throughput, offset by expected lower grades and resulting lower recoveries.

Costs

Cash costs for 2021 were $2.04/lb, 12.1% higher than in 2020 due to a stronger
Chilean peso, and higher input costs and maintenance expenditure.

Capital expenditure

Capital expenditure was $50 million, including $28 million on sustaining
capital expenditure.

Outlook for 2022

Production is forecast to be 75-80,000 tonnes of copper and cash costs are
expected to be approximately $2.30/lb.

 

ZALDÍVAR

2021 Performance

Operating Performance

Zaldívar had a challenging 2021 with grades declining compared to 2020,
however it improved its operational reliability during the year with daily ore
throughput increasing by 12.9% compared to 2020.

Attributable EBITDA was $173 million compared with $96 million in 2020.

Production

Attributable copper production was 44,000 tonnes, 8.7% lower than in 2020
mainly due to lower than planned recoveries and expected lower grades,
partially offset by higher throughput.

Costs

Cash costs were $2.39/lb, compared with $1.80/lb in 2020, mainly due to lower
grades, higher maintenance costs and the stronger Chilean peso.

Capital expenditure

Attributable capital expenditure in 2021 was $87 million, of which $49 million
was development capital expenditure, mainly on the Chloride Leach project.

Outlook for 2022

Attributable copper production is forecast to be 50-55,000 tonnes at a cash
cost of approximately $2.20/lb.

 

TRANSPORT DIVISION

2021 Performance

Operating performance

Tonnage transported in 2021 was 4.0% higher than in the previous year as a new
transport contract started.

EBITDA was $68 million, 11.8% higher than in 2020, reflecting the higher
revenue from increased volumes and better contracted sales prices.

Costs

Management is focused on optimising the division's business processes to
ensure its long-term competitiveness. The Group´s Cost and Competitiveness
Programme continued to be applied at the division during 2021 to improve its
cost structure, revenue stream and operating standards and achieved benefits
of some $8 million during the year.

Outlook for 2022

The division has recently strengthened its commercial area in order to ensure
the successful renewal of various sales contracts and capture new ones in the
medium and long term. Over the next few years, the division will transport an
increasing quantity of bulk materials.

The division continues to advance its plans to convert its land in the centre
of the city of Antofagasta from industrial to urban use. This has involved
extensive consultation with communities, neighbours and other stakeholders. An
important milestone was achieved in the first half of 2021 with the approval
of the project's Environmental Impact Assessment.

 

GROWTH PROJECTS AND OPPORTUNITIES

Los Pelambres Expansion

This expansion project is divided into two phases.

Phase 1

This phase is designed to optimise throughput within the limits of
the existing operating, environmental and water extraction permits.

During 2020, the decision was made to change the scope of the project and
double the planned capacity of the desalination plant that is part of Phase
1 from 400 litres per second to 800 litres per second. Enabling works for this
expansion are being carried out at the same time as the Phase 1 works but are
limited in extent by what is allowed under the permits that have already been
issued.

Following the change of scope and delays due to COVID-19, the project reached
68% overall completion by the end of the year.

As mining progresses at Los Pelambres, ore hardness will increase. The
expansion is designed to compensate for this, increasing plant throughput from
the current capacity of 175,000 tonnes of ore per day to an average of
190,000 tonnes of ore per day. The project has two components: the expansion
of the concentrator, including an additional SAG mill, ball mill and six cells
in the flotation circuit, and the construction of a desalination plant. These
are run under separate contracts, and we expect the desalination plant to be
commissioned in the second half of 2022 and the concentrator plant early in
2023.

Annual copper production will increase by an average of 60,000 tonnes per
year over 15 years, starting at approximately 40,000 tonnes per year for the
first four to five years and rising to 70,000 tonnes for the rest of the
period as the hardness of the ore increases and the benefit of higher
milling capacity is fully realised.

The 400 litres per second desalination plant includes a 62 km pipeline from
the coast to the El Mauro tailings storage facility, where it will connect
with the existing recycling circuit that returns water to the Los Pelambres
concentrator plant.

Additional permits will be needed to complete the expansion of the
desalination plant to 800 litres per second, but some preparatory work is
being carried out as part of Phase 1 of the Los Pelambres Expansion project.
The planned investment to enable the future expansion will be limited to
what is allowed under the existing permits and includes changes to the marine
works associated with the inlet and outlet pipes, expanding the plant
footprint and changes in the piping, cabling and civil works.

The capital cost of the project is $1.7 billion but is under final review,
given the challenges of higher absenteeism and worker rotation as well as
higher logistics costs experienced this year due to the COVID-19 pandemic.

Phase 2 - Future expansion

Following the decision in 2020 to increase the size of the desalination plant,
Phase 2 of the expansion requires two separate Environmental Impact Assessment
(EIA) applications:

Desalination plant expansion

This project is to protect Los Pelambres from the future impact of climate
change and the deteriorating availability of water in the region, and to free
up continental water for use by local communities.

The additional works required, beyond those being completed as part of Phase
1, include the expansion of the desalination plant and the construction of a
new water pipeline from the El Mauro tailings storage facility to the
concentrator plant. This project requires a new EIA application, which was
submitted in the first half of 2021. The EIA also includes two sustaining
capital infrastructure projects; the replacement of the concentrate pipeline,
which is approaching the end of its useful life, and the construction of
certain long-term infrastructure at the El Mauro tailings storage facility.
The EIA is expected to be approved in 2023, with the project completed in 2025
when desalinated and recirculated water will account for at least 90% of Los
Pelambres's operational water use.

Mine life extension

The current mine life of Los Pelambres is 13 years and is limited by the
capacity of the El Mauro tailings storage facility. The scope of the second
EIA will include increasing the capacity of the tailings storage facility,
extending the pit's pushback plan and expanding the existing waste dumps. This
will extend the mine's life by a minimum of 15 years, with a significant
portion of Los Pelambres's six billion tonne mineral resources converting to
new mine reserves. The EIA will also include the option to increase
throughput to 205,000 tonnes of ore per day by adding a new ball mill and
repowering the conveyor that runs from the primary crusher in the pit to the
concentrator plant. This option would increase copper production by 35,000
tonnes per year.

Key studies on tailings and waste storage capacity have been completed, and
the environmental and social studies are now being prepared for submission to
the authorities during 2022.

The capital expenditure to extend the mine life was estimated in a
pre-feasibility study in 2014 at approximately $500 million, with most of
the expenditure on mining equipment and increasing the capacity of the
concentrator plant and the El Mauro tailings facility.

 

Esperanza Sur pit

The Esperanza Sur pit at Centinela is 4 km south of the Esperanza pit and is
close to Centinela's concentrator plant. The deposit contains 1.4 billion
tonnes of reserves with a grade of 0.4% copper, 0.13 g/t of gold and 0.012% of
molybdenum.

Stripping advanced in 2021 and is expected to be completed in the first half
of 2022. The stripping cost is being capitalised and is being carried out by a
contractor. Once completed, autonomous trucks operated by Centinela will be
used to mine the deposit.

Opening the Esperanza Sur pit will improve Centinela's flexibility in how it
supplies ore to its concentrator. Over the initial years, the higher-grade
material from the pit will increase production by some 10-15,000 tonnes of
copper per year, compared to the amount that would be produced if material was
solely supplied by the Esperanza pit. This greater flexibility will allow
Centinela to smooth and optimise its year-on-year production profile, which
has in the past been variable.

 

Centinela Second Concentrator

We are currently evaluating the construction of a second concentrator and
tailings deposit some 7 km from the existing concentrator, to take place in
two phases. Phase 1 would have an ore throughput capacity of approximately
90,000 tonnes per day, producing copper, and gold and molybdenum
as by-products, with an annual production of approximately 180,000 tonnes
of copper equivalent. Once Phase 1 is operating successfully, a further
expansion is possible and would involve increasing the capacity of the
concentrator to 150,000 tonnes of ore per day, with annual production
increasing to 250,000 tonnes of copper equivalent, maximising the potential of
Centinela's large resource base.

Ore for the second concentrator would be sourced initially from the Esperanza
Sur deposit and later from Encuentro Sulphides. The latter lies under the
Encuentro Oxides reserves, which are expected to be depleted by 2026.

The EIA for both phases of the project was approved in 2016 and the initial
feasibility study for Phase 1 was completed during 2020, with further
detailed and supplier engineering progressing during 2021 ahead of an expected
decision by the Board by the end of 2022. The capital cost estimated in the
2015 pre-feasibility study for Phase 1 was $2.7 billion, which included
capitalised stripping, mining equipment, a concentrator plant, a
new tailings storage facility, a water pipeline and other infrastructure,
plus the owner's and other costs.

During 2021, a tender process to invite third parties to provide water for
Centinela's current operations by acquiring the existing water supply system
and building the new water pipeline, progressed and is expected to be
completed during 2022.

 

Zaldívar Chloride Leach

The project includes an upgrade of the Solvent Extraction (SX) plant, and the
construction of new reagents facilities and additional washing ponds for
controlling chlorine levels. It was completed in January 2022 and is now
being commissioned.

The project will increase copper recoveries by approximately 10 percentage
points, with further improvement possible depending on the type of ore being
processed. This will increase copper production at Zaldívar by approximately
10-15,000 tonnes per annum over the remaining life of the mine.

As the Group equity accounts for its interest in Zaldívar, capital
expenditure at the operation is not included in Group total capital
expenditure amounts.

 

Twin Metals Minnesota

Twin Metals Minnesota (Twin Metals) is a wholly owned copper, nickel and
platinum group metals (PGM) underground mining project, which holds copper,
nickel, cobalt-PGM deposits in north-eastern Minnesota, US. The project
envisages mining and processing 18,000 tonnes of ore per day for 25 years and
producing three separate concentrates - copper, nickel/cobalt and PGM.

Twin Metals has been progressing its Mine Plan of Operations (MPO) and Scoping
Environmental Assessment Worksheet Data Submittal, submitted in December 2019
to the US Bureau of Land Management (BLM) and Minnesota Department of Natural
Resources (DNR), respectively. However, over the past year, while the Twin
Metals project was advancing its environmental review, several actions were
taken by the federal government that have changed the regulatory position.

In 2021, the US Forest Service (USFS) and BLM initiated an up to two-year
study regarding the potential withdrawal of lands within the Superior National
Forest (SNF), which could ultimately lead to an effective ban on mining for
twenty years. This action alone would not have impacted Twin Metals's valid
existing rights in the area or the project.

BLM also rejected advancing Twin Metals's preference right lease applications
(PRLAs) and prospecting permit applications (PPAs), using the potential
withdrawal as a rationale. Twin Metals is appealing that decision but made
minor changes to its project configuration to address this decision.

In early 2022, BLM took an additional action through a legal opinion issued by
the Office of the Solicitor (M-Opinion). This action arbitrarily cancelled
Twin Metals's federal leases 1352 and 1353, citing concerns with the
reinstatement and renewal process, Twin Metals considers the lease
cancellation to be contrary to the terms of the leases and in violation of its
existing valid rights.

These actions, taken collectively, create material risk to Twin Metals's
ability to continue the project. Considering the time and uncertainty related
to any legal action to challenge the government decisions, an impairment has
been recognised as at 31 December 2021 in respect of the intangible assets and
property, plant and equipment relating to the Twin Metals project. Twin Metals
is currently evaluating its options to protect its mineral rights and to
respond to these legal challenges.

 

 

FINANCIAL REVIEW FOR THE YEAR ENDED 31 DECEMBER 2021

                                                                                                                Year ended                                            Year ended

                                                                                                                31.12.2021                                            31.12.2020

                                                                                                                (Unaudited)                                           (Audited)
                                                                        Before exceptional items                              Before exceptional items                Total

                                                                                                  Exceptional   Total                                   Exceptional

                                                                                                   items                                                Items
                                                                        $m                        $m            $m            $m                        $m            $m
 Revenue                                                                7,470.1                   -             7,470.1       5,129.3                   -             5,129.3
 EBITDA (including share of EBITDA from associates and joint ventures)  4,836.2                   -             4,836.2       2,739.2                   -             2,739.2
 Total operating costs                                                  (3,891.1)                 (177.6)       (4,068.7)     (3,537.1)                 -             (3,537.1)
 Operating profit from subsidiaries                                     3,579.0                   (177.6)       3,401.4       1,592.2                   -             1,592.2
 Net share of results from associates and joint ventures                59.7                      -             59.7          5.1                       -             5.1
 Impairment of investment in associate                                  -                         -             -             -                         (80.8)        (80.8)
 Total profit from operations, associates and joint ventures            3,638.7                   (177.6)       3,461.1       1,597.3                   (80.8)        1,516.5
 Net finance expense                                                    16.0                      -             16.0          (103.4)                   -             (103.4)
 Profit before tax                                                      3,654.7                   (177.6)       3,477.1       1,493.9                   (80.8)        1,413.1
 Income tax expense                                                     (1,332.9)                 90.6          (1,242.3)     (546.2)                   19.7          (526.5)
 Profit from continuing operations                                      2,321.8                   (87.0)        2,234.8       947.7                     (61.1)        886.6
 Profit from discontinued operations                                    -                         -             -             7.3                       -             7.3
 Profit for the year                                                    2,321.8                   (87.0)        2,234.8       955.0                     (61.1)        893.9
 Attributable to:
 Non-controlling interests                                              917.4                     27.2          944.6         408.4                     (20.9)        387.5
 Profit attributable to the owners of the parent                        1,404.4                   (114.2)       1,290.2       546.6                     (40.2)        506.4

 Basic earnings per share                                               cents                     cents         cents         cents                     cents         cents
 From continuing operations                                             142.5                     (11.6)        130.9         54.7                      (4.1)         50.6
 From discontinued operations                                           -                         -             -             0.7                       -             0.7
 Total continuing and discontinued operations                           142.5                     (11.6)        130.9         55.4                      (4.1)         51.3

 

 

The profit for the financial year attributable to the owners of the parent
(including exceptional items and discontinued operations) increased from
$506.4 million in 2020 to $1,290.2 million in the current year. Excluding
exceptional items and discontinued operations the profit attributable to the
owners of the parent increased by $539.3 million to $1,404.4 million.

 

 The full reconciliation between 2020 and 2021, including exceptional items, is   $m
 as follows:

 Profit attributable to the owners of the parent in 2020                         506.4

 Increase in revenue                                                             2,340.8
 Increase in total operating costs (excluding exceptional items)                 (354.0)
 Increase in net share of profit from associates and joint ventures (excluding   54.6
 exceptional items)
 Decrease in net finance expenses                                                119.4
 Increase in income tax expense (excluding exceptional items)                    (786.7)
 Increase in non-controlling interests                                           (509.0)
                                                                                 865.1
 Profit attributable to the owners of the parent in 2021, excluding exceptional  1,371.5
 items and discontinued operations
 Exceptional items - impairment of investment in associate                       (74.0)
 Profit from discontinued operations                                             (7.3)
 Profit attributable to the owners of the parent in 2021                         1,290.2

 

COVID-19

 

The Group has continued to proactively manage the risks of COVID-19 on its
operations and projects, allowing its operations to continue to operate
without interruption throughout the year. The Group incurred $60 million of
operational expenses (including the 50% attributable share of Zaldívar's
expenditure) during the year in respect of COVID-19 measures, including costs
relating to testing, additional travel expenses for its employees travelling
to and from the mine sites, hygiene supplies and additional costs for
third-party services. This compares with $40 million incurred during 2020.

 

The Group has capitalised $32 million of additional project costs during 2021
linked to the impact of COVID-19, mainly relating to the additional costs of
third-party contractors, testing, and increased travel for employees and
project contractors travelling to the sites. This compares with $31 million
capitalised during 2020.

 

Revenue

 

The $2,340.8 million increase in revenue from $5,129.3 million in 2020 to
$7,470.1 million in the current year reflected the following factors:

                                              $m

 Revenue in 2020                             5,129.3

 Increase in realised copper price           2,095.9
 Decrease in copper sales volumes            (61.3)
 Decrease in treatment and refining charges  30.4
 Increase in gold revenue                    78.7
 Increase in molybdenum revenue              156.9
 Increase in silver revenue                  19.6
 Increase in transport division revenue      20.6
                                             2,340.8

 Revenue in 2021                             7,470.1

 

Revenue from the Mining division

 

Revenue from the Mining division increased by $2,320.2 million, or 47%, to
$7,300.1 million, compared with $4,979.9 million in 2020. The increase
reflected a $2,065.0 million improvement in copper sales and $255.2 million
increase in by-product revenue.

 

Revenue from copper sales

 

Revenue from copper concentrate and copper cathode sales increased by $2,065.0
million, or 47%, to $6,413.2 million, compared with $4,348.2 million in 2020.
The increase reflected the impact of $2,095.9 million from higher realised
prices and $30.4 million from lower treatment and refining charges, partly
offset by $61.3 million from lower sales volumes.

 

(i) Realised copper price

 

The average realised price increased by 47% to $4.37/lb in 2021 (2020 -
$2.98/lb), resulting in a $2,095.9 million increase in revenue. The increase
in the realised price reflected the higher LME average market price, which
increased by 51% to $4.23/lb in 2021 (2020 - $2.80/lb), and a positive
provisional pricing adjustment of $352.7 million. The provisional pricing
adjustment mainly reflected the increase in the year-end mark-to-market copper
price to $4.42/lb at 31 December 2021, compared with $3.52/lb at 31 December
2020. In addition, there was a negative impact of $126.8 million in respect of
realised losses from commodity hedging instruments which matured during the
year (2020 - $3.4 million negative impact).

 

Realised copper prices are determined by comparing revenue (before treatment
and refining charges for concentrate sales) with sales volumes in the period.
Realised copper prices differ from market prices mainly because, in line with
industry practice, concentrate and cathode sales agreements generally provide
for provisional pricing at the time of shipment with final pricing based on
the average market price in future periods (normally around one month after
delivery to the customer in the case of cathode sales and normally four months
after delivery to the customer in the case of concentrate sales).

 

Further details of provisional pricing adjustments are given in Note 6 to the
preliminary results announcement.

 

(ii)  Copper volumes

 

Copper sales volumes reflected within revenue decreased by 1.3% from 690,200
tonnes in 2020 to 681,000 tonnes in 2021, decreasing revenue by $61.3 million.
This decrease was due to lower copper sales volumes at Los Pelambres (41,500
tonnes decrease) mainly as a result of its decreased production volumes,
partly offset by higher sales volumes at Centinela (28,400 tonnes increase)
due to increased production volumes as a result of higher grades and increased
throughput at Centinela Concentrates.

 

(iii) Treatment and refining charges

 

Treatment and refining charges (TC/RCs) for copper concentrate decreased by
$30.4 million to $152.0 million in 2021, compared with $182.4 million in 2020,
reflecting lower average TC/RC rates as well as the decrease in the
concentrate sales volumes at Los Pelambres.

 

With sales of concentrates at Los Pelambres and Centinela, which are sold to
smelters and roasting plants for further processing into fully refined metal,
the price of the concentrate invoiced to the customer reflects the market
value of the fully refined metal less a "treatment and refining charge"
deduction, to reflect the lower value of this partially processed material
compared with the fully refined metal. For accounting purposes, the revenue
amount is the net of the market value of fully refined metal less the
treatment and refining charges. Under the standard industry definition of cash
costs, treatment and refining charges are regarded as an expense and part of
the total cash cost figure.

 

Accordingly, the decrease in these charges has had a positive impact on
revenue in the year.

 

Revenue from molybdenum, gold and other by-product sales

 

Revenue from by-product sales at Los Pelambres and Centinela relate mainly to
molybdenum and gold and, to a lesser extent, silver. Revenue from by-products
increased by $255.2 million or 40.3% to $886.9 million in 2021, compared with
$631.7 million in 2020.

 

Revenue from gold sales (net of treatment and refining charges) was $436.4
million (2020 - $357.7 million), an increase of $78.7 million which reflected
an increase in volumes slightly offset by a lower realised price. Gold sales
volumes increased by 22.6% from 199,600 ounces in 2020 to 244,700 ounces in
2021, mainly due to higher throughput and grades at Centinela. The realised
gold price was $1,787.6/oz in 2021 compared with $1,796.8/oz in 2020,
reflecting the average market price for 2021 of $1,798.9/oz (2020 -
$1,770.1/oz) and a negative provisional pricing adjustment of $10.8 million.

 

Revenue from molybdenum sales (net of roasting charges) was $366.4 million
(2020 - $209.5 million), an increase of $156.9 million. The increase was due
to the higher realised price of $17.4/lb (2020 - $8.8/lb), partially offset by
decreased sales volumes of 10,400 tonnes (2020 - 12,500 tonnes).

 

Revenue from silver sales increased by $19.6 million to $84.1 million (2020 -
$64.5 million). The increase was due to a higher realised silver price of
$24.9/oz (2020 - $21.3/oz) and higher sales volumes of 3.4 million ounces
(2020 - 3.1 million ounces).

 

Revenue from the Transport division

 

Revenue from the Transport division (FCAB) increased by $20.6 million or 13.8%
to $170.0 million (2020 - $149.4 million), as a result of increased volumes
and better prices in sales contracts and the impact of the stronger Chilean
peso on sales denominated in the local currency.

