Annual Report 2007 - Antofagasta plc

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Financial ReviewFINANCIAL REVIEWBasis of PreparationThe Group’s financial statements on pages 78 to 133have been prepared in accordance with InternationalFinancial Reporting Standards (“IFRS”). The accountingpolicies followed are set out in Note 2 to the financialstatements.The presentational currency of the Group and thefunctional currency of the Company is the US dollar,the principal currency in which the Group operatesand in which assets and liabilities are denominated.Key Performance IndicatorsThe Group uses a number of financial and non-financialkey performance indicators in order to measureperformance, which are set out below. The Group’sperformance in respect of these indicators isdiscussed within the Chairman’s Review on pages 5to 21, and within this Financial Review. Definitions ofthese key performance indicators, along with crossreferencesto where the individual measures arereviewed and explained, are on pages 32 and 33.Other non-financial performance indicators, includinginformation relating to employees, health and safetyand the environment, are contained within theCorporate Social Responsibility report on pages36 to 59.Production and Sales VolumesProduction volumesGroup copper production in 2007 was 428,100 tonnes,8.0% below the amount produced in 2006.Los Pelambres produced 289,900 tonnes of payablecopper (2006 – 324,200 tonnes). This reflectedthe expected lower ore grades of 0.71% (2006 –0.81%) and the impact of the harder primary oreon throughput, which averaged 126,300 tonnesper day (2006 – 127,400 tonnes per day).Production at El Tesoro was 93,000 tonnes, whichwas ahead of the original forecast for the year and just1.1% below the 2006 production of 94,000 tonnes.Key performance indicators2007 2006Turnover US$m 3,826.7 3,870.0EBITDA US$m 2,824.0 2,957.3Earnings per share US cents 140.2 137.4Capital expenditure US$m 466.0 539.0Net cash US$m 1,946.5 1,446.8Copper production ‘000 tonnes 428.1 465.5Molybdenum production ‘000 tonnes 10.2 9.8Realised copper price (per pound) US cents 326.6 329.5Realised molybdenum price (per pound) US$ 31.7 24.6Cash costs (per pound, net of by-product credits) US cents 31.6 40.2Production and sales volumesProductionSales2007 2006 2007 2006’000 tonnes ’000 tonnes ’000 tonnes ’000 tonnesCopperLos Pelambres 289.9 324.2 289.4 324.8El Tesoro 93.0 94.0 93.3 95.3Michilla 45.1 47.3 45.8 47.7Group total 428.1 465.5 428.5 467.8MolybdenumLos Pelambres 10.2 9.8 10.0 9.9The totals in the table may include some small apparent differences as the specific individual figures have not been rounded.22Antofagasta plc Annual Report and Financial Statements 2007
The lower plant throughput in the year of 26,800tonnes per day (2006 – 28,700 tonnes per day) whichwas due to high moisture levels in the ore processed,was largely offset by the higher ore grades of 1.23%(2006 – 1.16%).Michilla’s production in 2007 was 45,100 tonnes,a 4.7% decrease over the 2006 production level of47,300 tonnes, although only slightly below the originalforecast for the year. The earthquake which occurredin northern Chile on 14 November 2007 resulted insome disruption during the final part of the year, whichreduced throughput and the grade of ore processed.During the year average throughput was 14,800tonnes per day compared with 15,200 tonnes perday in 2006, and ore grades declined to 1.03%(2006 – 1.05%).Molybdenum production at Los Pelambres reached10,200 tonnes, a 4.1% increase compared with the9,800 tonnes produced in 2006, mainly due to theimproved grades of 0.030% (2006 – 0.028%).Further details of throughput, grade and recoveriesat each mine are given in the Mining Production andSales, Transport and Water Statistics on page 143.Sales volumesThe volume of copper sold decreased by 8.4% from467,800 tonnes in 2006 to 428,500 tonnes this year.Molybdenum sales volumes were largely unchangedat 10,000 tonnes (2006 – 9,900 tonnes). Sales volumesfor both copper and molybdenum differed slightly fromproduction each year mainly due to differences inshipping and loading schedules.Transport and water volumesRail and road transport volumes at the transportdivision in 2007 were 5.0 million tons (2006 –4.5 million tons) and 1.3 million tons (2006 – 1.5 milliontons) respectively. Rail