Annual Report 2007 - Antofagasta plc

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CHAIRMAN’S REVIEWChairman’s Review continuedWater and ForestryWaterAguas de Antofagasta S.A. (ADASA)(100 per cent owned)ADASA continued implementing a long-termprogramme to improve services during the fourth yearof its 30-year concession. The following objectiveswere achieved:Aguas de Antofagasta’s water distribution system• water losses were further reduced to 26.5% witha target of 25% by 2009;• costs were controlled without affecting the qualityand reliability of supply;DesalinationPlantTOCOPILLAMEJILLONESANTOFAGASTATALTALCALAMAMantesBlancos SpenceSQMFilter PlantSalar delCarmenFilter PlantTaltalWaterCatchmentLequenaChuquicamataFilter PlantCerro TopaterWater SupplyLineC H I L EAgua VerdeWellsMixerTankEl Tesoro -EsperanzaWaterCatchmentQuinchamaleWaterCatchmentToconceCities / TownsMines / ProjectsFacilities ofAguas de Antofagsta• services to domestic customers were improvedwith fewer interruptions to supply; and• demand from mining and other industrial customerswas met by improvements in supply and fewerdelays in connection and installation to theirfacilities.Water sales to domestic users in 2007 increasedby 1.9% to 29.0 million cubic metres compared to28.5 million cubic metres in 2006 while sales to minesand industrial users increased by 16.3% from 9.3million cubic metres in 2006 to 10.9 million cubicmetres in 2007 due to increased demand from themining sector, particularly BHP Billiton’s Spence mine.ADASA is expecting growth starting in 2008 fromsales of re-treated water in Calama to mines andindustrial users. Water shortage in the Antofagastaregion has become acute, as the traditional watersources from the Río Loa and the Loa basin havebeen restricted by the environmental and waterauthorities, although demand from industrial users,towns and agricultural enterprises throughoutthe II Region has increased.0 50 100Kms0 50100MilesThird party facilityDistribution linefor untreated waterDistribution linefor potable waterIn future, ADASA will supply the city of Antofagastafrom the desalination plant located to the north of thecity and supply the mining and other industrial users inthe Calama region to the north with water from localsources.18Antofagasta plc Annual Report and Financial Statements 2007
CHAIRMAN’S REVIEWForestryForestal S.A. (100 per cent owned)Forestal planted 351 hectares in 2007 on its Releco-Puñir and Huilo-Huilo properties as part of its 5-yearforestation programme, making a total of 946 hectaresplanted since 2004. The principal species planted thisyear were Oregon and Insigne pine, followed by Raulí,Coigüe and Sequoia which are native plants bestsuited to the natural and environmental conditions ofthe region. Forestal has recently started fertilising thesoil and controlling the diseases which affect youngplantations. Once again, sales of timber from thinningand clearing the forests contributed to the costs ofimproving the roads, repairing bridges and protectingthe boundaries. Forestal’s two properties comprise26,295 hectares of native forest near the Panguipulliand Neltume lakes, in Chile’s X Region.OutlookThe general outlook for 2008 remains sound withmany of the strong features of 2007, especiallyrelating to mining and commodities remaining in place.The pace of global economic activity, however, hasmoderated and there will be continuing cost pressureson the mining industry in Chile.Consensus estimates for copper prices are nowexpected to average around US 340 cents until atleast the end of the year as positive fundamentalscontinue with strong demand from China, India,Russia, other developing countries and from partsof Europe. The feature in 2006 and 2007 of lowinventories of refined copper and concentrates hascontinued into 2008 and LME copper prices haveaveraged US 338.6 cents per pound in the first twomonths of 2008.US$30.0 per pound and may exceed these levelsduring the year.Production of payable copper in 2008 is expected tobe higher than 2007 at around 463,000 tonnes due tohigher ore grades and throughput at Los Pelambres.Global mining costs rose significantly in 2007 andincreased in Chile in five main categories: oil andenergy, steel, sulphuric acid, mining equipment andlabour costs and these cost pressures will continuein 2008.FCAB and ADASA, the transportation and waterentities, will continue to benefit from increasedmining activity in the region. New business for FCABin 2008 will include copper cathodes and substantialshipments of sulphuric acid for Gaby at Baquedanostarting in July, cathodes and acid for Spence atSierra Gorda and increased shipments of concentratesfrom San Cristóbal. ADASA plans to start supplyingre-treated water to mines and industrial users in thearea during the latter part of the year.Antofagasta will develop and expand its miningoperations and exploration activities in Chile, the restof Latin America, Asia and Africa and its increasinglystrong financial position should enable it to acquiremining and energy related assets.Molybdenum prices averaged US$33.1 per poundin the first two months of 2008, reflecting strongdemand from the main consumers in the stainlesssteel and oil and gas industries. Molybdenum pricesshould stay around the historically high levels ofAntofagasta plc Annual Report and Financial Statements 2007 19