 

Total operating costs (excluding exceptional items)

 

The $354.0 million increase in total operating costs (excluding exceptional
items) from $3,537.1 million in 2020 to $3,891.1 million in the current year
reflected the following factors:

                                                                $m

 Total operating costs in 2020 (excluding exceptional items)   3,537.1

 Increase in mine-site operating costs                         291.5
 Decrease in closure provision and other mining expenses       (14.6)
 Increase in exploration and evaluation costs                  18.1
 Increase in corporate costs                                   11.2
 Decrease in Transport division operating costs                14.9
 Increase in depreciation, amortisation and loss on disposals  32.9
                                                               354.0

 Total operating costs in 2021 (excluding exceptional items)   3,891.1

 

Operating costs (excluding depreciation, amortisation, loss on disposals and
impairments) at the Mining division

 

Operating costs (excluding depreciation, amortisation, loss on disposals and
impairments) at the Mining division increased by $306.1 million to $2,696.8
million in 2021, an increase of 12.8%. Of this increase, $291.5 million was
attributable to higher mine-site operating costs. This increase in mine-site
costs reflected higher key input prices, the stronger Chilean peso and the
cost impact of the expected lower ore grades and lower throughput due to water
optimisation at Los Pelambres, partly offset by the cost savings from the
Group's Cost and Competitiveness Programme and the lower sale volumes. On a
unit cost basis, weighted average cash costs excluding by-product credits
(which for accounting purposes are part of revenue) and treatment and refining
charges for concentrates (which are also part of revenue for accounting
purposes), increased from $1.43/lb in 2020 to $1.68/lb in 2021 (see the
alternative performance measures on page 64 of this preliminary results
announcement for further details in respect of the definition of cash costs).

 

The Cost and Competitiveness Programme was implemented to reduce the Group's
cost base and improve its competitiveness within the industry. During 2021 the
programme achieved benefits of $130.7 million, of which $72.1 million
reflected cost savings and $58.6 million reflected the value of productivity
improvements. Of the $72.1 million of cost savings, $54.5 million related to
Los Pelambres, Centinela and Antucoya, and therefore impacted the Group's
operating costs, and $17.6 million related to Zaldívar (on a 100% basis) and
therefore impacted the share of results from associates and joint ventures.

 

Closure provisions and other mining expenses decreased by $14.6 million.
Exploration and evaluation costs increased by $18.1 million to $103.2 million
(2020 - $85.1 million), reflecting increased exploration expenditure
principally in Chile, the on-going evaluation and review work at Twin Metals,
and drilling in relation to the reserve and resource estimates at Centinela
and Antucoya. Corporate costs increased by $11.2 million.

 

Operating costs (excluding depreciation, amortisation and loss on disposals)
at the Transport division

 

Operating costs (excluding depreciation, amortisation and loss on disposals)
at the Transport division increased by $14.9 million to $106.3 million (2020 -
$91.4 million), mainly due the effect of the stronger Chilean peso, higher
diesel prices and inflation, and to a lesser degree non-recurrent COVID-19
costs.

 

Depreciation, amortisation and disposals (excluding impairments)

 

The depreciation and amortisation charge increased by $32.9 million from
$1,055.0 million in 2020 to $1,087.9 million. This increase is mainly due to
inventory variation impacts at Centinela and higher depreciation at Centinela
and Los Pelambres, largely offset by lower amortisation of IFRIC 20 stripping
cost at Centinela. The loss on disposal of property, plant & equipment was
$9.2 million, an increase of $2.9 million (2020 - $6.3 million).

 

Operating profit from subsidiaries

 

As a result of the above factors, operating profit from subsidiaries increased
by $1,986.8 million or 124.8% in 2021 to $3,579.0 million (2020 - $1,592.2
million).

 

Share of results from associates and joint ventures

 

The Group's share of results from associates and joint ventures was a profit
of $59.7 million in 2021, compared to $5.1 million in 2020. Of this increase,
$56.3 million was due to the higher profit from Zaldívar.

 

EBITDA

 

EBITDA (earnings before interest, tax, depreciation and amortisation, and
impairments) increased by $2,097.0 million or 76.6% to $4,836.2 million (2020
- $2,739.2 million). EBITDA includes the Group's proportional share of EBITDA
from associates and joint ventures.

 

EBITDA from the Mining division increased by 78.0% from $2,678.2 million in
2020 to $4,768.0 million this year. This reflected the higher revenue and
higher EBITDA from associates and joint ventures partly offset by higher
mine-site costs and increased exploration and evaluation expenditure.

 

EBITDA at the Transport division increased by $7.2 million to $68.2 million in
2021 ($61.0 million - 2020), reflecting the higher revenue and slightly
increased EBITDA from associates and joint ventures, partly offset by higher
operating costs.

 

Commodity price and exchange rate sensitivities

 

The following sensitivities show the estimated approximate impact on EBITDA
for 2021 of a 10% movement in the average copper, molybdenum and gold prices
and a 10% movement in the average US dollar / Chilean peso exchange rate.

 

The impact of the movement in the average commodity prices reflects the
estimated impact on the relevant revenues during 2021, and the impact of the
movement in the average exchange rate reflects the estimated impact on Chilean
peso denominated operating costs during the year. These estimates do not
reflect any impact in respect of provisional pricing or hedging instruments,
any potential inter-relationship between commodity price and exchange rate
movements, or any impact from the retranslation or changes in valuations of
assets or liabilities held on the balance sheet at the year-end.

 

                                         Average market commodity price / average exchange rate during the year ended  Impact of a 10% movement in the commodity price / exchange rate on EBITDA
                                         31.12.21
for the year ended 31.12.21
                                                                                                                       $m

 Copper price                            $4.23/lb                                                                      676
 Molybdenum price                        $15.9/lb                                                                      36
 Gold price                              $1,799/oz                                                                     44
 US dollar / Chilean peso exchange rate  760                                                                           154

 

 

Net finance expense

 

Net finance expense decreased by $119.4 million to $16.0 million, compared
with $103.4 million in 2020.

 

                      Year ended 31.12.21  Year ended 31.12.20

                      $m                   $m
 Investment income    5.0                  18.9
 Interest expense     (63.4)               (77.1)
 Other finance items  74.4                 (45.2)
 Net finance expense  16.0                 (103.4)

 

Interest income decreased from $18.9 million in 2020 to $5.0 million in 2021,
mainly due to a decrease in average interest rates partially offset by higher
average cash and liquid investment balances.

 

Interest expense decreased from $77.1 million in 2020 to $63.4 million in
2021, reflecting the decrease in the average interest rates and also a
reduction in the average relevant borrowing balances, partially offset by
interest expenses relate to the bond issue in October 2020.

 

Other finance items were a net gain of $74.4 million, compared with a net loss
of $45.2 million in 2020, a variance of $119.6 million. This was mainly due to
the foreign exchange impact of the retranslation of Chilean peso denominated
assets and liabilities, which resulted in a $49.7 million gain in 2021
compared with a $28.4 million loss in 2020. Also, there was a positive
variance of $41.5 million related to the discounting of long-term provisions,
with the increase in the relevant year-end interest rates resulting in a
decrease in the net present value of the provisions and a corresponding credit
recognised in other finance items.

 

Profit before tax

 

As a result of the factors set out above, profit before tax increased by
146.1% to $3,477.1 million (2020 - $1,413.1 million).

 

Income tax expense

 

The tax charge for 2021 excluding exceptional items increased by $786.7
million to $1,332.9 million (2020 - $546.2 million) and the effective tax rate
for the year was 36.5% (2020 - 36.6%). Including exceptional items the tax
charge for 2021 was $1,242.3 million and the effective tax rate was 35.7%.

 

                                                                                   Year ended                              Year ended                                           Year ended                                        Year ended

                                                                                   Excluding exceptional items             Including exceptional items                          Excluding exceptional items                       Including exceptional items

31.12.2021
31.12.2021
31.12.2020
31.12.2020
                                                                                               $m          %                               $m         %                         $m                  %                             $m                      %
 Profit before tax                                                                             3,654.7                                     3,477.1                              1,493.9                                           1,413.1
 Tax at the Chilean corporate tax rate of 27%                                                  (986.8)     27.0                            (938.8)    27.0                      (403.4)             27.0                          (381.5)                 27.0
 Mining Tax (royalty)                                                                          (243.8)     6.7                             (243.8)    7.0                       (101.3)             6.8                           (101.3)                 7.2
 Deduction of mining royalty as an allowable expense in determination of first                 67.8        (1.9)                           67.8       (1.9)                     28.1                (1.9)                         28.1                    (2.0)
 category tax
 Items not deductible from first category tax                                                  (31.6)      0.9                             (31.6)     0.9                 (9.8)           0.7                               (9.8)             0.6
 Adjustment in respect of prior years                                                          (12.1)      0.3                             (12.1)     0.3                 (1.6)           0.1                               (1.6)             0.1
 Withholding tax                                                                               (195.0)     5.3                             (195.0)    5.6                 (70.0)          4.7                               (70.0)            5.0
 Tax effect of share of profit of associates and joint ventures                                16.1        (0.4)                           16.1       (0.5)                     1.4                 (0.1)                         1.4                     (0.1)
 Impact of previously unrecognised tax losses on current tax                                   52.5        (1.4)                           52.5       (1.5)                     10.5                (0.7)                         10.5                    (0.7)
 Impact of recognition of previously unrecognised tax losses on deferred tax                   -           -                               90.6       (2.6)                     -                   -                             -                       -
 Impairment of investment in associate                                                         -           -                               -          -                         -                   -                             (2.2)                   0.2
 Provision against carrying value of assets                                                    -           -                               (48.0)     1.4                       -                   -                             -                       -
 Net other items                                                                               -           -                               -          -                         (0.1)               -                             (0.1)                   -
 Tax expense and effective tax rate for the Year ended                                         (1,332.9)   36.5                            (1.242.3)  35.7                      (546.2)             36.6                          (526.5)                 37.3

 

The effective tax rate excluding exceptional items of 36.5% varied from the
statutory rate principally due to the mining tax (royalty) (net impact of
$176.0 million / 4.8% including the deduction of the mining tax (royalty) as
an allowable expense in the determination of first category tax), the
withholding tax relating to the remittance of profits from Chile (impact of
$195.0 million / 5.3%), items not deductible for Chilean corporate tax
purposes, principally the funding of expenses outside of Chile (impact of
$31.6 million / 0.9%) and adjustments in respect of prior years (impact of
$12.1 million / 0.3%), partly offset by the impact of unrecognised tax losses
(impact of $52.5 million / 1.4%)  and the impact of the recognition of the
Group's share of profit from associates and joint ventures, which are included
in the Group's profit before tax net of their respective tax charges (impact
of $16.1 million / 0.4%).

 

The impact of the exceptional items on the effective tax rate including
exceptional items was $42.6 million / 1.2%.

 

Exceptional items

 

Exceptional items are material items of income and expense which are
non-regular or non-operating and typically non-cash, including impairments and
profits or losses on disposals. The tax effect of items presented as
exceptional is also classified as exceptional, as are material deferred tax
adjustments that relate to more than one reporting period. The classification
of these types of items as exceptional is considered to be useful as it
provides an indication of the earnings generated by the on-going businesses of
the Group.

 

2021 - Impairment of Twin Metals' assets

 

Twin Metals Minnesota (Twin Metals) is a wholly owned copper, nickel and
platinum group metals (PGM) underground mining project, which holds copper,
nickel, cobalt-PGM deposits in north-eastern Minnesota, US. In recent years
Twin Metals has been progressing its Mine Plan of Operations (MPO) and Scoping
Environmental Assessment Worksheet Data Submittal, submitted in December 2019
to the US Bureau of Land Management (BLM) and Minnesota Department of Natural
Resources (DNR), respectively. However, over the past year, while the Twin
Metals project was advancing through environmental review, several actions
were taken by the federal government that have changed the potential scenarios
for the project.

In September 2021 the United States Forest Service (USFS) submitted an
application to withdraw approximately 225,000 acres of land in the Superior
National Forest from the scope of federal mineral leasing laws, subject to
valid existing rights.  In October 2021, the United States Bureau of Land
Management (BLM) rejected Twin Metals' Preference Right Lease Applications
(PRLAs) and Prospecting Permit Applications (PPAs). In January 2022 the United
States Department of the Interior cancelled Twin Metals' MNES-1352 and
MNES-1353 federal mineral leases. The PRLAs and federal mineral leases form a
significant proportion of the mineral resources contained within Twin Metals'
current project plan and, accordingly, it was determined that these events
collectively represented an impairment trigger as at the balance sheet date.

Prior to the resulting impairment assessment being performed, as at 31
December 2021 the Group had recognised an intangible asset of $150.1 million
and property, plant and equipment of $27.5 million relating to the Twin Metals
project. The intangible asset arose upon the acquisition in 2015 of Duluth
Metals, which owned a 60% stake in the Twin Metals project, with the carrying
value of the intangible asset reflecting the consideration paid for that
acquisition. The property, plant and equipment balances reflected the
historical cost of acquiring those assets. These carrying values prior to the
impairment did not, therefore, reflect an estimate of the commercial potential
of the project as at 31 December 2021.

The Group believes that Twin Metals has a valid legal right to the mining
leases and a strong case to defend its legal rights. Although the Group
intends to pursue validation of those rights, considering the time and
uncertainty related to any legal action to challenge the government decisions,
an impairment has been recognised as at 31 December 2021 in respect of the
$177.6 million of intangible assets and property, plant and equipment relating
to the Twin Metals project.

 

2021 - Recognition of previously unrecognised deferred tax assets

 

At 31 December 2021 the Group recognised $90.6 million of previously
unrecognised deferred tax assets relating to tax losses available for offset
against future profits. In previous periods the Group had reviewed these tax
losses for potential recognition, and concluded that it was not probable that
future taxable profits would be available against which the losses could be
utilised, and accordingly had not recognised a deferred tax asset in respect
of these losses. In making this assessment in previous periods the Group had
taken into account that the relevant Group entity had consistently generated
taxable losses in recent years, was continuing to generate taxable losses in
the then current period, and was forecast to continue generating taxable
losses in future periods.

During 2021 there has been a significant improvement in the current copper
price (with the copper price reaching record levels in nominal terms during
the year) and also the near-term copper price outlook. As a result of this
improvement in the copper price environment the relevant Group entity began to
generate taxable profits in 2021. The improved near-term outlook for the
copper price also means that the entity is now forecast to generate sufficient
future taxable profits to fully utilise its remaining tax losses.

2020 - Impairment of the investment in Hornitos

 

On 31 March 2020 the Group agreed to dispose of its 40% interest in Hornitos
coal-fired power station to ENGIE Energía Chile S.A. ("ENGIE"), the owner of
the remaining 60% interest. This was part of the value accretive renegotiation
of Centinela's power purchase agreement which as a result will be wholly
supplied from lower cost renewable sources from the beginning of 2022. In
accordance with the terms of the agreement the Group disposed of its
investment to Engie in December 2021 for a nominal consideration and has not
been be entitled to receive any further dividend income from Hornitos from the
date of the agreement. Accordingly, the Group no longer had any effective
economic interest in the results or assets of Hornitos from 31 March 2020
onwards, and therefore recognised an impairment of $80.8 million in respect of
its investment in associate balance during 2020, and no longer recognised any
share of Hornitos' results. The post-tax impact of the impairment was $61.1
million, of which $40.2 million was attributable to the equity owners of the
Company.

 

Non-controlling interests

 

Profit for 2021 attributable to non-controlling interests (excluding
exceptional items) was $917.4 million, compared with $408.4 million in 2020,
an increase of $509.0 million. This reflected the increase in earnings
analysed above.

Earnings per share

                                                                                   Year ended 31.12.21  Year ended

                                                                                                        31.12.20
                                                                                   $ cents              $ cents

 Underlying earnings per share (excluding exceptional items and

 discontinued operations)                                                          142.5                54.7
 Earnings per share (exceptional items)                                            (11.6)               (4.1)
 Earnings per share (discontinued operations)                                      -                    0.7
 Earnings per share (including exceptional items and discontinued operations)      130.9                51.3

 

Earnings per share calculations are based on 985,856,695 ordinary shares.

 

As a result of the factors set out above, the underlying profit attributable
to equity shareholders of the Company (excluding exceptional items and
discontinued operations) was $1,404.4 million compared with $539.3 million in
2020, giving underlying earnings per share of 142.5 cents per share (2020 -
54.7 cents per share). The profit attributable to equity shareholders
(including exceptional items and discontinued operations) was $1,290.2
million, resulting in earnings per share of 130.9 cents per share (2020 - 51.3
cents per share).

 

Dividends

 

Dividends per share proposed in relation to the period are as follows:

                                               Year ended 31.12.21  Year ended

                                                                    31.12.20
                                               $ cents              $ cents
 Ordinary dividends:
 Interim                                       23.6                 6.2
 Final                                         118.9                48.5
 Total dividends to ordinary shareholders      142.5                54.7

 

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 recommended a final dividend for 2021 of 118.9 cents per
ordinary share, which amounts to $1,172.1 million and will be paid on 13 May
2022 to shareholders on the share register at the close of business on 22
April 2022.

 

The Board declared an interim dividend for the first half of 2021 of 23.6
cents per ordinary share, which amounted to $232.7 million.

 

This gives total dividends proposed in relation to 2021 (including the interim
dividend) of 142.5 cents per share or $1,404.8 million in total (2020 - 54.7
cents per ordinary share or $539.3 million in total) equivalent to a payout
ratio of 100% of underlying earnings.

 

Capital expenditure

 

Capital expenditure increased by $470.1 million from $1,307.4 million in 2020
to $1,777.5 million in the current year, mainly due to expenditure on the Los
Pelambres Expansion project, work on the Esperanza Sur pit at Centinela,
including the completion of the pre-stripping, and increased mine development
at Centinela.

 

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 its
exposure to commodity price, foreign exchange and interest rate movements. The
Group does not use such derivative instruments for speculative trading
purposes. At 31 December 2021 the derivative financial instruments are nil
(2020 - negative $36.0 million).

 

Cash flows

 

The key features of the cash flow statement are summarised in the following
table.

                                                      Year ended 31.12.21   Year ended 31.12.20
                                                      $m                    $m
 Cash flows from continuing operations                4,507.7               2,431.1
 Income tax paid                                      (776.9)               (319.7)
 Net interest paid                                    (53.3)                (40.1)
 Capital contributions and loans to associates        (33.5)                (7.2)
 Purchases of property, plant and equipment           (1,777.5)             (1,307.4)
 Dividends paid to equity holders of the Company      (710.8)               (131.1)
 Dividends paid to non-controlling interests          (604.5)               (280.0)
 Capital increase from non-controlling interest       -                     210.0
 Dividends from associates and joint ventures         142.5                 -
 Other items                                          1.4                   2.3
 Changes in net debt relating to cash flows           695.1                 557.9
 Other non-cash movements                             (73.8)                (68.0)
 Effects of changes in foreign exchange rates         1.2                   (8.5)
 Movement in net debt in the period                   622.5                 481.4
 Net debt at the beginning of the year                (82.0)                (563.4)
 Net cash/ (net debt) at the end of the year          540.5                 (82.0)

 

 

Cash flows from continuing operations were $4,507.7 million in 2021 compared
with $2,431.1 million in 2020.  This reflected EBITDA from subsidiaries for
the year of $4,666.9 million (2020 - $2,647.2 million) adjusted for the
negative impact of a net working capital increase of $140.2 million (2020 -
working capital increase of $242.5 million) and a non-cash decrease in
provisions of $19.4 million (2020 - increase of $26.4 million).

 

The working capital increase in 2021 was mainly due to an increase in
receivables, predominantly due to the higher sales volumes in December 2021
compared with December 2020 and the higher average mark-to-market price at 31
December 2021 of $4.42/lb (31 December 2020 - $3.52/lb).

 

The net cash outflow in respect of tax in 2021 was $776.9 million (2020 -
$319.7 million). This amount differs from the current tax charge in the
consolidated income statement (including exceptional items) of $1,035.5
million (2020 - $515.3 million) mainly because cash tax payments for corporate
tax and the mining tax include the settlement of outstanding balances in
respect of the previous year's tax charge of $30.9 million (2020 - $8.0
million), withholding tax payments of $222.9 million, payments on account for
the current year based on the prior year's profit levels of $569.6 million, as
well as the recovery of $46.5 million in 2021 relating to prior years.

 

Contributions and loans to associates and joint ventures of $33.5 million
(2020 - $7.2 million) relate to Hornitos and Tethyan.

 

Capital expenditure in 2021 was $1,777.5 million compared with $1,307.4
million in 2020. This included expenditure of $880.4 million at Los Pelambres
(2020 - $782.6 million), $791.8 million at Centinela (2020 - $441.5 million),
$49.6 million at Antucoya (2020 - $41.9 million), $24.4 million at the
corporate centre (2020 - $8.3 million) and $31.3 million at the Transport
division (2020 - $33.1 million). The increase at Centinela reflects work on
the Esperanza Sur pit, including the completion of the pre-stripping, and
increased mine development, and at Los Pelambres reflects expenditure on the
Expansion project.