tonnages transported in 2007increased by 11.6% over 2006 due to increases fromvarious mines. The most significant of these wasBHP Billiton’s Spence mine where the combinedvolumes of sulphuric acid and copper cathodescontributed an additional 0.3 million tons.At Aguas de Antofagasta the volume of water soldin 2006 increased by 5.5% from 37.8 million cubicmetres to 39.9 million cubic metres this year, as aresult of higher volumes to industrial customers,mainly due to the full-year impact of Spence whichstarted its operations during the second half of 2006.Realised Prices per Pound ofCopper and Molybdenum Sold andCash Costs per Pound of CopperProducedRealised pricesThe Group’s average realised copper price decreasedby 0.9% to US 326.6 cents per pound (2006 –US 329.5 cents per pound), despite a 5.9% increasein the average LME copper price to US 323.3 centsper pound (2006 – US 305.3 cents per pound).Realised copper prices are determined by comparingturnover (gross of tolling charges for concentrate sales)with sales volumes in the period. Realised copperprices differ from market prices mainly because, in linewith industry practice, concentrate and cathode salesagreements generally provide for provisional pricingat the time of shipment with final pricing based on theaverage market price for future periods (normally about30 days after delivery to the customer in the case ofcathode sales and up to 180 days after delivery to thecustomer in the case of concentrate sales). In 2007the pricing adjustments on provisionally invoiced sales,while remaining positive, were lower than in 2006,as the level of increase in the LME copper price inthe current year was less than in 2006.In the case of Los Pelambres, pricing adjustmentsadded US$52.8 million in 2007 to initially invoicedsales (before adjusting for tolling charges) comparedwith US$223.5 million in 2006. The adjustments in2007 comprised US$22.0 million in respect of salesinvoiced in 2006 (net of the reversal of mark-to-marketadjustments made at the end of 2006) which werefinally priced in 2007 and US$30.8 million in respectof sales invoiced in 2007 (net of a mark-to-marketprovision for open sales at the end of the year ofUS$72.8 million). Pricing adjustments in 2007 atEl Tesoro and Michilla reduced revenues by US$5.1million (2006 – increased revenues by US$11.7 million)and US$1.2 million (2006 – increased revenues byUS$8.9 million) respectively. El Tesoro and Michillacontinued to benefit from strong cathode premiumsreflecting tight market conditions in the year.FINANCIAL REVIEWAntofagasta plc Annual Report and Financial Statements 2007 23
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 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
Page 71 and 72: Company, for safeguarding the asset
Page 73 and 74: Statement of Compliance withthe Det
Page 75 and 76:
Non-Executive Directors’ feesThe
Page 77 and 78:
Audited InformationDirectors’ rem
Page 79 and 80:
Basis of audit opinionWe conducted
Page 81 and 82:
Consolidated Balance SheetAt 31 Dec
Page 83 and 84:
Consolidated Statement of Changes i
Page 85 and 86:
2 Principal Accounting Policiesa) A
Page 87 and 88:
2 Principal Accounting Policies con
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
4 Revenue and Total Profit from Ope
Page 97 and 98:
5 Segment Information continueda) P
Page 99 and 100:
5 Segment Information continueda) P
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6 Profit for the YearProfit for the
Page 103 and 104:
8 Net Finance IncomeNet finance inc
Page 105 and 106:
11 DividendsAmounts recognised as d
Page 107 and 108:
13 Property, Plant and EquipmentLan
Page 109 and 110:
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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Page 125 and 126:
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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
Page 133 and 134:
37 Related Party Transactions conti
Page 135 and 136:
38 Contingent Assets and Contingent
Page 137 and 138:
40A Basis of Preparation of the Bal
Page 139 and 140:
40D Subsidiaries continueda) Invest
Page 141 and 142:
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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Annual Report 2007 - Antofagasta plc

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