Page 1: ANTOFAGASTAAnnual Report and Financ
Page 4 and 5: Highlights• Net earnings up 2.1%
Page 6 and 7: Highlights continued471.8 498.4 467
Page 8 and 9: CHAIRMAN’S REVIEWChairman’s Rev
Page 12 and 13: A R G E N T I N ACHAIRMAN’S REVIE
Page 24 and 25: Financial ReviewFINANCIAL REVIEWBas
Page 26 and 27: Financial Review continuedFINANCIAL
Page 38 and 39: Corporate Social ResponsibilityCSR
Page 41 and 42: TransportationThe Antofagasta Railw
Page 43 and 44: Other international and national st
Page 45 and 46: Organisations of which Group compan
Page 47 and 48: Compensation, recruitment and reten
Page 49 and 50: CSR REPORTEl Tesoro promotes a cult
Page 51 and 52: • health and safety issues are mo
Page 53 and 54: Native vegetation at the Choapa Val
Page 55 and 56: existing naturally in the Andean re
Page 57 and 58: saponaria), Espino (Acacia caven),
Page 59 and 60: • The “Together We Can Grow Mor
Page 61 and 62: Awards and RecognitionDuring the ye
Page 63 and 64: special dividend. The total cost of
Page 65 and 66: EnvironmentThe Group seeks to ensur
Page 67 and 68: Antofagasta Railway Company plc (ra
Page 69 and 70: Information and professional develo
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Company, for safeguarding the asset
Page 73 and 74:
Statement of Compliance withthe Det
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Non-Executive Directors’ feesThe
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Audited InformationDirectors’ rem
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Basis of audit opinionWe conducted
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Consolidated Balance SheetAt 31 Dec
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Consolidated Statement of Changes i
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2 Principal Accounting Policiesa) A
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2 Principal Accounting Policies con
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4 Revenue and Total Profit from Ope
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5 Segment Information continueda) P
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5 Segment Information continueda) P
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6 Profit for the YearProfit for the
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8 Net Finance IncomeNet finance inc
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11 DividendsAmounts recognised as d
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13 Property, Plant and EquipmentLan
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16 Investment in Associate2007 2006
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19 Inventories2007 2006US$m US$mRaw
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22 Borrowings continued(ii)Other lo
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22 Borrowings continuedd) Maturity
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24 Financial Instruments and Financ
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26 Deferred Tax continuedAt 31 Dece
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29 Minority InterestsThe minority i
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33 Notes to the Consolidated Cash F
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37 Related Party Transactions conti
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38 Contingent Assets and Contingent
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40A Basis of Preparation of the Bal
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40D Subsidiaries continueda) Invest
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40G Independent Auditors’ Report
Page 143 and 144:
Dividends to Ordinary ShareholdersD
Page 145 and 146:
Mining Production and Sales, Transp
Page 147 and 148:
A ‘Measured Mineral Resource’ i
Page 149 and 150:
Notes to Ore Reserve and Mineral Re
Page 151 and 152:
GDPGross Domestic Product.Governmen
Page 153 and 154:
TC/RCTreatment and refining charges
Page 155 and 156:
Directors and AdvisorsDirectorsJ-P
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