 

Dividends paid to equity holders of the Company were $710.8 million (2020 -
$131.1 million) of which $478.1 million related to the payment of the final
element of the previous year's dividend and $232.7 million to the interim
dividend declared in respect of the current year.

 

Dividends paid by subsidiaries to non-controlling shareholders were $604.5
million (2020 - $280.0 million).

 

Dividends received from associates and joint ventures was $142.5 million for
2021 (2020 - nil).

 

A capital contribution of $210.0 million was received from Marubeni during
2020, the minority partner at Antucoya, in order to replace part of the
subordinated debt financing with equity.

 

Financial position

 

                                                        At 31.12.21  At 31.12.20
                                                        $m           $m
 Cash, cash equivalents and liquid investments          3,713.1      3,672.8
 Total borrowings                                       (3,172.6)    (3,754.8)
 Net cash/(net debt) at the end of the period           540.5        (82.0)

 

At 31 December 2021 the Group had combined cash, cash equivalents and liquid
investments of $3,713.1 million (31 December 2020 - $3,672.8). Excluding the
non-controlling interest share in each partly-owned operation, the Group's
attributable share of cash, cash equivalents and liquid investments was
$3,299.9 million (31 December 2020 - $3,046.9 million).

 

Total Group borrowings at 31 December 2021 were $3,172.6 million, a decrease
of $582.2 million on the prior year (31 December 2020 - $3,754.8 million). The
decrease was mainly due to the $222.8 million subordinated debt repayment by
Centinela and Antucoya to Marubeni, repayment of the senior loan by Los
Pelambres of $209.3 million, repayment of the senior loan by Centinela of
$111.1 million and the $141.0 million repayment of Antucoya's senior loan and
short term loan, and a net decrease of lease liabilities of $27.1 million,
partly offset by the $114.1 million refinancing of the senior loan at Los
Pelambres and the $35.0 million increase of the short term loan at Antucoya.

 

Excluding the non-controlling interest share in each partly-owned operation,
the Group's attributable share of the borrowings was $2,409.6 million (31
December 2020 - $2,805.4 million).

 

This resulted in net cash at 31 December 2021 of $540.5 million (31 December
2020 - net debt $82.0 million). Excluding the non-controlling interest share
in each partly-owned operation, the Group had an attributable net cash
position of $890.3 million (31 December 2020 - net cash $241.5 million).

 

Going concern

 

The financial information contained in this unaudited preliminary 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 in Note 1 to the financial report.

 

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 apply 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 31.12.2021                                                                                                             Year ended 31.12.2020
                                                                                                                                                                                                (Unaudited)                                                                                                                       (Audited)
                                                                                                Excluding exceptional items                         Exceptional items                           Total                                                   Excluding exceptional             Exceptional                             Total

note 3
items
items note 3
                                                              Notes                             $m                                                  $m                                          $m                                                      $m                                $m                                      $m
 Group Revenue                                                2,6                                           7,470.1                                                 -                                           7,470.1                                   5,129.3                                        -                          5,129.3
 Total operating costs                                        2                                         (3,891.1)                                         (177.6)                                      (4,068.7)                                        (3,537.1)                                        -                        (3,537.1)
 Operating profit from subsidiaries                           2,5                                             3,579.0                                        (177.6)                                          3,401.4                                   1,592.2                                              -                    1,592.2
 Net share of results from associates and joint ventures      2,5                                             59.7                                                       -                                            59.7                                            5.1                                    -                                 5.1
 Impairment of investment in associate                        3                                                          -                                             -                                                  -                                          -                             (80.8)                             (80.8)
 Total profit from operations, associates and joint ventures                                                  3,638.7                                         (177.6)                                          3,461.1                                  1,597.3                                    (80.8)                         1,516.5
 Investment income                                                                                           5.0                                                       -                                           5.0                                    18.9                                           -                                   18.9
 Interest expense                                                                                                 (63.4)                                                -                                           (63.4)                                 (77.1)                                          -                             (77.1)
 Other finance items                                                                                             74.4                                                   -                                            74.4                                       (45.2)                                    -                            (45.2)
 Net finance income/(expense)                                 8                                                  16.0                                                -                                              16.0                                        (103.4)                                      -                        (103.4)
 Profit before tax                                                                                           3,654.7                                         (177.6)                                             3,477.1                                     1,493.9                      (80.8)                                    1,413.1
 Income tax expense                                           9                                          (1,332.9)                                               90.6                                         (1,242.3)                                        (546.2)                                 19.7                           (526.5)
 Profit for continuing operations                                                                            2,321.8                                             (87.0)                                         2,234.8                                    947.7                                    (61.1)                                 886.6

 Discontinued operations
 Profit for the period from discontinued operations           10                                                      -                                            -                                                       -                                     7.3                                     -                                      7.3
 Profit for the period                                                                                        2,321.8                                            (87.0)                                         2,234.8                                       955.0                               (61.1)                                   893.9
 Attributable to:
 Non-controlling interests                                                                                      917.4                                             27.2                                             944.6                                     408.4                            (20.9)                                      387.5
 Profit for the period attributable to the owners of the parent                                              1,404.4                                          (114.2)                                        1,290.2                                       546.6                                    (40.2)                                 506.4

 Basic earnings per share from continuing operations          11                                             142.5                                              (11.6)                                      130.9                                              54.7                                 (4.1)                                    50.6
 From discontinued operations                                 11                                                      -                                                -                                                  -                                            0.7                                -                                     0.7
 Total continuing and discontinued operations                                                                  142.5                                             (11.6)                                             130.9                                   55.4                                      (4.1)                                 51.3

 

Consolidated Statement of Comprehensive Income

 

                                                                                       Year ended 31.12.2021                             Year ended 31.12.2020
                                                                                       (Unaudited)                                       (Audited)
                                                                                Notes  $m                                                $m
 Profit for the year                                                                         2,234.8                                                   893.9
 Items that may be or were subsequently reclassified to profit or loss:
 Losses on cash flow hedges                                                                     (90.9)                                                (32.1)
 Losses in fair value of cash flow hedges transferred to the income statement                          126.8                                                3.4
 Currency translation adjustment                                                                         (1.6)                                              0.9
 Tax relating to these items                                                                             (4.4)                                              2.4
 Total items that may be or were subsequently reclassified to profit or loss                             29.9                                          (25.4)

 Items that will not be subsequently reclassified to profit or loss:
 Actuarial gains on defined benefit plans                                       19                         3.1                                              9.8
 (Losses)/gains in fair value of equity investments                             16                      (2.1)                                               5.5
 Tax relating to these items                                                                            (2.5)                                           (2.6)
 Total Items that will not be subsequently reclassified to profit or loss                                (1.5)                                            12.7

 Total other comprehensive income/(expense)                                                              28.4                                          (12.7)

 Total comprehensive income for the period                                                          2,263.2                                            881.2
 Attributable to:
 Non-controlling interests                                                                             952.8                                           383.2
 Equity holders of the Company                                                                      1,310.4                                            498.0

 Total comprehensive income for the year - continuing operations                                    2,263.2                              873.9
 Total comprehensive income for the year - discontinued operations                                             -                         7.3
                                                                                                    2,263.2                              881.2

 

Consolidated Statement of Changes in Equity

 

For the year ended 31 December 2021 (Unaudited)

 

                                        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 2021                         89.8                             199.2                              (30.6)                             7,492.2                                 7,750.6                          2,330.5                           10,081.1
 Profit for the period                                   -                                  -                                  -                          1,290.2                                 1,290.2                             944.6                            2,234.8
 Other comprehensive income for period                   -                                  -                            20.2                                        -                                 20.2                               8.2                               28.4
 Dividends                                               -                                  -                                  -                           (710.8)                                (710.8)                           (604.5)                          (1,315.3)
 Balance at 31 December 2021                       89.8                             199.2                              (10.4)                             8,071.6                                 8,350.2                          2,678.8                           11,029.0

 

 

 

For the year ended 31 December 2020 (Audited)

 

                                                      Share       capital        Share premium  Other  reserves  (Note 23)    Retained earnings  (Note 23)   Net        Non- controlling interests  Total

 equity
                                                      $m                         $m             $m                            $m                             $m         $m                          $m
 Balance at 1 January 2020                             89.8                       199.2          (18.1)                        7,112.8                        7,383.7    2,017.3                     9,401.0
 Capital increases from non-controlling interest (1)   -                          -              -                             -                              -          210.0                       210.0
 Profit for the year                                   -                          -              -                             506.4                          506.4      387.5                       893.9
 Other comprehensive (expense)/income for the year     -                          -              (12.5)                        4.1                            (8.4)      (4.3)                       (12.7)
 Dividends                                             -                          -              -                             (131.1)                        (131.1)    (280.0)                     (411.1)
 Balance at 31 December 2020                           89.8                       199.2          (30.6)                        7,492.2                        7,750.6    2,330.5                     10,081.1

 

1.        In 2020 a capital contribution of $210 million was received
from Marubeni, the minority partner at Antucoya, in order to replace part of
Antucoya's subordinated debt financing with equity.

 

 

Consolidated Balance Sheet

                                                                     At 31.12.2021                                                           At 31.12.2020
                                                                     (Unaudited)                                                             (Audited)
 Non-current assets                                       Notes      $m                                                                      $m
 Intangible assets                                        13                                            -                                                      150.1
 Property, plant and equipment                            14                               10,538.5                                                         9,851.9
 Other non-current assets                                                                           1.3                                                            2.6
 Inventories                                              17                                    270.4                                                          278.1
 Investments in associates and joint ventures             15                                    905.8                                                          914.6
 Trade and other receivables                                                                      51.2                                                           55.9
 Derivative financial instruments                         7                                             -                                                          0.3
 Equity investments                                       16                                        8.7                                                          11.1
 Deferred tax assets                                      21                                      96.8                                                             6.4
                                                                                           11,872.7                                                       11,271.0
 Current assets
 Inventories                                              17                                    532.8                                                          592.7
 Trade and other receivables                                                                 1,146.1                                                        1,016.9
 Current tax assets                                                                               13.7                                                           49.8
 Derivative financial instruments                         7                                             -                                                          1.1
 Liquid investments                                       25                                 2,969.7                                                        2,426.0
 Cash and cash equivalents                                25                                 743.4                                                          1,246.8
                                                                                             5,405.7                                                        5,333.3
 Total assets                                                                              17,278.4                                                       16,604.3

 Current liabilities
 Short-term borrowings and leases                         18                                 (337.1)                                                       (603.4)
 Derivative financial instruments                         7                                             -                                                      (37.4)
 Trade and other payables                                                                     (829.1)                                                       (808.8)
 Short-term decommissioning & restoration provisions      20                                   (33.8)                                                          (22.2)
 Current tax liabilities                                                                      (374.2)                                                  (153.9)
                                                                                           (1,574.2)                                                     (1,625.7)
 Non-current liabilities
 Medium and long-term borrowings and leases               18                               (2,835.5)                                                   (3,151.4)
 Trade and other payables                                                                      (16.8)                                                          (11.0)
 Liabilities in relation to joint ventures                15                                       (0.6)                                                         (1.1)
 Post-employment benefit obligations                      19                                  (107.5)                                                       (123.2)
 Decommissioning & restoration provisions                 20                                  (302.3)                                                      (498.0)
 Deferred tax liabilities                                 21                               (1,412.5)                                                    (1,112.8)
                                                                                           (4,675.2)                                                     (4,897.5)
 Total liabilities                                                                         (6,249.4)                                                    (6,523.2)
 Net assets                                                                                11,029.0                                                       10,081.1

 Equity
 Share capital                                            22                                      89.8                                                           89.8
 Share premium                                            22                                    199.2                                                          199.2
 Other reserves                                           23                                    (10.4)                                                         (30.6)
 Retained earnings                                        23                                 8,071.6                                                        7,492.2
 Equity attributable to equity holders of the Company                                        8,350.2                                                        7,750.6
 Non-controlling interests                                                                   2,678.8                                                        2,330.5
 Total equity                                                                              11,029.0                                                       10,081.1

 

The preliminary information was approved by the Board of Directors on 21
February 2022.

 

 

Consolidated Cash Flow Statement

 

 

                                                                              At 31.12.2021                                             At 31.12.2020
                                                                              (Unaudited)                                               (Audited)
                                                                   Notes      $m                                                        $m

 Cash flows from operations                                        24                    4,507.7                                                         2,431.1
 Interest paid                                                                                   (60.7)                                                     (52.7)
 Income tax paid                                                                                (776.9)                                                   (319.7)
 Net cash from operating activities                                                            3,670.1                                                   2,058.7

 Investing activities
 Capital contributions and loans to associates and joint ventures  15                             (33.5)                                                       (7.2)
 Dividends from associates                                         15                              142.5                                                            -
 Acquisition of mining properties                                                                    (4.5)                                                     (1.5)
 Proceeds from sale of property, plant and equipment                                                   1.5                                                       0.8
 Purchases of property, plant and equipment                                               (1,773.0)                                                    (1,305.9)
 Net increase in liquid investments                                25                           (543.7)                                                   (886.3)
 Interest received                                                                                   7.4                                                       12.6
 Net cash used in investing activities                                                       (2,203.3)                                                 (2,187.5)

 Financing activities
 Dividends paid to equity holders of the Company                              (710.8)                                                   (131.1)
 Dividends paid to preference shareholders of the Company                                            (0.1)                                                     (0.1)
 Dividends paid to non-controlling interests                                                    (604.5)                                                   (280.0)
 Capital increase from non-controlling interest (1)                                                       -                                                  210.0
 Proceeds from issue of new borrowings                             25                              149.1                                                 2,398.6
 Repayments of borrowings                                          25                           (694.7)                                                (1,393.8)
 Repayments of lease obligations                                   25                             (88.9)                                                    (86.5)

 Net cash (used in)/generated from financing activities                                      (1,949.9)                                                       717.1

 Net (decrease)/increase in cash and cash equivalents              25                      (483.1)                                                           588.3

 Cash and cash equivalents at beginning of the period                                          1,246.8                                                       653.7
 Net (decrease)/increase in cash and cash equivalents              25                        (483.1)                                                         588.3
 Effect of foreign exchange rate changes                           25                           (20.3)                                                           4.8

 Cash and cash equivalents at end of the period                    25                          743.4                                                     1,246.8

 

1.     In 2020 a capital contribution of $210 million was received from
Marubeni, the minority partner at Antucoya, in order to replace part of
Antucoya's subordinated debt financing with equity.

 

 

Notes
1.   General information and accounting policies

a)             General information

This preliminary results announcement is for the year ended 31 December 2021
and has been prepared in accordance with UK-adopted International Accounting
Standards. The consolidated financial information has been prepared on the
going concern basis.

 

Preliminary results announcement

 

The consolidated financial information for the year ended 31 December 2021 was
approved for issue by the Board of Directors of the Company on 21 February
2022. The consolidated financial information is unaudited but is derived from
the Group's full financial accounts, which are in the final stages of being
prepared.

 

This preliminary results announcement has been prepared under the accounting
policies as set out in the statutory accounts for the year ended 31 December
2020.

 

On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into UK law and became UK-adopted International Accounting Standards,
with future changes being subject to endorsement by the UK Endorsement Board.
Antofagasta plc transitioned to UK-adopted International Accounting Standards
in its consolidated financial statements on 1 January 2021. This change
constitutes a change in accounting framework. However, there is no impact on
recognition, measurement or disclosure in the period reported as a result of
the change in framework. The consolidated financial statements of the
Antofagasta plc Group for the year ended 31 December 2021 are being prepared
in accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards.

 

The preliminary results announcement does not include all of the notes of the
type normally included in annual financial statements.

 

The information contained in this announcement for the year ended 31 December
2020 also does not constitute statutory accounts. A copy of the statutory
accounts for that year has been delivered to the Registrar of Companies. The
auditors' 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 Alternative performance measures and Production
and Sales Statistics section of this preliminary results announcement is not
derived from the statutory accounts for the years ended 31 December 2021 and
2020 and is accordingly not covered by the auditor's reports.

 

Going concern

The Directors have assessed the going concern status of the Group, considering
the period to 31 December 2023.

The Group's business activities, together with those factors likely to affect
its future performance, are set out in the Directors' Comments, and in
particular within the Review of Operations. Details of the cash flows of the
Group during the period, along with its financial position at the period-end,
are set out in the Financial Review. The condensed consolidated financial
statements include details of the Group's cash, cash equivalents and liquid
investment balances in Note 25, and details of borrowings are set out in Note
18.

When assessing the going concern status of the Group the Directors have
considered in particular its financial position, including its significant
balance of cash, cash equivalents and liquid investments and the terms and
remaining duration of the borrowing facilities in place. The Group had a
strong financial position as at 31 December 2021, with combined cash, cash
equivalents and liquid investments of $3,713.1 million. Total borrowings were
$3,172.6 million, resulting in a net cash position of $540.5million.

When assessing the prospects of the Group, the Directors have considered the
Group's copper price forecasts, the Group's expected production levels,
operating cost profile and capital expenditure. These forecasts are based on
the Group's budgets and life-of-mine models, which are also used when
assessing relevant accounting estimates. This analysis has focused on the
existing asset base of the Group, without factoring in potential development
projects, which is considered appropriate for an assessment of the Group's
ability to manage the impact of a depressed economic environment. The analysis
has only included the draw-down of existing committed borrowing facilities,
and has not assumed that any new borrowing facilities will be put in place.
The Directors have assessed the key risks which could impact the prospects of
the Group over the going concern period and consider the most relevant to be
risks to the copper price outlook, as this is the factor most likely to result
in significant volatility in earnings and cash generation. Robust down-side
sensitivity analyses have been performed, assessing the impact of:

·      A significant deterioration in the future copper price forecasts
by 10% throughout the going concern period.

·      In addition to the above deterioration in the copper price
throughout the review period, an even more pronounced short-term reduction of
15% in the copper price for a period of three months.

·      The Group's most significant individual operational risks. In
respect of the El Mauro tailings storage facility at Los Pelambres, the risk
of a major failure is considered to be extremely low, principally because of
the nature of its design and construction, as well as the rigorous on-going
monitoring and controls and its performance since it was built. Given this, it
has not been considered appropriate to include a scenario incorporating the
possible impact of a potential major dam failure within the sensitivity
analyses.

·      A shut-down of the Group's operations for a period of three
months as the result of COVID-19 or other issues.

·      The proposed new Chilean mining royalty.

 

These stress-tests each indicated results which could be managed in the normal
course of business. The analysis indicated that the Group is expected to
remain in compliance with all of the covenant requirements of its borrowings
throughout the review period and retain sufficient liquidity. Based on their
assessment of the Group's prospects and viability, the Directors have formed a
judgement, at the time of approving the preliminary results announcement, that
there are no material uncertainties that the Directors are aware of that cast
doubt on the Group's going concern status and that there is a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the period to 31 December 2023. The Directors therefore consider
it appropriate to adopt the going concern basis of accounting in preparing
this preliminary results announcement.

 

b)             Adoption of new accounting standards

Other accounting standards

The following accounting standards, amendments and interpretations became
effective in the current reporting period but the application of these
standards and interpretations had no material impact on the amounts reported
in these condensed consolidated financial statements:

·      Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16.

 

c)             Accounting standards issued but not yet effective

 The following accounting standards, interpretations and amendments have been
issued by the IASB, but are not yet effective:

 New Standards                                                                   Effective date (Subject to UK endorsement)
 IFRS 17, Insurance Contracts                                                    Annual periods beginning on or after January 1, 2023
 Amendments to IFRSs                                                             Effective date (Subject to UK endorsement)
 Deferred Tax related to Assets and Liabilities arising from a Single            Annual periods beginning on or after January 1, 2023
 Transaction (Amendments to IAS 12)
 Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)   Annual periods beginning on or after January 1, 2023
 Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice       Annual periods beginning on or after January 1, 2023
 Statement 2
 Definition of Accounting Estimates - Amendments to IAS 8                        Annual periods beginning on or after January 1, 2023
 Reference to the Conceptual Framework (Amendments to IFRS 3)                    Annual periods beginning on or after January 1, 2022
 Property, Plant and Equipment - Proceeds before Intended Use (Amendments to     Annual periods beginning on or after January 1, 2022
 IAS 16)
 Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)        Annual periods beginning on or after January 1, 2022
 Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9,  Annual periods beginning on or after January 1, 2022
 IFRS 16 and IAS 41)

 

The item which is expected to have most relevance to the Group is the
amendment to IAS 16 Property, Plant and Equipment - Proceeds before intended
use. Currently the Group deducts amounts received from the sale of products
during the initial ramp-up of new projects, before commercial production is
achieved, from the capital cost of the project. Under the amendment to IAS 16
such amounts will instead be recognised as revenue in the income statement
along with a corresponding allocation of related operating expenses, which is
likely to result in increased revenue and operating expenses and a higher
initial capitalised amount. The amendment will be applicable in the year
beginning on 1 January 2022. The amendment would apply retrospectively only to
relevant projects in progress at 1 January 2021 which were generating
proceeds, and there were no such projects at 1 January 2021.

