Annual Report 2007 - Antofagasta plc

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Financial Review continuedFINANCIAL REVIEWRealised prices per pound of copper and molybdenum sold andcash costs per pound of copper producedCash costsRealised prices2007 2006 2007 2006US cents US cents US cents US centsCopperLos Pelambres (10.8) 16.4 328.3 335.0El Tesoro 109.8 78.6 327.6 316.4Michilla 143.5 126.4 313.8 318.5Group weighted average (net of by-products) 31.6 40.2 326.6 329.5Group weighted average (before deducting by-products) 110.7 95.6Cash costs at Los Pelambres compriseOn-site and shipping costs 76.3 56.4Tolling charges for concentrates 29.6 39.7Cash costs before deducting by-product credits 105.9 96.1By-product credits (principally molybdenum) (116.7) (79.7)Cash costs (net of by-product credits) (10.8) 16.4LME average 323.3 305.3US$US$MolybdenumLos Pelambres 31.7 24.6Market average price 30.2 24.8The realised molybdenum price increased by 28.9%to US$31.7 per pound in 2007 (2006 – US$24.6 perpound), mainly due to the increase in the market pricewhich averaged US$30.2 per pound compared withUS$24.8 per pound in 2006. Molybdenum salesare also subject to provisional pricing and as pricesstrengthened during 2007, realised prices were slightlyhigher than the average market price. In contrast,during 2006 weakening prices caused the realisedprice to be lower than the market price.Further details of the pricing adjustments made toprovisionally invoiced sales of copper and molybdenumconcentrates at Los Pelambres are given in Note 24(d)to the financial statements.Cash costsGroup weighted average cash costs in 2007 wereUS 31.6 cents per pound, compared with US 40.2cents per pound in 2006. Excluding by-product credits(which are reported in the financial statements as partof turnover), weighted average cash costs for theGroup as a whole increased by 15.8% from US 95.6cents per pound in 2006 to US 110.7 cents per poundin 2007. Cash costs (excluding by-product credits)were higher at each of the Group’s three minescompared with 2006.Cash costs at Los Pelambres averaged negativeUS 10.8 cents per pound in 2007, a decrease ofUS 27.2 cents per pound compared with the costsof US 16.4 cents per pound in 2006. This was mainlydue to higher by-product credits and lower tollingcharges, partly offset by higher on-site costs.By-product credits increased by US 37.0 cents perpound, mainly due to the higher average molybdenumprice compared with 2006, along with the increasein molybdenum production. Tolling charges wereUS 10.1 cents per pound lower, mainly due to reducedprice participation as a result of the 2007 calendar yearnegotiations. On-site and shipping costs averagedUS 76.3 cents per pound in 2007, US 19.9 cents24Antofagasta plc Annual Report and Financial Statements 2007
per pound above 2006 mainly as a result of increasedmachinery hire, maintenance, fuel, oil and labour costs.The higher labour costs were due to the one-off bonuspayments on the conclusion of the mine-port unionand plant union negotiations during the year.At El Tesoro, cash costs increased to US 109.8 centsper pound compared with US 78.6 cents per poundin 2006. The main reasons for these increases werehigher energy costs and, to a lesser extent, increasedsulphuric acid costs (due to higher prices andconsumption levels).Cash costs at Michilla for 2007 were US 143.5 centsper pound, US 17.1 cents per pound higher than 2006.The increase compared to the previous year wasmainly due to increased energy costs, the impact ofthe bonus payment following the early conclusion ofthe labour negotiation during the year, and higher costsof third party services.Review of PerformanceTurnover, EBITDA, depreciation and amortisation,operating profit, capital expenditure and net assetsare analysed on a segmental basis in Note 5 to thefinancial statements.Turnover2007 2006US$m US$mTurnover 3,826.7 3,870.0Turnover from copper concentrate and copper cathodesTurnover from copper concentrate and copper cathodesales from the Group’s three mines decreased by7.3% to US$2,915.9 million, compared withUS$3,144.7 million in 2006. In 2007, sales of copperconcentrate and copper cathodes represented 76.2%of Group turnover and therefore revenues dependsignificantly on LME and realised copper prices.A one cent change in the average copper pricefor the year would affect turnover and profit beforetax by US$9.4 million and earnings per share byUS 0.5 cents, based on production volumes in2007, and without taking into account the effectsof provisional pricing and hedging activity.Tolling charges for copper concentrate at LosPelambres decreased from US$254.0 million in 2006to US$169.4 million in 2007, mainly due to reducedprice participation as a result of the 2007 calendaryear negotiations. Tolling charges are deducted fromconcentrate sales in reporting turnover and hencepartly offset the effect of improved copper prices.In 2007 turnover also included a loss of US$14.0million on commodity derivatives at El Tesoro andMichilla which matured during the year, recognisedunder the hedge accounting provisions of IAS 39“Financial Instruments: Recognition and Measurement”which were applied with effect from 1 January 2007.As explained below, during 2006 losses on thecommodity derivatives were recognised withinother operating expenses.FINANCIAL REVIEWGroup turnover in 2007 was US$3,826.7 million,1.1% below the US$3,870.0 million achieved in 2006.The slight decrease mainly reflected the impact oflower sales volumes and realised prices for copper,partly offset by the effect of higher molybdenumprices and volumes, reduced tolling charges forcopper concentrate and increased sales at thetransport and water divisions. The reasons for theimproved prices and changes in volumes are explainedin this Financial Review on pages 22 to 24 as wellas in the discussion contained in the Chairman’sReview on pages 5 to 21.Turnover from by-productsTurnover from by-products at Los Pelambres increasedby 30.6% to US$726.7 million in 2007 compared withUS$556.3 million in 2006, mainly due to highermolybdenum market prices. Molybdenum revenues(net of roasting charges) were US$676.4 million(2006 – US$513.8 million). A one dollar change in theaverage molybdenum price for the year would affectturnover and profit before tax by US$22.5 million,and earnings per share by US 1.1 cents, based onproduction volumes in 2007, and without taking intoaccount the effects of provisional pricing.Antofagasta plc Annual Report and Financial Statements 2007 25
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 28 and 29: 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:
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4 Revenue and Total Profit from Ope
Page 97 and 98:
5 Segment Information continueda) P
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5 Segment Information continueda) P
Page 101 and 102:
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
Page 111 and 112:
19 Inventories2007 2006US$m US$mRaw
Page 113 and 114:
22 Borrowings continued(ii)Other lo
Page 115 and 116:
22 Borrowings continuedd) Maturity
Page 117 and 118:
24 Financial Instruments and Financ
Page 119 and 120:
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Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
26 Deferred Tax continuedAt 31 Dece
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29 Minority InterestsThe minority i
Page 131 and 132:
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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