 

 

2.   Total profit from operations, associates and joint ventures

 

                                                                  Year ended 31.12.2021                                 Year ended 31.12.2020
                                                                  (Unaudited)                                           (Audited)
                                                                  $m                                                    $m
 Revenue                                                                         7,470.1                                           5,129.3
 Cost of sales                                                             (3,297.8)                                         (2,856.9)
 Gross profit                                                                   4,172.3                                            2,272.4
 Administrative and distribution expenses                                       (550.4)                                             (484.6)
 Other operating income                                                               31.8                                               27.0
 Other operating expenses                                                        (252.3)                                            (222.6)
 Operating profit from subsidiaries                                              3,401.4                                           1,592.2
 Net share of income from associates and joint ventures                               59.7                                                 5.1
 Impairment of investment in associate                                                      -                                         (80.8)
 Total profit from operations, associates and joint ventures                     3,461.1                                           1,516.5

Other operating expenses comprise $103.2 million of exploration and evaluation
expenditure (2020 - $85.1 million), $19.8 million in respect of the employee
severance provision (2020 - $17.9 million), $11.3 million in respect of the
closure provision (2020 - $45.2 million) and $117.9 million of other expenses
(2020 - $74.5 million).

 

3.   Exceptional items

Exceptional items are material items of income and expense which are
non-regular or non-operating and typically non-cash, including impairments and
profits or losses on disposals. The tax effect of items presented as
exceptional is also classified as exceptional, as are material deferred tax
adjustments that relate to more than one reporting period. The classification
of these types of items as exceptional is considered to be useful as it
provides an indication of the earnings generated by the on-going businesses of
the Group.

2021 - Impairment of Twin Metals' assets

Twin Metals Minnesota (Twin Metals) is a wholly owned copper, nickel and
platinum group metals (PGM) underground mining project, which holds copper,
nickel, cobalt-PGM deposits in north-eastern Minnesota, US. In recent years,
Twin Metals has been progressing its Mine Plan of Operations (MPO) and Scoping
Environmental Assessment Worksheet Data Submittal, submitted in December 2019
to the US Bureau of Land Management (BLM) and Minnesota Department of Natural
Resources (DNR), respectively. However, over the past year, while the Twin
Metals project was advancing through environmental review, several actions
were taken by the federal government that have changed the potential scenarios
for the project.

 

In September 2021, the United States Forest Service (USFS) submitted an
application to withdraw approximately 225,000 acres of land in the Superior
National Forest from the scope of federal mineral leasing laws, subject to
valid existing rights.  In October 2021, the United States Bureau of Land
Management (BLM) rejected Twin Metals' Preference Right Lease Applications
(PRLAs) and Prospecting Permit Applications (PPAs). In January 2022, the
United States Department of the Interior cancelled Twin Metals' MNES-1352 and
MNES-1353 federal mineral leases. The PRLAs and federal mineral leases form a
significant proportion of the mineral resources contained within Twin Metals'
current project plan and, accordingly, it was determined that these events
collectively represented an impairment trigger as at the balance sheet date.

 

Prior to the resulting impairment assessment being performed, as at 31
December 2021, the Group had recognised an intangible asset of $150.1 million
and property, plant and equipment of $27.5 million relating to the Twin Metals
project. The intangible asset arose upon the acquisition in 2015 of Duluth
Metals, which owned a 60% stake in the Twin Metals project, with the carrying
value of the intangible asset reflecting the consideration paid for that
acquisition. The property, plant and equipment balances reflected the
historical cost of acquiring those assets. These carrying values prior to the
impairment did not, therefore, reflect an estimate of the commercial potential
of the project as at 31 December 2021.

 

The Group believes that Twin Metals has a valid legal right to the mining
leases and a strong case to defend its legal rights. Although the Group
intends to pursue validation of those rights, considering the time and
uncertainty related to any legal action to challenge the government decisions,
an impairment has been recognised as at 31 December 2021 in respect of the
$177.6 million of intangible assets and property, plant and equipment relating
to the Twin Metals project.

 

2021 - Recognition of previously unrecognised deferred tax assets

At 31 December 2021, the Group recognised $90.6 million of previously
unrecognised deferred tax assets relating to tax losses available for offset
against future profits. In previous periods, the Group had reviewed these tax
losses for potential recognition, and concluded that it was not probable that
future taxable profits would be available against which the losses could be
utilised, and accordingly had not recognised a deferred tax asset in respect
of those losses. In making this assessment in previous periods, the Group had
taken into account that the relevant Group entity (Antucoya) had consistently
generated taxable losses in recent years, was continuing to generate taxable
losses in the then current period, and was forecast to continue generating
taxable losses in future periods, and the Group could not use these taxable
losses to offset profits in other Group entities. During 2021, there has been
a significant improvement in the current copper price (with the copper price
reaching record levels in nominal terms during the year) and also the
near-term copper price outlook. As a result of this improvement in the copper
price environment, the relevant Group entity began to generate taxable profits
in 2021. The improved near-term outlook for the copper price also means that
the entity is now forecast to generate sufficient future taxable profits to
fully utilise its remaining tax losses. Current forecasts indicate that the
losses will be utilised over approximately the next eight years (compared with
the remaining mine life for Antucoya of 22 years). The forecasts are based on
Antucoya's life-of-mine model. When the tax losses are utilised in future
years, it is expected that the impact will be recorded within the underlying
tax charge for that year, in order to match with the similar classification of
the corresponding taxable profits of that year.

 

2020 - Impairment of the investment in Hornitos

On 31 March 2020, the Group agreed to dispose of its 40% interest in Hornitos
coal-fired power station to ENGIE Energía Chile S.A. ("ENGIE"), the owner of
the remaining 60% interest. This was part of the value accretive renegotiation
of Centinela's power purchase agreement which as a result will be wholly
supplied from lower cost renewable sources from 2022. In accordance with the
terms of the agreement, the Group disposed of its investment to ENGIE in
December 2021 for a nominal consideration, and has not been entitled to
receive any further dividend income from Hornitos from the date of the
agreement. Accordingly, the Group no longer had any effective economic
interest in the results or assets of Hornitos from 31 March 2020 onwards, and
therefore recognised an impairment of $80.8 million in respect of its
investment in associate balance during 2020, and no longer recognised any
share of Hornitos' results. The post-tax impact of the impairment was $61.1
million, of which $40.2 million was attributable to the equity owners of the
Company.

 

4.   Asset sensitivities

Based on an assessment of both qualitative and quantitative factors, there
were no indicators of potential impairment, or reversal of previous
impairments, for the Group's non-current assets associated with its mining
operations at the 2021 year-end, and accordingly no impairment tests have been
performed. The quantitative element of the trigger assessment, which is based
on the Group's life-of-mine models, provides an indication of what the
approximate recoverable amount of the Group's operations would be, were a full
impairment test under IAS 36 to be performed. In order to provide an
indication of the sensitivities of the approximate recoverable amount of the
Group's mining operations, a sensitivity analysis has been performed on the
indicative valuation, prepared as part of the Group's impairment indicator
analysis.

 

This impairment indicator valuation exercise demonstrated positive headroom
for all of the Group's mining operations, with the recoverable amount of the
assets in excess of their carrying value.

 

Relevant aspects of these indicative valuation estimates include:

 

Fair value less costs of disposal and value in use valuations

 

If a full IAS 36 impairment test were to be prepared, which was not the case
as at 31 December 2021, the recoverable amount is the higher of fair value
less costs of disposal and value in use. Fair value less costs of disposal
reflects the net amount the Group would receive from the sale of the asset in
an orderly transaction between market participants. For mining assets, this
would generally be determined based on the present value of the estimated
future cash flows arising from the continued use, further development or
eventual disposal of the asset. Value in use reflects the expected present
value of the future cash flows which the Group would generate through the
operation of the asset in its current condition, without taking into account
potential enhancements or further development of the asset. The fair value
less costs of disposal valuation will normally be higher than the value in use
valuation for mining companies, and accordingly the Group typically applies
this valuation estimate in its impairment or valuation assessments.

 

Climate risks

 

The indicative valuations incorporate estimates of the potential future costs
relating to climate risks. The Group will report against the recommendations
of the Task Force on Climate-related Financial Disclosures (TCFD) in the 2021
Annual Report. This process included scenario analyses assessing the potential
future impact of transition and physical risks. In preparing this analysis,
the Group used two climate scenarios to capture the broadest possible spectrum
of climate-related risks and opportunities, an aggressive mitigation scenario
and a high warming scenario. The total of the estimated potential transition
and physical risk impacts under this approach is likely to overstate the
probable overall impact, for example because if relatively aggressive actions
are taken in order to minimise transition risks, this should reduce the risk
of relatively significant physical impacts. However, in order to incorporate a
simple and conservative estimate of the potential future costs of climate
risks we have combined the estimates of the potential costs of the transition
risk and physical risk scenarios, and incorporated those total cost forecasts
into the indicative valuations.

 

 

Copper price outlook

 

The assumption to which the value of the assets is most sensitive is the
future copper price. The copper 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 for the longer term. A long-term
copper price of $3.30/lb has been used in the base valuations used in the
impairment indicator assessment. As an additional down-side sensitivity, a
valuation was performed with a long-term copper price of $2.97/lb, reflecting
the lower quartile price in the consensus of analyst forecasts. Los Pelambres,
Centinela and Zaldívar still showed positive headroom in this alternative
down-side scenario. However, the Antucoya valuation indicated a potential
deficit of $160 million. This was a simple sensitivity exercise, looking at an
illustrative change in the forecast long-term copper price in isolation. 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. In
particular, given that copper exports account for over 50% of Chile's exports,
movements in the US dollar/Chilean peso exchange rate have historically been
highly correlated to the copper price, and a decrease in the copper price is
likely to result in a weakening of the Chilean peso, with a resulting
reduction in the Group's operating costs and capital expenditure. These likely
cost reductions, as well as potential operational changes which could be made
in a weaker copper price environment, could partly mitigate the impact of the
lower copper price modelled in these estimated potential sensitivities.

 

The US dollar/Chilean peso exchange rate

 

The value of the assets is also sensitive to movements in the US
dollar/Chilean peso exchange rate. A long-term exchange rate of Ch$770/$1 has
been used in the base valuations used in the impairment indicator assessment.
As an additional downside sensitivity, an indicative valuation was performed
with a 10% stronger long-term Chilean peso exchange rate assumption. Los
Pelambres, Centinela, and Zaldivar all still showed positive headroom in this
alternative downside scenario. In the case of Antucoya, this downside scenario
indicated a potential break-even position. As noted above, movements in the US
dollar/Chilean peso exchange rate have historically been highly correlated to
the copper price and so, in reality, the exchange rate would not be expected
to move in isolation.

 

Other relevant assumptions

 

In addition to the impact of climate change risks, the future copper price and
the US dollar/Chilean peso exchange rate, the indicative valuations are
sensitive to the assumptions in respect of future production levels, operating
costs, sustaining and development capital expenditure, potential changes in
the Chilean mining royalty regime and the discount rate used to determine the
present value of the future cash flows.

 

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 as part of the
impairment indicator assessment.

 

The COVID-19 situation is not expected to have a significant negative impact
on the future production or capital projects of the Group's mining operations.
The forecasts within the indicative valuations reflect estimates of the
expected on-going costs of managing the situation over the near-term.

 

As indicated by the sensitivities for movements in the long-term copper price
and the US dollar/Chilean peso exchange rate described above, Antucoya is
particularly sensitive to movements in the input assumptions. The impairment
trigger assessments for Los Pelambres and Centinela are not sensitive to
movement in these assumptions.  While Zaldivar is also not particularly
sensitive to changes in the assumptions used in the indicative valuation
prepared as part of the quantitative impairment indicator assessment, the
conclusion that there are no impairment indicators at Zaldivar does reflect
certain assumptions about future operational considerations, which include the
following:

 

-       an Environmental Impact Assessment (EIA) has been submitted to
extend the permits for water extraction (which currently expire during 2025)
and general mining activities (which currently expire at the end of 2023)
until 2031. Subsequent applications will be required in due course to further
extend the permits beyond 2031. The indicative valuation assumes that
essential permits will be extended to the end of the mine life, and other
permits can be extended, or alternative solutions to enable the ongoing
operation of the mine can be implemented. However, if essential permits are
not extended, this is likely to be considered an indicator of a potential
impairment, requiring a full impairment assessment at that point.

 

-       Zaldívar's final pit phase, which represents approximately 20%
of current ore reserves, impacts a portion of Minera Escondida's mine
property, as well as infrastructure owned by third parties (road, railway,
powerline and pipelines). The indicative valuation assumes that mining of the
final pit phase, which is subject to agreements or easements to access these
areas and relocate this infrastructure, will be possible.

 

Indicators of potential reversal of previous impairments

 

Antucoya recognised impairments totalling $716 million in 2012 and 2016. Of
the original impairment amounts approximately $550 million remains in effect
unamortised as at 31 December 2021. Based on an assessment of both qualitative
and quantitative factors, there were no indicators of a potential reversal of
these previous impairments at the 2021 year-end. As noted above, the
indicative valuation exercise for Antucoya at the 2021 year-end indicated
positive headroom for Antucoya. However, the headroom position is relatively
marginal - the down-side sensitivity reflecting a 10% reduction in the
long-term copper price forecast resulted in a potential deficit of $160
million; the sensitivity using a 10% stronger long-term Chilean peso exchange
rate assumption indicated a potential break-even position. Given this marginal
headroom position, reasonably possible changes in the general market
environment, the operational performance of the mine or the regulatory and
taxation environment in Chile could result in a break-even or a potential
deficit position for Antucoya and hence it was concluded that there was no
impairment reversal trigger as at 31 December 2021.

 

However, if there is a future significant improvement in the performance and
value of Antucoya, for example due to one, or a combination of, the following
- a significant increase in the long-term copper price outlook, strong
operational performance that is expected to be sustained into the future,
and/or positive resolution of uncertainty with the regulatory and taxation
environment in Chile - a full or partial reversal of these impairments could
be triggered in future periods.

 

 

5.   Segmental analysis

The Group's reportable segments are as follows:

 

·       Los Pelambres

·       Centinela

·       Antucoya

·       Zaldívar

·       Exploration and evaluation

·       Corporate and other items

·       Transport division

 

For management purposes, the Group is organised into two business divisions
based on their products - Mining and Transport. The mining division is split
further for management reporting purposes to show results by mine and
exploration activity. Los Pelambres produces primarily copper concentrate and
molybdenum as a by-product. Centinela produces copper concentrate containing
gold as a by-product, molybdenum concentrates and copper cathodes. Antucoya
and Zaldívar produce copper cathodes. The transport division provides rail
and road cargo transport together with a number of ancillary services. All the
operations are based in Chile. The Exploration and evaluation segment incurs
exploration and evaluation expenses. "Corporate and other items" comprises
costs incurred by the Company, Antofagasta Minerals S.A., 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-maker (the Group's Chief Executive Officer)
monitors the operating results of the business segments separately for the
purpose of making decisions about resources to be allocated and 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 31.12.2021 (Unaudited)

 

                                                                    Los Pelambres                           Centinela                           Antucoya                            Zaldívar                        Exploration and evaluation(2)             Corporate and other items               Total Mining                    Transport division                Total
                                                                    $m                                      $m                                  $m                                  $m                              $m                                        $m                                      $m                              $m                                $m

 Revenue                                                                    3,621.0                              2,981.3                                 697.8                                     -                                    -                                        -                          7,300.1                           170.0                           7,470.1
 Operating costs excluding depreciation                                (1,095.0)                              (1,062.0)                              (360.7)                                       -                      (103.2)                                     (76.0)                             (2,696.9)                         (106.3)                        (2,803.2)
 Depreciation and amortisation                                         (281.8)                               (654.7)                                (98.3)                                         -                                    -                            (13.0)                           (1,047.8)                             (30.9)                      (1,078.7)
 Loss on disposals                                                           (3.7)                                     (4.0)                               (0.5)                                   -                                    -                                        -                            (8.2)                            (1.0)                               (9.2)
 Provision against the carrying value of assets(4)                   -                                       -                                   -                                   -                                   (177.6)                               -                                       (177.6)                         -                                 (177.6)
 Operating profit/(loss)                                                    2,240.5                           1,260.6                                    238.3                                     -                        (280.8)                                (89.0)                                  3,369.6                              31.8                         3,401.4
 Net share of income/(loss) from associates and joint ventures                         -                                     -                                   -                          68.5                     -                                                     (9.0)                                  59.5                            0.2                               59.7
 Investment income                                                                 1.4                                   1.5                                 0.3                                   -                                    -                                    1.7                                    4.9                           0.1                                 5.0
 Interest expense                                                                (3.5)                             (16.4)                            (15.5)                                        -                                    -                          (27.2)                                      (62.6)                       (0.8)                               (63.4)
 Other finance items                                                             41.1                                  26.1                                  4.9                                   -                                    -                                    5.1                                  77.2                         (2.8)                                74.4
 Profit/(loss) before tax                                                   2,279.5                              1,271.8                                 228.0                              68.5                          (280.8)                                    (118.4)                                3,448.6                             28.5                          3,477.1
 Tax                                                                   (743.7)                                   (382.0)                                  (7.1)                                    -                                    -                            (188.3)                            (1,321.1)                         (11.8)                        (1,332.9)
 Tax - exceptional items(3)                                                            -                                     -                             90.6                                    -                                    -                                        -                               90.6                                 -                            90.6
 Profit/(loss) for the period                                               1,535.8                                  889.8                               311.5                              68.5                             (280.8)                                (306.7)                                 2,218.1                             16.7                          2,234.8

 Non-controlling interests                                                     607.5                                 252.2                                 84.4                                    -                                    -                                    0.5                              944.6                                   -                          944.6

 Profit/(loss) for the period attributable to owners of the parent             928.3                                 637.6                               227.1                              68.5                            (280.8)                                  (307.2)                                1,273.5                             16.7                          1,290.2

 EBITDA(1)                                                                  2,526.0                              1,919.3                                 337.1                            172.8                              (103.2)                                 (84.0)                                 4,768.0                             68.2                          4,836.2
 Additions to non-current assets
 Additions to property, plant and equipment                                    903.1                                 826.4                                 62.7                                    -                                0.6                                    30.4                             1,823.2                             32.7                          1,855.9

 Segment assets and liabilities
 Segment assets                                                             5,667.1                              5,924.2                             1,735.9                                       -                                    -                             2,661.1                             15,988.3                            384.3                         16,372.6
 Investments in associates and joint ventures                                          -                                     -                                   -                        900.0                      -                                                           -                             900.0                              5.8                            905.8
 Segment liabilities                                                     (2,642.0)                            (1,797.0)                              (548.7)                                       -                                    -                        (1,174.5)                            (6,162.2)                             (87.2)                        (6,249.4)

 

(1 )EBITDA 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 )Operating cash outflow in the exploration and evaluation segment was $49.9
million.

(3) During 2021, there was an exceptional item of $90.6 million which
reflects the recognition of a deferred tax asset at Antucoya (see Note 3).

(4) An impairment has been recognised as at 31 December 2021 in respect of the
$177.6 million of intangible assets and property, plant and equipment relating
to the Twin Metals project, presented as an exceptional item.

 

 

For the year ended 31 December 2020 (Audited)

 

                                                                    Los Pelambres                                   Centinela                                   Antucoya                                    Zaldívar          Exploration and evaluation(2)  Corporate and other items  Total Mining                        Transport division                        Total
                                                                    $m                                              $m                                          $m                                          $m                $m                             $m                         $m                                  $m                                        $m

 Revenue                                                                        2,655.1                                  1,844.5                                         480.3                              -                 -                              -                                4,979.9                               149.4                                   5,129.3
 Operating costs excluding depreciation                                           (992.1)                                  (932.8)                                     (314.5)                              -                  (85.1)                                  (66.2)               (2,390.7)                                (91.4)                               (2,482.1)
 Depreciation and amortisation                                                    (252.6)                                  (662.9)                                        (94.6)                            -                 -                               (7.8)                         (1,017.9)                                (30.8)                               (1,048.7)
 Loss on disposals                                                   (2.5)                                                       (1.8)                                               -                      -                 -                              -                                        (4.3)                             (2.0)                                       (6.3)
 Operating profit/(loss)                                                        1,407.9                                      247.0                                          71.2                            -                  (85.1)                         (74.0)                          1,567.0                                  25.2                                 1,592.2
 Equity accounting profit /(loss)                                   -                                                                    -                                           -                      12.2               -                              (6.5)                                     5.7                             (0.6)                                         5.1
 Impairment of investment in associate(3)                           -                                                         (95.6)                                                 -                      -                 -                              -                                     (95.6)                              14.8                                      (80.8)
 Net share of results from associates and joint ventures            -                                                         (95.6)                                                 -                      12.2              -                               (6.5)                                (89.9)                              14.2                                      (75.7)
 Investment income                                                                        4.7                                      4.3                                         0.8                          -                 -                              9.0                                     18.8                                 0.1                                      18.9
 Interest expense                                                    (4.3)                                                    (24.9)                                      (25.5)                            -                 -                               (20.7)                               (75.4)                               (1.7)                                    (77.1)
 Other finance items                                                                 (26.0)                                   (13.7)                                         (4.0)                          -                 -                               (5.5)                                (49.2)                                 4.0                                    (45.2)
 Profit/(loss) before tax                                                       1,382.3                                      117.1                                          42.5                            12.2               (85.1)                         (97.7)                          1,371.3                                  41.8                                 1,413.1
 Tax                                                                              (435.8)                                     (23.0)                                         (0.3)                          -                 -                               (59.2)                            (518.3)                                 (8.2)                                 (526.5)
 Profit/(loss) for the year from continuing operations                              946.5                                       94.1                                        42.2                            12.2               (85.1)                         (156.9)                             853.0                                33.6                                     886.6

 Profit for the period from discontinued operations                 -                                                                    -                                           -                      -                 -                              7.3                                        7.3                                     -                                     7.3

 Profit/(loss) for the year                                                         946.5                                       94.1                                        42.2                            12.2               (85.1)                         (149.6)                             860.3                                33.6                                     893.9

 Non-controlling interests                                                          371.5                                       12.9                                           3.1                          -                 -                              -                                    387.5                                         -                               387.5

 Profit/(loss) for the period attributable to owners of the parent                  575.0                                       81.2                                        39.1                            12.2               (85.1)                         (149.6)                             472.8                                33.6                                     506.4

 EBITDA(1)                                                                      1,663.0                                      911.7                                       165.8                              95.5               (85.1)                         (72.7)                          2,678.2                                  61.0                                 2,739.2
 Additions to non-current assets
 Additions to property, plant and equipment                                         827.3                                    441.8                                          44.6                            -                 -                              8.4                              1,322.1                                  26.2                                 1,348.3

 Segment assets and liabilities
 Segment assets                                                                 5,475.9                                  5,898.8                                     1,641.5                                -                 -                                     2,284.2                15,300.4                                 382.9                                15,683.3
 Deferred tax assets                                                -                                               -                                           -                                           -                 -                              2.7                        2.7                                 3.7                                       6.4
 Investments in associates and joint ventures                       -                                                                    -                                           -                            909.0       -                              -                                    909.0                                   5.6                                   914.6
 Segment liabilities                                                          (2,700.1)                                (1,823.2)                                       (702.5)                              -                 -                                  (1,202.6)                  (6,428.4)                                (94.8)                               (6,523.2)

 

(1 )EBITDA 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 )Operating cash outflow in the exploration and evaluation segment was $43.1
million

(3) On 31 March 2020, the Group agreed to dispose of its 40% interest in
Hornitos coal-fired power station to ENGIE Energía Chile S.A. ("ENGIE"), the
owner of the remaining 60% interest. This has resulted in a $80.8 million
impairment in respect of the Group's investment in associate balance (see Note
3).

 

 

b)   Entity wide disclosures

 

Revenue by product

                                    Year ended                                                          Year ended 31.12.2020

                                    31.12.2021
                                    $m                                                                  $m
 Copper
  -  Los Pelambres                                           3,097.0                                                2,269.2
  -  Centinela concentrates                                  1,735.4                                                   908.6
  -  Centinela cathodes                                         774.1                                                  599.1
  -  Antucoya                                                   693.3                                                  475.9
 Provision of shipping services(1)
  -  Los Pelambres                                                57.8                                                   54.4
  -  Centinela concentrates                                       46.8                                                   31.8
 -  Centinela cathodes                                              4.3                                                    4.8
 -  Antucoya                                                        4.5                                                    4.4
 Gold
  -  Los Pelambres                                                91.0                                                 106.4
  -  Centinela                                                  345.4                                                  251.3
 Molybdenum
  -  Los Pelambres                                              329.2                                                  181.8
  -  Centinela                                                    37.2                                                   27.7
 Silver
  -  Los Pelambres                                                46.0                                                   43.3
  -  Centinela                                                    38.1                                                   21.2

 Total Mining                                                7,300.1                                                4,979.9
 Transport division                                             170.0                                                  149.4
                                                             7,470.1                                                5,129.3

( )

(1) These prior year figures have been re-presented to separately analyse
revenue from the sale of products and from the provision of shipping services.

 

Revenue by location of customer

                              Year ended                                                       Year ended 31.12.2020

                              31.12.2021
                              $m                                                               $m
 Europe
  -  United Kingdom                                         54.4                                              123.3
  -  Switzerland                                       1,303.7                                                593.5
  -  Spain                                                  67.6                                                29.3
  -  Germany                                              121.5                                               116.4
  -  Rest of Europe                                       177.4                                                 92.3
 Latin America
  -  Chile                                                282.0                                               224.4
  -  Rest of Latin America                                214.7                                               182.0
 North America
  -  United States                                        666.5                                               216.5
 Asia Pacific
  -  Japan                                             1,842.3                                             1,631.1
  -  China                                             1,236.9                                                531.4
  -  Singapore                                            726.1                                               667.5
  -  South Korea                                          322,6                                               353.4
  -  Hong Kong                                            217.1                                               235.7
  -  Rest of Asia                                         237.3                                               132.5
                                                       7,470.1                                             5,129.3

 

 

Information about major customers

 

In the year ended 31 December 2021, the Group´s mining revenue included
$1,015.1 million related to one large customer that individually accounted for
more than 10% of the Group's revenue (year ended 31 December 2020 - one large
customer representing $763.4 million).

 

Non-current assets by location of asset

 

                  Year ended 31.12.2021                                     Year ended 31.12.2020

                                                                            Restated
                  $m                                                        $m
  -  Chile                              11,715.2                                    11,023.2
  -  USA                                     1.0                                          178.3
                                        11,716.2                                    11,201.5

 

The above amounts reflect non-current assets excluding financial assets and
deferred tax assets. The non-current assets shown above exclude $96.7 million
($6.4 million - 2020) of deferred tax assets, $51.1 million ($51.7 million -
2020) of receivables (being financial assets), $8.7 million of equity
investments ($11.1 million - 2020) and nil ($0.3 million - 2020) of derivative
instruments. The prior period comparatives have been restated to exclude
financial assets and deferred tax assets, resulting in a reduction in respect
of the assets located in Chile of $69.5 million as at 31 December 2020.

 

6.   Group Revenue

Copper and molybdenum concentrate sale contracts and copper cathode sale
contracts 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 four months after shipment to the
customer. For sales contracts which contains provisional pricing mechanisms,
the total receivable balance is measured at fair value through profit or loss.
Gains and losses from the mark-to-market of open sales are recognised through
adjustments to revenue in the income statement and to trade receivables 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.

With sales of concentrates, which are sold to smelters and roasting plants for
further processing into fully refined metal, the price of the concentrate
reflects the market value of the fully refined metal less a "treatment and
refining charge" deduction, to reflect the lower value of this partially
processed material compared with the fully refined metal.

The shipping service represents a separate performance obligation, and is
recognised separately from the sale of the material over time as the shipping
service is provided.

The total revenue from contracts with customers and the impact of provisional
pricing adjustments in respect of concentrate and cathode sales is as follows:

                                                                            Year ended 31.12.2021                             Year ended 31.12.2020
                                                                            $m                                                $m

 Revenue from contracts with customers
 Sale of products                                                                            6,809.0                                       4,617.3
 Provision of shipping services associated with the sale of products (1)                          113.4                                         95.4
 Transport division (2)                                                                        170.0                                    149.4

 Provisional pricing adjustments in respect of copper, gold and molybdenum                     377.7                                       267.2

 Total revenue                                                                                  7,470.1                            5,129.3

 

(1)The Group sells a significant proportion of its products on Cost, Insurance
& freight (CIF) incoterms, which means that the Group is responsible for
shipping the product to a destination port specified by the customer

(2)The transport division provides rail and road cargo transport together with
a number of ancillary services.

 

The categories of revenue which are principally affected by different economic
factors are the individual product types. A summary of revenue by product is
set out in Note 5.

The following tables set out the impact of provisional pricing adjustments,
derivative commodity instruments and treatment and refining charges for the
more significant products. The revenue from these products, along with the
revenue from other products and services, is reconciled to total revenue in
Note 5.

 

For the year ended 31 December 2021

                                                                              $m                          $m                          $m                        $m                        $m                                 $m                              $m                                      $m
                                                                              Los Pelambres               Centinela                   Centinela                 Antucoya                  Los Pelambres                      Centinela                       Los Pelambres                           Centinela
                                                                              Copper concentrate          Copper concentrate          Copper cathodes           Copper cathodes           Gold in concentrate                Gold in concentrate             Molybdenum concentrate                  Molybdenum concentrate
                                                                                        2,966.6                     1,685.3                     824.3                     749.7                          93.3                             354.8                             322.1                                     38.4
 Provisionally priced sales of products
 Revenue from freight services                                                         57.8                 46.8                               4.3                       4.5                           -                             -                                          -                                      -
                                                                                   3,024.4                     1,732.1                      828.6                    754.2                93.3                                       354.8                           322.1                                       38.4
 Effects of pricing adjustments to previous year invoices
 Reversal of mark-to-market adjustments at the end of the previous year             (58.7)                    (26.8)                      0.1                           (0.5)                            -                            (0.9)                               0.2                                    (0.3)
 Settlement of sales invoiced in the previous year                                  175.1                          74.7                   1.8                        1.5                         (1.0)                              (4.0)                                  6.4                                      1.2
 Total effect of adjustments to previous year invoices in the current period      116.4                              47.9                 1.9                         1.0                           (1.0)                       (4.9)                                   6.6                                0.9

 Effects of pricing adjustments to current period invoices
 Settlement of sales invoiced in the current period                                92.2                             58.8              10.2                             6.0                        (1.1)                          (4.1)                             30.6                                       5.8
 Mark-to-market adjustments at the end of the current period                            12.0                      5.2                          0.3                  0.8                                -                                 0.4                             (5.7)                                   (0.7)
 Total effect of adjustments to current period invoices                              104.2                      64.0                    10.5                            6.8                         (1.1)                             (3.7)                          24.9                                      5.1

 Total pricing adjustments                                                     220.6                           111.9                    12.4                     7.8                              (2.1)                                (8.6)                         31.5                                           6.0

 Realised losses on commodity derivatives                                              -                              -                  (62.6)                      (64.2)                        -                                     -                                -                                      -

 Revenue before deducting treatment and refining charges                         3,245.0                      1,844.0                 778.4                     697.8                             91.2                               346.2                              353.6                                   44.4

 Treatment and refining  charges                                                      (90.2)                      (61.8)                     -                          -                          (0.2)                              (0.8)                         (24.4)                                      (7.2)
 Revenue
                                                                                3,154.8                   1,782.2                       778.4                   697.8                          91.0                            345.4                                329.2                                     37.2

 

The revenue from the individual products shown in the above table excludes
revenue from sales of silver and the transport division, which are presented
in  the revenue by product table in note 5 to reconcile to Group Revenue.

 

With sales of concentrates at Los Pelambres and Centinela, which are sold to
smelters and roasting plants for further processing into fully refined metal,
the price of the concentrate invoiced to the customer reflects the market
value of the fully refined metal less a "treatment and refining charge"
deduction, to reflect the lower value of this partially processed material
compared with the fully refined metal. For accounting purposes, the revenue
amount is the net of the market value of fully refined metal less the
treatment and refining charges. Under the standard industry definition of cash
costs, treatment and refining charges are regarded as an expense and part of
the total cash cost figure.

 

 

For the year ended 31 December 2020(1)

( )

                                                                              $m                  $m                  $m               $m               $m                                $m                                $m                                $m
                                                                              Los Pelambres       Centinela           Centinela        Antucoya         Los Pelambres                     Centinela                         Los Pelambres                     Centinela
                                                                              Copper concentrate  Copper concentrate  Copper cathodes  Copper cathodes  Gold in concentrate               Gold in concentrate               Molybdenum concentrate            Molybdenum concentrate
                                                                              2,202.3             917.5               590.0            470.4                          104.9                             250.6                             205.0                                  31.6
 Provisionally priced sales of products
 Revenue from freight services                                                54.4                31.8                4.8              4.4              -                                 -                                 -                                 -
                                                                              2,256.7             949.3               594.8            474.8            104.9                             250.6                             205.0                             31.6
 Effects of pricing adjustments to previous year invoices
 Reversal of mark-to-market adjustments at the end of the previous year        (29.1)              (15.2)              (0.4)            (0.4)           -                                  (1.2)                            0.4                               -
 Settlement of sales invoiced in the previous year                             (43.6)              (18.7)              (0.3)            (0.3)           0.2                               3.7                                (1.5)                             (0.2)
 Total effect of adjustments to previous year invoices in the current period   (72.7)              (33.9)              (0.7)            (0.7)           0.2                               2.5                                (1.1)                             (0.2)

 Effects of pricing adjustments to current period invoices
 Settlement of sales invoiced in the current period                           194.6               67.0                11.2             7.8              1.5                                (2.0)                            4.6                               2.1
 Mark-to-market adjustments at the end of the current period                  58.7                26.8                 (0.1)           0.5              -                                 0.9                                (0.2)                            0.3
 Total effect of adjustments to current period invoices                       253.3               93.8                11.1             8.3              1.5                                (1.1)                            4.4                               2.4

 Total pricing adjustments                                                    180.6               59.9                10.4             7.6              1.7                               1.4                               3.3                               2.2

 Realised losses on commodity derivatives                                     -                   -                    (1.3)            (2.1)           -                                 -                                 -                                 -

 Revenue before deducting treatment and refining charges                      2,437.3             1,009.2             603.9            480.3            106.6                             252.0                             208.3                             33.8

 Treatment and refining charges                                                (113.6)             (68.8)             -                -                 (0.2)                             (0.7)                             (26.5)                            (6.1)
 Revenue
                                                                              2,323.7             940.4               603.9            480.3            106.4                             251.3                             181.8                             27.7

( )

The revenue from the individual products shown in the above table is
reconciled to total revenue in Note 5, excluding silver revenue

(1) These prior year figures have been re-presented to separately analyse
revenue from the sale of products and from the provision of shipping services.

 

With sales of concentrates at Los Pelambres and Centinela, which are sold to
smelters and roasting plants for further processing into fully refined metal,
the price of the concentrate invoiced to the customer reflects the market
value of the fully refined metal less a "treatment and refining charge"
deduction, to reflect the lower value of this partially processed material
compared with the fully refined metal. For accounting purposes, the revenue
amount is the net of the market value of fully refined metal less the
treatment and refining charges. Under the standard industry definition of cash
costs, treatment and refining charges are regarded as an expense and part of
the total cash cost figure.

 

 

(i)   Copper concentrate

 

The typical period for which sales of copper concentrate remain open until
settlement occurs is a range of approximately three to four months from
shipment date.

                                            At 31.12.2021                                    At 31.12.2020
 Sales                              Tonnes                  177,900                                          162,300
 Average mark-to-market price       $/lb                          4.41                                             3.52
 Average provisional invoice price  $/lb                          4.37                                             3.28

 

 

(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 31.12.2021                                    At 31.12.2020
 Sales                              Tonnes                    15,000                                           13,800
 Average mark-to-market price       $/lb                          4.42                                             3.52
 Average provisional invoice price  $/lb                          4.39                                             3.50

 

 

(iii) Gold in concentrate

 

The typical period for which sales of gold in concentrate remain open until
settlement is approximately one month from shipment date.

 

                                            At 31.12.2021                                 At 31.12.2020
 Sales                              Ounces                    32,300                                        16,300
 Average mark-to-market price       $/oz                        1,801                                         1,917
 Average provisional invoice price  $/oz                        1,791                                         1,861

 

 

(iv) Molybdenum concentrate

 

The typical period for which sales of molybdenum remain open until settlement
is approximately two months from shipment date.

 

 

                                            At 31.12.2021                                 At 31.12.2020
 Open Sales                         Tonnes                      2,400                                         2,000
 Average mark-to-market price       $/lb                        18.60                                           9.34
 Average provisional invoice price  $/lb                        19.65                                           9.38

 

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 receivables in the balance sheet. The effect of
mark-to-market adjustments on the balance sheet at the end of each period are
as follows:

 

                                             Gain/(loss) on debtors of period end
                                             mark-to-market adjustments
                                             Year ended 31.12.2021                               Year ended 31.12.2020
                                             $m                                                  $m
 Los Pelambres - copper concentrate                                12.0                                                58.7
 Los Pelambres - molybdenum concentrate                            (5.7)                                               (0.2)
 Centinela - copper concentrate                                      5.2                                               26.8
 Centinela - molybdenum concentrate                                (0.7)                                                 0.3
 Centinela - gold in concentrate                                     0.4                                                 0.9
 Centinela - copper cathodes                                         0.3                                               (0.1)
 Antucoya - copper cathodes                                          0.8                                                 0.5
                                                                   12.3                                                86.9

 

7.   Financial instruments

a)             Categories of financial instruments

The carrying value of financial assets and financial liabilities is shown
below:

                                   For the year ended 31.12.2021
                                                  At fair value through profit and loss                                           At fair value through other comprehensive income                                                    Held at amortised cost                                                                Total

                                                  $m                                                                              $m                                                                                                  $m                                                                                    $m
 Financial assets
 Equity investments                                                                      -                                                                                                                                                                                                                                                        8.7
                                                                                                                                  8.7                                                                                                 -
 Loans and receivables                                                         1,011.7                                                                                                                                                                                   83.3                                                              1,095.0
                                                                                                                                  -
 Cash and cash equivalents                                                               -                                                                                                                                            743.4                                                                                 743.4
                                                                                                                                  -
 Liquid investments                                                            2,969.7                                                                                                                                                                                                                                                     2,969.7
                                                                                                                                  -                                                                                                   -
                                                                               3,981.4                                                                                                                                                                              826.7                                                                  4,816.8
                                                                                                                                  8.7

 Financial liabilities
 Trade and other payables                                                                -                                                                                                                                                                            (835.6)                                                                (835.6)
                                                                                                                                  -
 Borrowings and leases                                                                   -                                                                                                                                                                         (3,172.6)                                                              (3,172.6)
                                                                                                                                  -
                                                                                         -                                                                                                                                                                         (4,008.2)                                                              (4,008.2)
                                                                                                                                  -

                                   For the year ended 31.12.2020

                                   At fair value through profit and loss                                                                                                            At fair value through other comprehensive income                                             Held at amortised cost                                                             Total

                                   $m                                                                                                                                               $m                                                                                           $m                                                                                 $m
 Financial assets
 Derivative financial assets       1.4                                                                                                                                              -                                                                                            -                                                                                  1.4
 Equity investments                -                                                                                                                                                11.1                                                                                         -                                                                                  11.1
 Loans and receivables             808.0                                                                                                                                            -                                                                                            184.6                                                                              992.6
 Cash and cash equivalents         -                                                                                                                                                -                                                                                            1,246.8                                                                            1,246.8
 Liquid investments                2,426.0                                                                                                                                          -                                                                                            -                                                                                  2,426.0
                                   3,235.4                                                                                                                                          11.1                                                                                         1,431.4                                                                            4,677.9

 Financial liabilities
 Derivative financial liabilities   (37.4)                                                                                                                                          -                                                                                            -                                                                                   (37.4)
 Trade and other payables           (0.3)                                                                                                                                           -                                                                                                                              (815.8)                                           (816.1)
 Borrowings and leases             -                                                                                                                                                -                                                                                             (3,754.8)                                                                          (3,754.8)
                                    (37.7)                                                                                                                                          -                                                                                             (4,570.6)                                                                          (4,608.3)

 

The fair value of the fixed rate bond included within the "Borrowings and
leases" category was $476.2 million at 31 December 2021 compared with its
carrying value of $496.1 million. The fair value of all other financial assets
and financial liabilities carried at amortised cost approximates the carrying
value presented above.

 

                                                                         Year ended 31.12.2021                        Year ended 31.12.2020
 Financial assets
 Trade and other receivables (non-current) per balance sheet                                 51.2                                         55.9
 Trade and other receivables (current) per balance sheet                                1,146.1                                      1,016.9
 Total trade and other receivables per balance sheet                                    1,197.3                                      1,072.8
 Less: non-financial assets (including prepayments and VAT receivables)                  (102.3)                                         (80.2)
 Total loans and receivables (financial assets)                                         1,095.0                                         992.6

 Financial liabilities
 Trade and other payables (current) per balance sheet                                     (829.1)                                      (808.8)
 Trade and other payables (non-current) per balance sheet                                   (16.8)                                       (11.0)
 Total trade and other payables per balance sheet                                        (845.9)                                      (819.8)
 Less: non-financial liabilities (including VAT payables)                                    10.3                                           3.7
  Total loans and payables (financial liabilities)                                       (835.6)                                      (816.1)

 

 

Fair value of financial instruments

An analysis of financial assets and financial liabilities measured at fair
value is presented below:

                                        For the year ended 31.12.2021
                                        Level 1                                     Level 2                                           Level 3                               Total
                                        $m                                          $m                                                $m                                    $m
 Financial assets
 Derivatives financial assets (a)                            -                                           -                                              -                                         -
 Equity investments (b)                                  8.7                                             -                                              -                                      8.7
 Loans and receivables (c)                                   -                              1,011.7                                                     -                             1,011.7
 Liquid investment (d)                            -                                                      2,969.7                                        -                             2,969.7
                                                  8.7                                        3,981.4                                                    -                             3,990.1

 Financial liabilities
 Derivatives financial liabilities (a)                       -                                           -                                              -                                         -
 Trade and other payables                                    -                                           -                                              -                                         -
                                                             -                                           -                                              -                                         -

 

                                        For the year ended 31.12.2020
                                        Level 1                                  Level 2                              Level 3   Total
                                        $m                                       $m                                   $m        $m
 Financial assets
 Derivatives financial assets (a)       -                                        1.4                                  -         1.4
 Equity investments (b)                                   11.1                   -                                    -         11.1
 Loans and receivables (c)              -                                                      808.0                  -                         808.0
 Liquid investment (d) (restated)                 -                              2,426.0                              -                     2,426.0
                                                  11.1                                         3,235.4                -                     3,246.5

 Financial liabilities
 Derivatives financial liabilities (a)  -                                                       (37.4)                -          (37.4)
 Trade and other payables               -                                         (0.3)                               -          (0.3)
                                        -                                                       (37.7)                -          (37.7)

 

Recurring fair value measurements are those that are required in the balance
sheet at the end of each reporting year.

a)     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.
Hedging instruments in place during 2021 and 2020 related to commodity and
foreign exchange options.

b)     Equity 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.

c)     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 receivables 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.

d)     Liquid investments are highly liquid current asset investments that
are valued reflecting market prices at the period end. These are level 2
inputs as described below. The 2020 comparative figures have been restated to
reclassify these amounts from level 1 to level 2 inputs.

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 2021, there were
no transfers between levels in the hierarchy.

 

b)             Derivative financial instruments

 

The Group periodically uses derivative financial instruments to reduce
exposure to foreign exchange, interest rate and commodity price movements. The
Group does not use such derivative instruments for trading purposes. The Group
has applied the hedge accounting provisions of IFRS 9 Financial Instruments.
The effective portion of changes in the fair value of derivative financial
instruments that are designated and qualify as hedges of future cash flows
have been recognised directly in equity, with such amounts subsequently
recognised in profit or loss in the period when the hedged item affects profit
or loss. Any ineffective portion is recognised immediately in profit or loss.
Realised gains and losses on commodity derivatives recognised in profit or
loss are recorded within revenue. The time value element of changes in the
fair value of derivative options is recognised within other comprehensive
income. Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of host contracts and the
host contracts are not carried at fair value. Changes in fair value are
reported in profit or loss for the year.

 

8.   Net finance income/(expense)

 

                                                                        Year ended 31.12.2021                               Year ended 31.12.2020
                                                                        $m                                                  $m
 Investment income
 Interest receivable                                                                            3.4                                                 3.4
 Gains on liquid investments held at fair value through profit or loss                          1.6                                               15.5
                                                                                                5.0                                               18.9

 Interest expense
 Interest expense                                                                           (63.4)                                              (77.1)
                                                                                            (63.4)                                              (77.1)

 Other finance items
 Unwinding of discount on provisions                                    (5.4)                                               (5.9)
 Adjustment to provision discount rates                                 30.0                                                (11.8)
 Effects of changes in foreign exchange rates                           49.9                                                (28.4)
 Preference dividends                                                                         (0.1)                                               (0.1)
                                                                                              74.4                                              (45.2)
 Net finance income/(expenses)                                                                16.0                                           (103.4)

 

During 2021, amounts capitalised and consequently not included within the
above table were as follows: $2.1 million at Centinela (year ended 31 December
2020 - $5.7 million) and $12.1 million at Los Pelambres (year ended 31
December 2020 - $21.0 million).

The interest expense shown above includes $7.9 million in respect of leases
(2020 - $9.7 million).

 

 

9.   Taxation

The tax charge for the period comprised the following:

 

                                                          Year ended 31.12.2021                         Year ended 31.12.2020
                                                          $m                                            $m

 Current tax charge
 Corporate tax (principally first category tax in Chile)             (560.8)                                        (353.5)
 Mining tax (royalty)                                                (250.0)                                        (106.1)
 Withholding tax                                                     (224.7)                                          (55.8)
 Exchange gains on corporate tax balances                                       -                                          0.1
                                                                  (1,035.5)                                         (515.3)

 Deferred tax
 Corporate tax (principally first category tax in Chile)               (237.4)                                            (1.1)
 Mining tax (royalty)                                                        0.9                                           4.2
 Withholding tax                                                           29.7                                       (14.3)
                                                                     (206.8)                                          (11.2)

 Total tax charge (income tax expense)                           (1,242.3)                                          (526.5)

 

 

The rate of first category (i.e. corporate) tax in Chile is 27.0% (2020 -
27.0%).

In addition to first category tax and the mining tax, the Group incurs
withholding taxes on any remittance of profits from Chile. Withholding tax is
levied on remittances of profits from Chile at 35% less first category (i.e.
corporation) tax already paid in respect of the profits to which the
remittances relate.

 

The Group's mining operations are also subject to a mining tax (royalty).
Production from Los Pelambres, Antucoya, Encuentro (oxides), the Tesoro North
East pit and the Run-of-Mine processing at Centinela Cathodes is subject to a
rate of between 5-14%, depending on the level of operating profit margin, and
production from Centinela Concentrates and the Tesoro Central and Mirador pits
is subject to a rate of 5% of taxable operating profit.

 

                                                                                    Year ended                            Year ended                            Year ended                            Year ended

                                                                                    Excluding exceptional items           Including exceptional items           Excluding exceptional items           Including exceptional items

31.12.2021
31.12.2021
31.12.2020
31.12.2020
                                                                                    $m               %                    $m               %                    $m               %                    $m               %
 Profit before tax                                                                  3,654.7                               3,477.1                               1,493.9                               1,413.1
 Tax at the Chilean corporate tax rate of 27%                                       (986.8)          27                   (938.8)          27                   (403.4)          27.0                 (381.5)          27.0
 Mining Tax (royalty)                                                               (243.8)          6.7                  (243.8)          7.0                  (101.3)          6.8                  (101.3)          7.2
 Deduction of mining royalty as an allowable expense in determination of first      67.8             (1.9)                67.8             (1.9)                28.1             (1.9)                28.1             (2.0)
 category tax
 Items not deductible from first category tax                                       (31.6)           0.9                  (31.6)           0.9                  (9.8)            0.7                  (9.8)            0.6
 Adjustment in respect of prior years                                               (12.1)           0.3                  (12.1)           0.3                  (1.6)            0.1                  (1.6)            0.1
 Withholding tax                                                                    (195.0)          5.3                  (195.0)          5.6                  (70.0)           4.7                  (70.0)           5.0
 Tax effect of share of profit of associates and joint ventures                     16.1             (0.4)                16.1             (0.5)                1.4              (0.1)                1.4              (0.1)
 Impact of previously unrecognised tax losses on current tax                        52.5             (1.4)                52.5             (1.5)                10.5             (0.7)                10.5             (0.7)
 Impact of recognition of previously unrecognised tax losses on deferred tax        -                -                    90.6             (2.6)                -                -                    -                -
 Impairment of investment in associate                                              -                -                    -                -                    -                -                    (2.2)            0.2
 Provision against carrying value of assets                                         -                -                    (48.0)           1.4                  -                -                    -                -
 Net other items                                                                    -                -                    -                -                    (0.1)            -                    (0.1)            -
 Tax expense and effective tax rate for the Year ended                              (1,332.9)        36.5                 (1,242.3)        35.7                 (546.2)          36.6                 (526.5)          37.3

 

The effective tax rate excluding exceptional items of 36.5% varied from the
statutory rate principally due to the mining tax (royalty) (net impact of
$176.0 million / 4.8% including the deduction of the mining tax (royalty) as
an allowable expense in the determination of first category tax), the
withholding tax relating to the remittance of profits from Chile (impact of
$195.0 million / 5.3%), items not deductible for Chilean corporate tax
purposes, principally the funding of expenses outside of Chile (impact of
$31.6 million / 0.9%) and adjustments in respect of prior years (impact of
$12.1 million / 0.3%), partly offset by the impact of previously unrecognised
tax losses (impact of $52.5 million / 1.4%)  and the impact of the
recognition of the Group's share of profit from associates and joint ventures,
which are included in the Group's profit before tax net of their respective
tax charges (impact of $16.1 million / 0.4%).

 

The impact of the exceptional items on the effective tax rate including
exceptional items was $42.6 million / 1.2%.

 

The main factors which could impact the sustainability of the Group's existing
effective tax rate are:

 

·      The level of future distributions made by the Group's Chilean
subsidiaries out of Chile, which could result in increased withholding tax
charges.

 

·      The impact of expenses which are not deductible for Chilean first
category tax. Some of these expenses are relatively fixed costs, and so the
relative impact of these expenses on the Group's effective tax rate will vary
depending on the Group's total profit before tax in a particular year.

 

There are no significant tax uncertainties which would require critical
judgements, estimates or potential provisions.

 

10. Discontinued operation

There were no profits from discontinued operations in the year ended 2021.

In 2016, the Group disposed of Minera Michilla SA, with the profit on
disposal, along with the results for that year, being presented on the "Profit
for the period from discontinued operations" line in the income statement. The
Group retained certain residual options over the Michilla operation, and in
December 2020 the current owner of Michilla paid the Group $10.0 million in
order to extinguish those options, resulting in a post-tax gain for the Group
of $7.3 million. Consistent with the original presentation in 2016, this gain
was reflected on the "Profit for the period from discontinued operations" line
in the income statement for the year ended 2020.

 

11. Earnings per share

                                                                                   Year ended 31.12.2021                                 Year ended 31.12.2020
                                                                                   $m                                                    $m
 Profit for the period attributable to equity holders of the Company (exc.                     1,404.4                                                     546.6
 exceptional items)
 Exceptional Items                                                                            (114.2)                                                     (40.2)
 Less profit from discontinued operations                                                                 -                                                  (7.3)
 Profit for the period attributable to equity holders of the Company (inc.                     1,290.2                                                     499.1
 exceptional items) from continuing operations

                                                                                   Number                                                Number
 Ordinary shares in issue throughout each period                                             985,856,695                                              985,856,695

                                                                                   Year ended 31.12.2021                                 Year ended 31.12.2020
                                                                                   US cent                                               US cent
 Basic earnings per share (exc. exceptional items) from continuing operations                    142.5                                                       54.7
 Basic earnings per share (exceptional items) from continuing operations                          (11.6)                                                     (4.1)
 Basic earnings per share (inc. exceptional items) from continuing operations                     130.9                                                     50.6
 Basic earnings per share from discontinued operations                                                     -                                                  0.7
 Total continuing and discontinued operations (inc. exceptional items)                            130.9                                                      51.3

 

Basic earnings per share are calculated as profit after tax and
non-controlling interests, based on 985,856,695 (2020: 985,856,695) ordinary
shares.

 

There was no potential dilution of earnings per share in either year set out
above, and therefore diluted earnings per share did not differ from basic
earnings per share as disclosed above.

 

Reconciliation of basic earnings per share from continuing operations:

                                                                                         Year ended 31.12.2021                                         Year ended 31.12.2020
 Profit for the year attributable to equity holders of the Company including     $m                        1,290.2                                                             506.4
 exc. Items
 Less: profit for discontinued operations attributable to equity holders of the                                      -                                                           (7.3)
 Company
 Profit from continuing operations attributable to equity holders of the                                   1,290.2                                                             499.1
 Company
 Ordinary shares                                                                 number            985,856,695                                                      985,856,695
 Basic earnings per share from continuing operations                                                          130.9                                                              50.6

 

 

12. Dividends

The Board has recommended a final dividend of 118.9 cents per ordinary share
or $1,172.1 million in total (2020 - 48.5 cents per ordinary share or $478.1
million in total). The interim dividend of 23.6 cents per ordinary share or
$232.7 million in total was paid on 1 October 2021 (2020 interim dividend of
6.2 cents per ordinary share or $61.1 million in total). This gives total
dividends proposed in relation to 2021 (including the interim dividend) of
142.5 cents per share or $1,404.8 million in total (2020 - 54.7 cents per
share or $539.3 million in total).

Dividends per share actually paid in the year and recognised as a deduction
from net equity under IFRS were 72.1 cents per ordinary share or $710.8
million in total (2020 - 13.3 cents per ordinary share or $131.1 million in
total) being the interim dividend for the year and the final dividend proposed
in respect of the previous year.

Further details of the currency election timing and process (including the
default currency of payment) are available on the Antofagasta plc website
(www.antofagasta.co.uk) or from the Company's registrar, Computershare
Investor Services PLC on +44 370 702 0159.

 

13. Intangible asset

                                               At 31.12.2021                                         At 31.12.2020
                                               $m                                                    $m

 Balance at the beginning of the year                            150.1                                                 150.1
 Provision against carrying value                              (150.1)                                -
 Balance at the end of the period                                        -                                             150.1

 

The $150.1 million intangible asset reflects the value of Twin Metals' mining
licences assets included within the corporate segment. As explained in note 3,
an impairment provision has been recognised in respect of this asset as at 31
December 2021.

 

14. Property, plant and equipment

                                                                 Mining                                          Railway and other transport                       At 31.12.2021                                     At 31.12.2020
                                                                 $m                                              $m                                                $m                                                $m

 Balance at the beginning of the year                                           9,582.7                                           269.2                                            9,851.9                                     9,556.7
 Additions                                                                      1,823.2                                             32.7                                           1,855.9                                     1,348.3
 Additions - depreciation capitalised                                                72.0                                                -                                              72.0                                        67.8
 Reclassifications                                                                  (2.2)                                             0.6                                               (1.6)                                             -
 Capitalisation of critical spare parts                                                0.4                                            0.5                                                 0.9                                       10.2
 Capitalisation of interest                                                          14.2                                                -                                              14.2                                          8.0
 Adjustment to capitalised decommissioning provisions (Note 20)                 (119.9)                                                  -                                        (119.9)                                           59.4
 Depreciation expensed in the year                                           (1,047.8)                                          (30.9)                                         (1,078.7)                                    (1,048.7)
 Depreciation capitalised in PP&E                                                 (72.0)                                                 -                                            (72.0)                                     (67.8)
 Net effect of depreciation capitalised in inventories                               54.1                                                -                                              54.1                                     (74.8)
 Asset disposals                                                                   292.1                                      (302.9)                                                 (10.8)                                        (7.2)
 Provision against carrying value                                                  (27.5)                         -                                                                   (27.5)                          -
 Balance at the end of the period                                            10,569.3                                            (30.8)                                         10,538.5                                       9,851.9

 

During the year ended 31 December 2021, the net effect of depreciation
capitalised within property, plant and equipment or inventories in respect of
assets relating to Los Pelambres, Centinela and Antucoya is $17.9million (31
December 2020 - $142.6 million), and has accordingly been excluded from the
depreciation charge recorded in the income statement as shown in Note 5.

 

At 31 December 2021, the Group had entered into contractual commitments for
the acquisition of property, plant and equipment amounting to $890.6 million
(31 December 2020 - $849.5 million).

 

As explained in note 3, an impairment provision has been recognised in respect
of $27.5 million of property, plant and equipment relating to the Twin Metals
project.

 

Depreciation capitalised in property, plant and equipment of $72.0 million
related to the depreciation of assets used in mine development (operating
stripping) at Centinela, Los Pelambres and Antucoya (at 31 December 2020 -
$67.8 million).

 

 

15. Investment in associates and joint ventures

 

                                                            ATI(ii)           Minera Zaldívar(iii)            Tethyan Copper(iv)                    For the year ended                          For the year ended

                                                                                                                                                    31.12.2021                                  Restated

                                                                                                                                                                                                 31.12.2020
                                                            $m                $m                              $m                                    $m                                          $m

 Balance at the beginning of the year                       5.6                      909.0                                      -                            914.6                                         1,024.8
 Obligations on behalf of JV at the beginning of the year       -                    -                             (1.1)                                     (1.1)                                               (1.8)
 Capital contribution                                       -                          -                             9.5                                          9.5                                           31.1
 Impairment of investment in associate (i)                    -                    -                                    -                                           -                                          (80.8)
 Share of profit/(loss) before tax                            0.2                    99.0                           (9.0)                                      90.2                                             12.2
 Share of tax                                               -                 (30.5)                                   -                                   (30.5)                                                (7.1)
 Share of profit/(loss) from associate                      0.2                   68.5                             (9.0)                                        59.7                                              5.1
 Dividends receivable                                       -                   (77.5)                                   -                                  (77.5)                                             (65.0)
 Balance at the end of the period                                  5.8        900.0                                    -                                   905.8                                              914.6
 Obligations on behalf of JV at the end of the year           -                              -                             (0.6)                                       (0.6)                                     (1.1)

                                                            ATI               Minera                          Tethyan Copper                        For the year ended                          For the year ended

                                                                              Zaldívar                                                              31.12.2021                                  Restated

                                                                                                                                                                                                 31.12.2020
                                                            $m                $m                              $m                                    $m                                          $m

 Share of profit/(loss) from associates and joint ventures  0.2               68.5                            (9.0)                                 59.7                                        5.1

 

 

The investments which are included in the $905.2 million balance at 31
December 2021 are set out below:

 

Investment in associates

 

(i)            On 31 March 2020, the Group agreed to dispose of its
40% interest in Hornitos coal-fired power station to ENGIE Energía Chile S.A.
("ENGIE"), the owner of the remaining 60% interest. This was part of the value
accretive renegotiation of Centinela's power purchase agreement which as a
result will be wholly supplied from lower cost renewable sources from 2022. In
accordance with the terms of the agreement, the Group disposed of its
investment to ENGIE in December 2021 for a nominal consideration, and has not
been entitled to receive any further dividend income from Hornitos from the
date of the agreement. Accordingly, the Group no longer had any effective
economic interest in the results or assets of Hornitos from 31 March 2020
onwards, and therefore recognised an impairment of $80.8 million in respect of
its investment in associate balance during 2020, and no longer recognised any
share of Hornitos' results. The post-tax impact of the provision was $61.1
million, of which $40.2 million was attributable to the equity owners of the
Company.

 

(ii)           The Group's 30% interest in ATI, which operates a
concession to manage installations in the port of Antofagasta.

 

Investment in joint ventures

 

(iii)          The Group's 50% interest in Minera Zaldívar SpA
("Zaldívar").

 

(iv)           The Group's 50% interest in Tethyan Copper Company
Limited ("Tethyan"), which is a joint venture with Barrick Gold Corporation in
respect of the Reko Diq project in the Islamic Republic of Pakistan
("Pakistan"). Tethyan has been pursuing arbitration claims against Pakistan
following the unlawful denial of a mining lease for the project in 2011.
Details in respect of the arbitration are set out in Note 27.

 

As the net carrying value of the interest in Tethyan is negative it is
included within non-current liabilities, as the Group is liable for its share
of the joint venture's obligations.

 

Summarised financial information for the associates at December 2021 is as
follows:

 

                                           ATI                                          Total                              Total
                                           31.12.2021                                   31.12.2021                         31.12.2020
                                           $m                                           $m                                 $m
 Cash and cash equivalents                 1.2                                          1.2                                0.2
 Current assets                            13.7                                         13.7                               11.3
 Non-current assets                        99.3                                         99.3                               108.2
 Current liabilities                                          (22.5)                                  (22.5)               (19.9)
 Non-current liabilities                                      (75.0)                                  (75.0)               (83.5)
 Revenue                                   47.2                                         47.2                               40.4
 Profit/(loss) from continuing operations  1.3                                          1.3                                (1.9)
 Total comprehensive income/(expense)      1.3                                          1.3                                (1.9)

 

Summarised financial information for the joint ventures at December 2021 is as
follows:

 

                                       Minera                                  Tethyan                                 Total                         Total
                                       Zaldívar                                Copper
                                       31.12.2021                              31.12.2021                              31.12.2021                    31.12.2020
                                       $m                                      $m                                      $m                            $m
 Cash and cash equivalents             170.7                                   3.6                                     174.3                         285.2
 Current assets                        759.2                                    -                                      759.2                         677.2
 Non-current assets                    1,792.5                                 -                                       1,792.50                      1,856.3
 Current liabilities                                   (224.5)                                  (5.1)                             (229.6)            (296.2)
 Non-current liabilities                        (662.7)                                         (0.1)                             (662.8)            (670.5)
 Revenue                               849.2                                    -                                      849.2                         599.3
 Profit/(loss) after tax               137.1                                                 (18.0)                    119.1                         11.4
 Total comprehensive income/(expense)  137.1                                                 (18.0)                    119.1                         11.4

 

The above summarised financial information is based on the amounts included in
the IFRS Financial Statements of the associate or joint venture (100% of the
results or balances of the associate or joint venture, rather than the Group's
proportionate share), after the Group's fair value adjustments.

 

16. Equity investments

                                           At 31.12.2021                                   At 31.12.2020
                                           $m                                              $m
 Balance at the beginning of the year                          11.1                                                5.1
 Movements in fair value                                       (2.1)                                               5.5
 Foreign currency exchange difference                          (0.3)                                               0.5
 Balance at the end of the period                                8.7                                             11.1

 

Equity investments represent those investments which are not subsidiaries,
associates or joint ventures and are not held for trading purposes. The fair
value of all equity investments are based on quoted market prices.

 

17. Inventories

                                                    At 31.12.2021                                At 31.12.2020
                                                    $m                                           $m
 Current:
 Raw materials and consumables                                        155.6                      178.2
 Work in progress                                                     316.5                      339.3
 Finished goods                                                         60.7                     75.2
                                                                      532.8                      592.7

 Non-current:
 Work in progress                                                     270.4                      278.1

 Total current and non-current inventories                            803.2                      870.8

 

18. Borrowings and leases

                                       Note    At 31.12.2021                                       At 31.12.2020
                                               $m                                                  $m
 Los Pelambres
 Senior loan                           (i)                (1,188.3)                                              (1,288.1)
 Leases                                (ii)                      (54.8)                                                (91.4)
 Centinela
 Senior loan                           (iii)                  (386.8)                                               (496.5)
 Subordinated debt                     (iv)                             -                                           (203.0)
 Leases                                (v)                       (59.8)                                                (78.0)
 Antucoya
 Senior loan                           (vi)                    (196.3)                                              (261.1)
 Subordinated debt                     (vii)                   (184.5)                                              (191.5)
 Short-term loan                       (viii)                    (35.0)                                                (75.0)
 Leases                                (ix)                      (23.4)                                                (19.9)
 Corporate and other items
 Senior loan                           (x)                     (497.3)                                              (496.6)
 Bond                                  (xi)                    (496.1)                                              (495.6)
 Leases                                (xii)                     (20.4)                                                (18.6)
 Railway and other transport services
 Senior loan                           (xiii)                    (25.8)                                               (36.5)
 Leases                                (xiv)                       (1.4)                                                 (0.3)
 Preference shares                     (xv)                        (2.7)                                                 (2.7)
 Total                                              (3,172.6)                                                    (3,754.8)

 

(i) The senior loan at Los Pelambres are divided in three tranches. The first
tranche has a remaining duration of 4 years and has an interest rate of US
LIBOR six-month rate plus 1.05%.  The second tranche has a remaining duration
of 7 years and has an interest rate of US LIBOR six-month rate plus 0.85%. The
third tranche has a remaining duration of 6.5 years and has an interest rate
of US LIBOR six-month rate plus 1.10%. As at 31 December 2021, $1,420 million
of the loan facility had been drawn-down and $209 million had been repaid. The
loans are subject to financial covenants which require that specified net debt
to EBITDA and EBITDA to finance expense ratios are maintained.

(ii) Leases at Los Pelambres are denominated in US dollars with an average
interest rate of US LIBOR six-month rate plus 1.74% and a remaining duration
of 0.5 years.

(iii) The senior loan at Centinela is US dollars denominated with a duration
of 4 years and an interest rate of US LIBOR six-month rate plus 0.95%. The
loan is subject to financial covenants which require that specified net debt
to EBITDA and EBITDA to finance expense ratios are maintained.

(iv) The US dollar denominated subordinated debt at Centinela was repaid on 19
November 2021.

(v) Leases at Centinela are denominated in US dollars with an average interest
rate of US LIBOR six-month rate plus 4.8% and a remaining duration of 5
years.

(vi) The senior loan at Antucoya represents a US dollar denominated syndicated
loan. This loan has a remaining duration of 3 years and has an interest rate
of US LIBOR six-month rate plus 1.3%. The loan is subject to financial
covenants which require that specified net debt to EBITDA and EBITDA to
finance expense ratios are maintained.

(vii) Subordinated debt at Antucoya is US dollar denominated, provided to
Antucoya by Marubeni Corporate with a remaining duration of 3 years and an
interest rate of US LIBOR six-month rate plus 3.65%. Subordinated debt
provided by Group companies to Antucoya has been eliminated on consolidation.

(viii) The short- duration loan at Antucoya is US dollar denominated,
comprising a working capital loan for an average period of 0.8 years and has
an interest rate of US LIBOR six-month rate plus a weighted average spread of
0.25%.

(ix) Leases at Antucoya are denominated in US dollars with an average interest
rate of US LIBOR six-month rate plus 2.0% and a remaining duration of 2.5
years.

(x) Senior loan at Corporate (Antofagasta plc) is US dollar denominated with
an interest rate of US LIBOR six-month rate plus 2.25% and has a remaining
duration of 4 years.

(xi) Antofagasta plc in October 2020 issued a corporate bond for $500 million
with a 10 year tenor and a yield of 2.415%.

(xii) Leases at Corporate and other items are denominated in Unidades de
Fomento (inflation-linked Chilean pesos) and have a remaining duration of 5
years and are at fixed rates with an average interest rate of 5.2%.

(xiii) Long-term loans at The Transport division are US dollar denominated,
and remaining duration of 1.5 years and an interest rate of US LIBOR six-month
rate plus 1.06%.

(xiv) Leases at The Transport division are US dollar denominated in with an
average interest rate of US LIBOR six-month rate plus 3.2% and a remaining
duration of 5 years.

(xv) The preference shares are Sterling-denominated and issued by Antofagasta
plc. There were 2 million shares of £1 each authorised, issued and fully paid
at 31 December 2018. The preference shares are non-redeemable and are entitled
to a fixed cumulative dividend of 5% per annum. On winding up, they are
entitled to repayment and any arrears of dividend in priority to ordinary
shareholders, but are not entitled to participate further in any surplus. Each
preference share carries 100 votes in any general meeting of the Company.

 

                                      At 31.12.2021                             At 31.12.2020
                                      $m                                        $m
 Short-term borrowings                               (337.1)                                    (603.4)
 Medium and long-term borrowings               (2,835.5)                                   (3,151.4)
 Total                                           (3,172.6)                                  (3,754.8)

 

At 31 December 2021, $639.5 million (31 December 2020 - $673.1 million) of the
borrowings has fixed rate interest and $2,533.1 million (December 2020 -
$3,079.0 million) has floating rate interest. The Group periodically enters
into interest rate derivative contracts to manage its exposure to interest
rates.

 

19. Post-employment benefit obligation

 

                                                 For the year ended 31.12.2021                   For the year ended 31.12.2020
                                                 $m                                              $m
 Balance at the beginning of the year                           (123.2)                                          (118.7)
 Current service cost                                               (19.8)                                          (17.9)
 Actuarial gains                                                       3.1                                             9.8
 Unwinding of discount on provisions                                  (2.8)                                           (3.3)
 Adjustment to provision discount rates          (0.8)                                           (1.6)
 Paid in the year                                                    16.4                                            14.5
 Foreign currency exchange difference                                19.6                                             (6.0)
 Balance at the end of the year                                 (107.5)                                          (123.2)

 

The post-employment benefit obligation relates to the provision for severance
indemnities which are payable when an employment contract comes to an end, in
accordance with normal employment practice in Chile and other countries in
which the Group operates.  The severance indemnity obligation is treated as
an unfunded defined benefit plan, and the calculation is based on valuations
performed by an independent actuary.

 

20. Decommissioning and restoration and other long term provisions

                                                 For the year ended 31.12.2021                 For the year ended 31.12.2020
                                                 $m                                            $m
 Balance at the beginning of the year                           (520.2)                                       (413.3)
 Charge to operating profit in the year                           (11.3)                                        (45.2)
 Unwinding of discount on provisions                                 (2.6)                     (2.6)
 Adjustment to provision discount rates          30.8                                          (9.2)
 Capitalised adjustment to provision                               119.9                                         (59.4)
 Utilised in the year                                                33.8                                          22.2
 Foreign currency exchange difference                                13.5                                        (12.7)
 Balance at the end of the year                                 (336.1)                                       (520.2)

 

 

                                For the year ended 31.12.2021              For the year ended 31.12.2020
                                $m                                         $m
 Short-term provisions                            (33.8)                                     (22.2)
 Long-term provisions                           (302.3)                                    (498.0)
 Total                                          (336.1)                                    (520.2)

 

 

Decommissioning and restoration costs relate to the Group's mining operations.
Costs are estimated on the basis of a formal closure plan and are subject to
regular independent formal review by Sernageomin, the Chilean government
agency which regulates the mining industry in Chile. There have not been any
significant updates to the mining operations closure plans approved by
Sernageomin during the year. During 2019, the Los Pelambres, Centinela and
Zaldívar balances were updated to reflect new plans approved by Sernageomin
during that year.  The provision balance reflects the present value of the
forecast future cash flows expected to be incurred in line with the closure
plans, discounted using Chilean real interest rates with durations
corresponding with the timings of the closure activities. At 31 December 2021,
the real discount rates ranged from 2.31% to 2.54% (31 December 2020: 0.5% to
0.9%).

 

It is estimated that the provision will be utilised from 2021 until 2064 based
on current mine plans, with approximately 22% of the total provision balance
expected to be utilised between 2021 and 2030, approximately 46% between 2031
and 2040, approximately 9% between 2041 and 2050 and approximately 23% between
2051 and 2068.

 

Given the long-term nature of these balances, it is possible that future
climate risks could impact the appropriate amount of these provisions, both in
terms of the nature of the decommissioning and site rehabilitation activities
that are required, or the costs of undertaking those activities. The Group
will report against the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD) in the 2021 Annual Report. This process included
scenario analyses assessing the potential future transition and physical
risks. As a simple high-level sensitivity, we have considered whether the
level of estimated costs relating to the potential future risks identified
under the scenario analysis could indicate a general level of future cost
increases as a consequence of climate risks which could indicate a significant
potential impact on these provision balances. This analysis did not indicate a
significant potential impact on the decommissioning and restoration provision
balances. However, more detailed specific analysis of the potential impacts of
climate risks in future periods could result in adjustments to these provision
balances. When future updates to the closure plans are prepared and submitted
to Sernageomin for review and approval, it is likely that there will be more
detailed consideration of potential climate risk impacts which may need to be
incorporated into the plan assumptions. In addition, Sernageomin may introduce
new regulations or guidance in respect of climate risks which may need to be
addressed in future updates to the Group's closure plans.

 

 

21. Deferred tax assets and liabilities

                                                     At 31.12.2021                                         At 31.12.2020
                                                     $m                                                    $m
 Net position at the beginning of the year                       (1,106.4)                                             (1,097.0)
 Charge to tax on profit in year                                    (206.8)                                                 (11.2)
 Deferred tax recognised directly in equity                             (2.5)                                                    1.7
 Disposal                                                                      -                                                 0.1
 Net position at the end of the year                             (1,315.7)                                             (1,106.4)

 

 

 Analysed between:
 Net deferred tax assets                                   96.8                                           6.4
 Net deferred tax liabilities                       (1,412.5)                                    (1,112.8)
 Net position                                       (1,315.7)                                    (1,106.4)

 

The deferred tax balance of $1,315.7 million (2020 - $1,106.4 million)
includes $1,274.6 million (2020 - $1,053.4 million) expected to crystalise in
more than one year. All amounts are shown as non-current on the face of the
balance sheet as required by IAS 12 Income Taxes.

Deferred tax assets and deferred tax liabilities have been offset where they
relate to income taxes levied by the same taxation authority and the relevant
Group entity has a legally enforceable right to set off current tax assets
against current tax liabilities.

At 31 December 2021, the Group recognised $90.6 million of previously
unrecognised deferred tax assets relating to tax losses available for offset
against future profits. In previous periods, the Group had reviewed these tax
losses for potential recognition, and concluded that it was not probable that
future taxable profits would be available against which the losses could be
utilised, and accordingly had not recognised a deferred tax asset in respect
of those losses. In making this assessment in previous periods, the Group had
taken into account that the relevant Group entity (Antucoya) had consistently
generated taxable losses in recent years, was continuing to generate taxable
losses in the then current period, and was forecast to continue generating
taxable losses in future periods. During 2021, there has been a significant
improvement in the current copper price (with the copper price reaching record
levels in nominal terms during the year) and also the near-term copper price
outlook. As a result of this improvement in the copper price environment, the
relevant Group entity began to generate taxable profits in 2021. The improved
near-term outlook for the copper price also means that the entity is now
forecast to generate sufficient future taxable profits to fully utilise its
remaining tax losses. Current forecasts indicate that the losses will be
utilised over approximately the next eight years (compared with the remaining
mine life for Antucoya of 22 years). The forecasts are based on Antucoya's
life-of-mine model. When the tax losses are utilised in future years, it is
expected that the impact will be recorded within the underlying tax charge for
that year, in order to match with the similar classification of the
corresponding taxable profits of that year.

 

22. Share capital and share premium

There was no change in share capital or share premium in the year ended 2021
or 2020. Details are shown in the Consolidated Statement of Changes in Equity.

 

23. Other reserves and retained earnings

                                                                                    At 31.12.2021                                         At 31.12.2020
                                                                                    $m                                                    $m
 Share premium
 At 1 January and 31 December                                                                         199.2                                                 199.2
 Hedging reserve (1)
 At 1 January                                                                                          (23.9)                                                  (5.0)
 Parent and subsidiaries' net cash flow hedge fair value losses                                     (100.4)                                                  (24.2)
 Parent and subsidiaries' net cash flow hedge losses transferred to the income                     126.8                                                        3.4
 statement
 Tax on the above                                                                                        (2.5)                                                  1.9
 At 31 December                                                                                           -                                                  (23.9)
 Equity investment revaluation reserve (2)
 At 1 January                                                                                            (5.3)                                               (10.8)
 (Losses)/gains on equity investment                                                                     (2.1)                                                  5.5
 At 31 December                                                                                          (7.4)                                                 (5.3)
 Foreign currency translation reserve (3)
 At 1 January                                                                                            (1.4)                                                 (2.3)
 Currency translation adjustment                                                                         (1.6)                                                  0.9
 At 31 December                                                                                          (3.0)                                                 (1.4)
 Total other reserves per balance sheet                                                                (10.4)                                                (30.6)

 Retained earnings
 At 1 January                                                                                      7,492.2                                               7,112.8
 Parent and subsidiaries' profit for the year                                                      1,230.5                                                  582.1
 Equity accounted units' profit/(loss) after tax for the year                                           59.7                                                 (75.7)
 Actuarial gains/(loss) (4)                                                                                   -                                                 4.1
                                                                                                   8,782.4                                               7,623.3
 Dividends paid                                                                                     (710.8)                                               (131.1)
 At 31 December                                                                                    8,071.6                                               7,492.2

 

(1) The hedging reserve records gains or losses on cash flow hedges that are
recognised initially in equity, as described in Note 7.

(2) The equity investment revaluation reserves record fair value gains or
losses relating to equity investments, as described in Note 16.

(3) Exchange differences arising on the translation of the Group's net
investment in foreign-controlled companies are taken to the foreign currency
translation reserve.

(4) Actuarial gains or losses relate to long-term employee benefits.

 

24. Reconciliation of profit before tax to net cash inflow from operating
activities

 

                                                                            At 31.12.2021                               At 31.12.2020
                                                                            $m                                          $m

 Profit before tax                                                                      3,477.1                                     1,413.1
 Depreciation                                                                           1,078.7                                     1,048.7
 Net loss on disposals                                                                          9.2                                        6.3
 Net finance income/(expense)                                                              (16.0)                                      103.4
 Share of profit of associates and joint ventures (exc. exceptional items)                 (59.7)                                        (5.1)
 Provisions for impairment                                                                  177.6                                        80.8
 Decrease/(Increase) in inventories                                                           10.9                                     (13.6)
 Increase in debtors                                                                     (206.8)                                     (259.9)
 Increase in creditors                                                                        55.7                                       31.0
 (Decrease)/Increase in provisions                                                         (19.0)                                        26.4
 Cash flow from operations                                                              4,507.7                                     2,431.1

 

25. Analysis of changes in net debt

 

                                 At 31.12.2020             Cash flows                      Fair value gains        New leases                Amortisation of finance costs                 Capitalisation of interest                          Other                     Reclassification                      Exchange                          At 31.12.2021
                                 $m                        $m                              $m                      $m                        $m                                            $m                                                  $m                        $m                                    $m                                $m

 Cash and cash equivalents             1,246.8                    (483.1)                          -                    -                                  -                                                 -                                   -                                         -                     (20.3)                          743.4
 Liquid investments              2,426.0                   543.7                                -                       -                              -                                   -                                                      -                                        -                       -                                2,969.7
 Total                           3,672.8                    60.6                              -                        -                                      -                                                 -                                         -                                -                    (20.3)                                3,713.1
 Borrowings due within one year  (529.8)                    545.6                                 -                            -                          -                                                   -                                10.4                             (294.2)                               -                               (268.0)
 Borrowings due after one year   (3,013.8)                        -                        -                            -                           (5.7)                                                 (16.6)                                          -                      294.2                               (0.2)                              (2,742.1)
 Leases due within one year               (73.6)                    88.9                             -                       -                                     -                                               -                                    -                         (84.4)                                       -                                (69.1)
 Leases due after one year          (134.9)                             -                            -                (61.8)                                      -                                                -                                       -                        84.4                               21.6                                   (90.7)
 Preference shares                         (2.7)                          -                        -                     -                                        -                                                 -                                      -                               -                                 -                                    (2.7)
 Total borrowings                    (3,754.8)                   634.5                                -              (61.8)                                  (5.7)                                 (16.6)                                          10.4                                    -                           21.4                                (3,172.6)
 Net cash/(debt)                       (82.0)                    695.1                                -             (61.8)                                (5.7)                                          (16.6)                                  10.4                                      -                       1.1                                       540.5

 

 

Net cash/(debt)

 

Net cash/(debt) at the end of each period was as follows:

 

                                                At 31.12.2021                       At 31.12.2020
                                                $m                                  $m
 Cash, cash equivalents and liquid investments              3,713.1                             3,672.8
 Total borrowings                                      (3,172.6)                        (3,754.8)
 Net cash/(debt)                                               540.5                               (82.0)

 

 

26. Related party transactions

 

Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Transactions between the Group and its associates and joint ventures are
disclosed below.

 

The transactions which Group companies entered into with related parties who
are not members of the Group are set out below. There are no guarantees given
or received and no provisions for doubtful debts related to the amount of
outstanding balances.

 

a)      Quiñenco SA

Quiñenco SA ("Quiñenco") is a Chilean financial and industrial conglomerate,
the shares of which are traded on the Santiago Stock Exchange. The Group and
Quiñenco are both under the control of the Luksic family, and two Directors
of the Company, Jean-Paul Luksic and Andronico Luksic, who are also directors
of Quiñenco.

The following transactions took place between the Group and the Quiñenco
group of companies, all of which were on normal commercial terms at market
rates:

-      the Group earned interest income of nil (2020 - $1.7 million)
during the year on deposits with Banco de Chile SA, a subsidiary of Quiñenco.
Deposit balances at the end of the year were nil (2020 - nil);

-      the Group earned interest income of $0.1 million (2020 - $0.3
million) during the year on investments with BanChile Corredores de Bolsa SA,
a subsidiary of Quiñenco. Investment balances at the end of the year were
$2.2 million (2020 - nil);

-      the Group made purchases of fuel from ENEX SA, a subsidiary of
Quiñenco, of $263.9 million (2020 - $212.6 million). The balance due to ENEX
SA at the end of the year was $20.4 million (2020 - nil).

-      the Group purchased shipping services from Hapag Lloyd, an
associate of Quiñenco, for $8.9 million (2020 - $7.0 million). The balance
due to Hapag Lloyd at the end of the year was $0.4 million (2020 - nil).

 

b)      Compañía de Inversiones Adriático SA

In 2021, the Group leased office space on normal commercial terms from
Compañía de Inversiones Adriático SA, a company in which members of the
Luksic family are interested, at a cost of $0.8 million (2020 - $0.7 million)

 

c)      Antomin 2 Limited and Antomin Investors Limited

The Group holds a 51% interest in Antomin 2 Limited ("Antomin 2") and Antomin
Investors Limited ("Antomin Investors"), which own a number of copper
exploration properties. The Group originally acquired its 51% interest in
these properties for a nominal consideration from Mineralinvest Establishment,
which continues to hold the remaining 49% of Antomin 2 and Antomin Investors.
Mineralinvest is owned by the E. Abaroa Foundation, in which members of the
Luksic family are interested. During 2021, the Group incurred $0.1 million
(2020 - $0.1 million) of exploration costs at these properties.

 

d)      Tethyan Copper Company Limited

As explained in Note 15, the Group has a 50% interest in Tethyan Copper
Company Limited ("Tethyan"), which is a joint venture with Barrick Gold
Corporation over Tethyan's mineral interests in Pakistan. During 2020, the
Group contributed $9.5 million (2020 - $7.2 million) to Tethyan.

e)      Compañía Minera Zaldívar SpA

The Group has a 50% interest in Zaldívar, which is a joint venture with
Barrick Gold Corporation. Antofagasta is the operator of Zaldívar. The
balance due from Zaldívar to group companies at the end of the year was $2.5
million (2020 - $0.5 million). During 2021, Zaldivar declared dividends of
$77.5 million to the Group (2020 - $65.0 million).

 

f)       Inversiones Hornitos SA

As explained in Note 3, on 31 March 2020, the Group agreed to dispose of its
40% interest in Hornitos coal-fired power station to ENGIE Energía Chile S.A.
("ENGIE"), the owner of the remaining 60% interest. Under the terms of this
agreement the Group agreed to make a final capital contribution to Hornitos of
$24 million, the payment of which took place during 2021. During 2020, the
Group paid $128.2 million to Inversiones Hornitos in relation to the energy
supply contract at Centinela. During 2020 and 2021, the Group has not received
dividends from Inversiones Hornitos S.A.

 

g)      Other related parties

The ultimate parent company of the Group is Metalinvest Establishment, which
is controlled by the E. Abaroa Foundation, in which members of the Luksic
family are interested. The Company's subsidiaries, in the ordinary course of
business, enter into various sale and purchase transactions with companies
also controlled by members of the Luksic family, including Banco de Chile
S.A., Madeco S.A. and Compañía Cervecerías Unidas S.A., which are
subsidiaries of Quiñenco S.A., a Chilean industrial and financial
conglomerate the shares of which are traded on the Santiago Stock Exchange.
These transactions, all of which were on normal commercial terms, are in total
not considered to be material.

 

27. Tethyan arbitration award

 

In July 2019, the World Bank Group's International Centre for Settlement of
Investment Disputes ("ICSID") awarded $5.84 billion in damages (compensation
and accumulated interest as at the date of the award) to Tethyan Copper
Company Pty Limited ("Tethyan"), the joint venture held equally by the Company
and Barrick Gold Corporation, in relation to an arbitration claim filed
against the Islamic Republic of Pakistan ("Pakistan") following the unlawful
denial of a mining lease for the Reko Diq project in Pakistan in 2011.

 

Damages include compensation of $4.087 billion by reference to the fair market
value of the Reko Diq project at the time of the mining lease denial, and
interest until the date of the award of $1.753 billion. The Tribunal also
awarded Tethyan just under $62 million in costs incurred in enforcing its
rights. Compound interest applies to the compensation and cost awards from 12
July 2019 at a rate of US Prime +1% per annum until the award is paid.

 

In November 2019, Pakistan requested that ICSID annul the award. In March
2020, ICSID appointed a committee to consider Pakistan's request for
annulment and a hearing on Pakistan's annulment application took place in May
2021. The Committee is expected to issue a decision on Pakistan's annulment
application in the coming months.

 

On 14 March 2021, Pakistan applied to ICSID for revision of the award. On 5
April 2021, the ICSID tribunal that issued the award was reconstituted to
consider Pakistan's revision application. Tethyan has filed an application to
dismiss Pakistan's revision application as manifestly meritless.

 

Tethyan is permitted to enforce 50% of the award plus accrued interest on the
condition that any amounts collected through enforcement of the award must be
put into escrow and returned if the award is annulled or if Pakistan's
revision application is successful. Tethyan continues to take steps to enforce
the award in accordance with these conditions.

 

As at 31 December 2021, the outstanding award amount was approximately $6.45
billion.

 

It is expected that the proceeds of the award will only be recognised in
Antofagasta's financial statements once they are received by the Group.

 

28. Litigation and contingent liabilities

 

The Group is subject from time to time to legal proceedings, claims,
complaints and investigations arising out of the ordinary course of business.
The Group cannot predict the outcome of individual legal actions or claims or
complaints or investigations. As a result, the Group may become subject to
liabilities that could affect the Group's business, financial position and
reputation. Litigation is inherently unpredictable and large judgments may at
times occur. The Group may incur, in the future, judgments or enter into
settlements of claims that could lead to material cash outflows. The Group
considers that no material loss to the Group is expected to result from the
legal proceedings, claims, complaints and investigations that the Group is
currently subject to. Provision is made for all liabilities that are expected
to materialise through legal claims against the Group.

 

29. Currency translation

Assets and liabilities denominated in foreign currencies are translated into
US dollars and sterling at the year-end rates of exchange. Results denominated
in foreign currencies have been translated into US dollars at the average rate
for each year.

 

                2021                       2020
 Year-end rate  $1,349=£1; $1 = Ch$844.7   $1,360=£1; $1 = Ch$710.95
 Average rates  $1,375=£1; $1 = Ch$759.8   $1,2820=£1; $1 = Ch$792.07

 

30. Distribution

The Annual Report and Financial Statements for the year ended 31 December
2021, together with the Notice of the 2022 Annual General Meeting, will be
posted to all shareholders in April 2022.

 

Alternative performance measures (not subject to audit or review)

This preliminary results announcement includes a number of alternative
performance measures, in addition to IFRS amounts. These measures are included
because they are considered to provide relevant and useful additional
information to users of the accounts. Set out below are definitions of these
alternative performance measures, explanations as to why they are considered
to be relevant and useful, and reconciliations to the IFRS figures.

 

a)    Underlying earnings per share

Underlying earnings per share is earnings per share from continuing
operations, excluding exceptional items. This measure is reconciled to
earnings per share from continuing and discontinued operations (including
exceptional items) on the face of the income statement. This measure is
considered to be useful as it provides an indication of the earnings generated
by the on-going businesses of the Group, excluding the impact of exceptional
items which are irregular or non-operating in nature.

 

b)     EBITDA

EBITDA 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.

EBITDA is considered to provide a useful and comparable indication of the
current operational earnings performance of the business, excluding the impact
of the historical cost of property, plant & equipment or the particular
financing structure adopted by the business.

 

For the year ended 31 December 2021

                                                           Los Pelambres                 Centinela                       Antucoya                        Zaldívar          Exploration and evaluation            Corporate and other items  Mining      Railway and other transport services  Total
                                                           $m                            $m                              $m                              $m                $m                                    $m                         $m          $m                                    $m

 Operating profit/(loss)                                         2,240.5                    1,260.6                            238.3                         -               (280.8)                                (89.0)                  3,369.6     31.8                                    3,401.4
 Depreciation and amortisation                                   281.8                         654.7                              98.3                      -                                -                          13.0                1,047.8                 30.9                         1,078.7
 Profit on disposals                                                    3.7                         4.0                             0.5                      -                               -                            -                    8.2                  1.0                                9.2
 Provision against the carrying value of assets            -                             -                               -                               -                 177.6                                 -                          177.6       -                                     177.6
 EBITDA from subsidiaries                                     2,526.0                       1,919.3                            337.1                             -                (103.2)                            (76.0)                 4,603.2                 63.7                            4,669.9
 Proportional share of the EBITDA from associates and JVs                -                              -                               -                   172.8           -                                           (8.0)                  164.8    4.5                                           169.3
 Total EBITDA                                                  2,526.0                      1,919.3                            337.1                      172.8                   (103.2)                             (84.0)                4,768.0                68.2                              4,836.2

 

For the year ended 31 December 2020

                                                           Los Pelambres  Centinela  Antucoya  Zaldívar   Exploration and evaluation  Corporate and other items  Mining   Railway and other transport services  Total
                                                           $m             $m         $m        $m         $m                          $m                         $m       $m                                    $m

 Operating profit/(loss)                                   1,407.9        247.0      71.2      -           (85.1)                      (74.0)                    1,567.0  25.2                                  1,592.2
 Depreciation and amortisation                             252.6          662.9      94.6      -          -                           7.8                        1,017.9  30.8                                  1,048.7
 Profit on disposals                                       2.5            1.8        -         -          -                           -                          4.3      2.0                                   6.3
 EBITDA from subsidiaries                                  1,663.0        911.7      165.8     -           (85.1)                      (66.2)                    2,589.2  58.0                                  2,647.2
 Proportional share of the EBITDA from associates and JVs  -              -          -         95.5        -                           (6.5)                     89.0     3.0                                   92.0
 Total EBITDA                                              1,663.0        911.7      165.8     95.5        (85.1)                      (72.7)                    2,678.2  61.0                                  2,739.2

 

c)     Net Earnings

Net Earnings represent profit for the period attributable to the owners of the
parent

 

d)     Cash costs

Cash costs are a measure of the cost of operational production expressed in
terms of cents per pound of payable copper produced.

This is considered to be a useful and relevant measure as it is a standard
industry measure applied by most major copper mining companies which reflects
the direct costs involved in producing each pound of copper. It therefore
allows a straightforward comparison of the unit production cost of different
mines, and allows an assessment of the position of a mine on the industry cost
curve. It also provides a simple indication of the profitability of a mine
when compared against the price of copper (per lb).

With sales of concentrates at Los Pelambres and Centinela, which are sold to
smelters and roasting plants for further processing into fully refined metal,
the price of the concentrate invoiced to the customer reflects the market
value of the fully refined metal less a "treatment and refining charge"
deduction, to reflect the lower value of this partially processed material
compared with the fully refined metal. For accounting purposes, the revenue
amount is the net of the market value of fully refined metal less the
treatment and refining charges. Under the standard industry definition of cash
costs, treatment and refining charges are regarded as an expense and part of
the total cash cost figure.

                                                                                 For the year ended 31.12.2021                   For the year ended 31.12.2020

 Reconciliation of cash costs excluding treatment and refining charges and
 by-product revenue:
 Total Group operating costs (Note 5) ($m)                                                      3,891.1                                     3,537.1
 Zaldívar operating costs                                                                          231.7                                        190.9
 Less:
 Total - Depreciation and amortisation (Note 5) ($m)                                       (1,078.7)                                      (1,048.7)
 Total - Loss on disposal (Note 5) ($m)                                                              (9.2)                                       (6.3)
 Elimination of non-mining operations
 Corporate and other items - Total operating cost (Note 5) ($m)                                    (75.5)                                      (64.3)
 Exploration and evaluation - Total operating cost (Note 5) ($m)                                 (103.2)                                       (85.1)
 Railway and other transport services - Total operating cost (Note 5) ($m)                       (106.3)                                       (91.4)
 Closure provision and other expenses not included within cash costs ($m)                          (91.2)                                    (105.8)
 Inventories Variations                                                                                2.1                                        11.1

 Total cost relevant to the mining operations' cash costs ($m)                                  2,660.8                                     2,337.5

 Copper production volumes (tonnes)                                                            721,450                                     733,920

 Cash costs excluding treatment and refining charges and by-product revenue                        3,688                                        3,185
 ($/tonne)

 Cash costs excluding treatment and refining charges and by-product revenue                          1.68                                         1.43
 ($/lb)

                                                                                 At 31.12.2021                                   At 31.12.2020
 Reconciliation of cash costs before deducting by-products:
 Treatment and refining charges - copper and by-product- Los Pelambres (Note 5)                    115.4                                        113.6
 Treatment and  refining charges - copper and by-product- Centinela (Note 5)                         70.4                                         68.8
 Treatment and  refining charges - copper - total                                                  185.8                                        182.4

 Copper production volumes (tonnes)                                                            721,450                                     733,920

 Treatment and refining charges ($/tonne)                                                          257.6                                        248.5
 Treatment and  refining charges ($/lb)                                                              0.11                                         0.13

 Cash costs excluding treatment and refining charges and by-product revenue                          1.68                                         1.43
 ($/lb)
 Treatment and refining charges ($/lb)                                                               0.11                                         0.13
 Cash costs before deducting by-product (S/lb)                                                       1.79                                         1.56

 

d)     Cash costs (continued)

                                                     At 31.12.2021                                At 31.12.2020
 Reconciliation of cash costs (net of by-products):
 Gold revenue - Los Pelambres (Note 5) ($m)                              91.2                                    106.4
 Gold revenue - Centinela (Note 5) ($m)                                346.2                                     251.3
 Molybdenum revenue - Los Pelambres (Note 5) ($m)                      353.6                                     181.8
 Molybdenum revenue - Centinela (Note 5) ($m)                            44.4                                      27.7
 Silver revenue - Los Pelambres (Note 5) ($m)                            46.6                                      43.3
 Silver revenue - Centinela (Note 5) ($m)                                38.7                                      21.2
 Total by-product revenue ($m)                                         920.7                                     631.7

 Copper production volumes (tonnes)                                721,450                               733,920

 By-product revenue ($/tonne)                                       1,276.0                                      860.7
 By-product revenue ($/lb)                                               0.59                                      0.42

 Cash costs before deducting by-producs (S/lb)                           1.79                                      1.56
 By-product revenue ($/lb)                                             (0.59)                                   (0.42)
 Cash costs (net of by-product) ($/lb)                                   1.20                                      1.14

 

 

The totals in the tables above may include some small apparent differences as
the specific individual figures have not been rounded.

 

e)     Attributable cash, cash equivalents & liquid investments,
borrowings and net debt

 

Attributable cash, cash equivalents & liquid investments, borrowings and
net debt reflects the proportion of those balances which are attributable to
the equity holders of the Company, after deducting the proportion attributable
to the non-controlling interests in the Group's subsidiaries.

This is considered to be a useful and relevant measure as the majority of the
Group's cash tends to be held at the corporate level and therefore 100%
attributable to the equity holders of the Company, whereas the majority of the
Group's borrowings tend to be at the level of the individual operations, and
hence only a proportion is attributable to the equity holders of the Company.

 

                                                                                   December 2021                                                                     December 2020
                                                 Total                             Attributable   Attributable                         Total                         Attributable share  Attributable

amount
share
amount
amount
amount
                                                 $m                                               $m                                   $m                                                $m
 Cash, cash equivalents and liquid investments:
 Los Pelambres                                                 427.9               60%                        256.7                               904.8              60%                             542.9
 Centinela                                                   625.3                 70%                     437.7                                   736.3             70%                         515.4
 Antucoya                                                 181.5                    70%                         127.1                        143.6                    70%                             100.5
 Corporate                                          2,436.5                        100%             2,436.5                                  1,843.4                 100%                      1,843.4
 Railway and other transport services                     41.9                     100%                         41.9                              44.7               100%                       44.7
 Total                                                3,713.1                                       3,299.9                                     3,672.8                                         3,046.9

 Borrowings:
 Los Pelambres (Note 18)                           (1,243.1)                       60%                     (745.9)                      (1,379.5)                    60%                           (827.7)
 Centinela (Note 18)                                       (446.6)                 70%                    (312.6)                                (777.5)             70%                          (544.2)
 Antucoya (Note 18)                                        (439.2)                 70%                      (307.5)                         (547.5)                  70%                      (383.3)
 Corporate (Note 18)                                    (1,016.5)                  100%                  (1,016.4)                            (1,013.5)              100%                        (1,013.5)
 Railway and other transport services (Note 18)             (27.2)                 100%                    (27.2)                             (36.8)                 100%                     (36.8)
 Total (Note 18)                                        (3,172.6)                                     (2,409.6)                            (3,754.8)                                     (2,805.5)

 Net cash/(debt)                                      540.5                                             890.3                                     (82.0)                                       241.4

 

 

Production and Sales Statistics (not subject to audit or review)

a)            Production and sales volumes for copper, gold and
molybdenum

                                       Production             Sales
                Year ended 31.12.2021  Year ended 31.12.2020  Year ended 31.12.2021  Year ended 31.12.2020

 Copper         000 tonnes             000 tonnes             000 tonnes             000 tonnes
 Los Pelambres  324.7                  359.6                  324.5                  366.0
 Centinela      274.2                  246.8                  276.1                  247.7
 Antucoya       78.6                   79.3                   80.4                   76.5
 Zaldívar       44                     48.2                   44.6                   48.3
 Group total    721.5                  733.9                  725.6                  738.5

 Gold           000 ounces             000 ounces             000 ounces             000 ounces
 Los Pelambres  53.2                   60.4                   51.1                   58.4
 Centinela      199.0                  143.7                  193.5                  141.2
 Group total    252.2                  204.1                  244.6                  199.6

 Molybdenum     000 tonnes             000 tonnes             000 tonnes             000 tonnes
 Los Pelambres  9.2                    10.9                   9.2                    10.8
 Centinela      1.3                    1.7                    1.2                    1.7
 Group total    10.5                   12.6                   10.4                   12.5

 Silver         000 ounces             000 ounces             000 ounces             000 ounces
 Los Pelambres  1,927.5                2,073.9                1,856.8                                 2,020.3
 Centinela      1,578.3                1,118.4                1,565.7                1,064.3
 Group total    3,505.8                3,192.3                3,422.5                3,084.6

 

 

b)         Cash costs per pound of copper produced and realised prices
per pound of copper and molybdenum sold

                                                                               Cash costs                                                                            Realised prices
                                                                               Year ended 31.12.2021                      Year ended 31.12.2020                      Year ended 31.12.2021            Year ended 31.12.2020
                                                                                $/lb                                      $/lb                                        $/lb                            $/lb

 Copper
 Los Pelambres                                                                                    0.89                                       0.81                                  4.54                               3.02
 Centinela                                                                                        1.13                                       1.27                                  4.31                               2.95
 Antucoya                                                                                         2.04                                       1.82                                  3.94                               2.85
 Zaldivar (attributable basis - 50%)                                                              2.39                                       1.80                     -                                 -
 Group weighted average (net of by-products)                                                      1.20                                       1.14                                  4.37                               2.98

 Group weighted average (before deducting by-products)                                            1.79                                       1.57

 Group weighted average (before deducting by-products and excluding treatment                     1.68                                       1.43
 and refining  charges from concentrate)

 Cash costs at Los Pelambres comprise:
 On-site and shipping costs                                                                       1.43                                       1.10
 Treatment and refining charges for concentrates                                                  0.15                                       0.18
 Cash costs before deducting by-product credits                                                   1.59                                       1.27
 By-product credits (principally molybdenum)                                                    (0.70)                                      (0.46)
 Cash costs (net of by-product credits)                                                           0.89                                       0.81

 Cash costs at Centinela comprise:
 On-site and shipping costs                                                                       1.75                                       1.71
 Treatment and refining charges for concentrates                                                  0.12                                       0.14
 Cash costs before deducting by-product credits                                                   1.87                                       1.85
 By-product credits (principally gold)                                                         (0.74)                                     (0.58)
 Cash costs (net of by-product credits)                                                           1.13                                       1.27

 LME average copper price                                                                                                                                                          4.23                               2.80

 

 Gold                             $/oz                             $/oz

 Los Pelambres                               1,783                              1,827
 Centinela                                   1,789                              1,784
 Group weighted average                      1,788                              1,797

 Market average price                        1,799                              1,770

 Molybdenum                       $/lb                             $/lb

 Los Pelambres                                 17.5                                 8.8
 Centinela                                     17.2                                 8.9
 Group weighted average                        17.4                                 8.8

 Market average price                          15.9                                 8.7

 Silver                           $/oz                             $/oz

 Los Pelambres                                 25.1                               21.7
 Centinela                                     24.7                               20.4
 Group weighted average                        24.9                               21.3

 Market average price                          25.2                               20.5

 

Notes to the production and sales statistics

 

(i)            For the Group's subsidiaries, the production and
sales figures reflect the total amounts produced and sold by the mine, not the
Group's share of each mine.  The Group owns 60% of Los Pelambres, 70% of
Centinela and 70% of Antucoya. For the Zaldívar joint venture, the production
and sales figures reflect the Group's proportional 50% share.

 

(ii)           Los Pelambres produces copper and molybdenum
concentrates, Centinela produces copper concentrate and copper cathodes and
Antucoya and Zaldívar produce copper cathodes. The figures for Los Pelambres
and Centinela are expressed in terms of payable metal contained in concentrate
and in cathodes. Los Pelambres and Centinela are also credited for the gold
and silver contained in the copper concentrate sold. Antucoya and Zaldívar
produce cathodes with no by-products.

 

(iii)          Cash costs are a measure of the cost of operational
production expressed in terms of cents per pound of payable copper produced,
with sales of concentrates at Los Pelambres and Centinela, which are sold to
smelters and roasting plants for further processing into fully refined metal,
the price of the concentrate invoiced to the customer reflects the market
value of the fully refined metal less a "treatment and refining charge"
deduction, to reflect the lower value of this partially processed material
compared with the fully refined metal. For accounting purposes, the revenue
amount is the net of the market value of fully refined metal less the
treatment and refining charges. Under the standard industry definition of cash
costs, treatment and refining charges are regarded as an expense and part of
the total cash cost figure. Cash costs are stated net of by-product credits.
Cash costs exclude depreciation, financial income and expenses, hedging gains
and losses, exchange gains and losses and corporate tax for all four
operations.

(iv)          Realised copper prices are determined by comparing
revenue from copper sales (before deducting treatment and refining charges for
concentrates) with sales volumes for each mine in the period. Realised
molybdenum and gold prices are calculated on a similar basis. Realised prices
reflect gains and losses on commodity derivatives, which are included within
revenue.

 

(v)           The totals in the tables above may include some small
apparent differences as the specific individual figures have not been rounded.

 

(vi)          The production information and the cash cost
information is derived from the Group's production report for the fourth
quarter of 2021, published on 19 January 2022.

 

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