Annual Report 2007 - Antofagasta plc

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Financial Review continuedFINANCIAL REVIEWCapital expenditure on a cash basis was US$481.7million in 2007 compared with US$506.6 million in2006. Capital expenditure on an accruals basis isexplained in the Financial Review on page 29.Dividends (including special dividends) paid to ordinaryshareholders of the Company this year were US$485.0million (2006 – US$236.6 million), which related to thefinal dividend declared in respect of the previous yearand the interim dividend in respect of the current year,and reflected the increased dividend per share paidin 2007 compared with 2006. Dividends paid bysubsidiaries to minority shareholders were US$681.2million (2006 – US$630.6 million), principally due toincreased distributions by Los Pelambres.Other items principally related to dividends from ATIand recovery of Chilean VAT previously paid on theacquisition of the water concession by Aguas deAntofagasta in 2003. The net cash inflow from theseitems was US$11.0 million in 2007 compared withUS$8.9 million in 2007.Foreign currency exchange differences and othernon-cash movements are analysed in Note 33 to thefinancial statements.Changes in the cash and debt components of net cashduring the year are analysed under Financial Positionbelow.Financial Position2007 2006US$m US$mCash and cash equivalents 2,212.5 1,805.5Total borrowings (266.0) (358.7)Net cash at the end of the year 1,946.5 1,446.8The increase in net cash during the year wasUS$499.7 million (2006 – US$595.3 million). Theprincipal reasons for the increase in net cash during2007 are set out above under Cash Flows.Repayments of borrowings and finance leasingobligations in the year, mainly at Los Pelambres andEl Tesoro, were US$100.2 million (2006 – US$111.4million). New borrowings in the year amounted toUS$7.0 million (2006 – US$3.8 million).At 31 December 2007, the Group had cash and cashequivalents of US$2,212.5 million (2006 – US$1,805.5million). Excluding the minority share in each partlyownedoperation, the Group’s attributable share oftotal cash and cash equivalents was US$2,135.4million (2006 – US$1,592.7 million).Total Group borrowings at 31 December 2007were US$266.0 million (2006 – US$358.7 million).Of this, US$169.5 million (2006 – US$230.0 million) isproportionally attributable to the Group after excludingthe minority shareholdings in partly-owned operations.The decrease in debt is mainly due to further principalrepayments at Los Pelambres and El Tesoro asexplained above.An analysis of borrowings by Group company iscontained in Note 22 to the financial statements.US$101.8 million of the total Group borrowings ofUS$266.0 million is repayable within one year, andrelates mainly to the short-term portion of thecorporate loans at Los Pelambres and El Tesoro.As explained above in relation to net interest payable,Group cash and debt is predominantly floating rate andalmost entirely denominated in US dollars.Balance SheetThe Group’s balance sheet is set out on page 79. Netequity (i.e. equity attributable to ordinary shareholdersof the Company) increased from US$3,155.1 million at1 January 2007 to US$4,065.0 million at 31 December2007, relating mainly to profit after tax and minorityinterests for the period less ordinary dividendsdeclared and paid in the year. Other changes relatemainly to movements in the fair value of hedges andavailable for sale investments and the currencytranslation adjustment; these are set out in theConsolidated Statement of Changes in Equity.Minority interests increased from US$793.0 million at1 January 2007 to US$841.5 million at 31 December2007, principally reflecting the minority’s share of profitafter tax, less the minority’s share of the dividendspaid by subsidiaries in the year. Other movementsaffecting minority interest are also set out in theConsolidated Statement of Changes in Equity.30Antofagasta plc Annual Report and Financial Statements 2007
Treasury Management and HedgingA detailed description of the key financial risks facingthe Group, and the processes in place to managethose risks, is included in Note 24(c).The Group periodically uses derivative financialinstruments to reduce exposure to commodity pricemovements. The Group does not use such derivativeinstruments for speculative trading purposes. TheGroup has applied the hedge accounting provisionsof IAS 39 “Financial Instruments: Recognition andMeasurement” with effect from 1 January 2007.From that date, changes in the fair value of derivativefinancial instruments that are designated and effectiveas hedges of future cash flows have been recogniseddirectly in equity, with such amounts subsequentlyrecognised in the income statement in the periodwhen the hedged item affects profit or loss. Anyineffective portion is recognised immediately in theincome statement. Realised gains and losses oncommodity derivatives recognised in the incomestatement have been recorded within turnover. Thetime value element of changes in the fair value ofderivative options is excluded from the designatedhedging relationship, and is therefore recogniseddirectly in the income statement within other financeitems. Prior to 1 January 2007 derivatives weremeasured at fair value through the income statement,with both realised and unrealised gains or losses oncommodity derivatives being recorded within otheroperating income or expense.The impact of derivative instruments on theGroup’s results for the period is set out above in thesections on turnover, EBITDA and operating profit fromsubsidiaries and joint ventures and net finance income,and in Note 24(e) to the financial statements.At 31 December 2007, the Group had min/maxinstruments for 70,200 tonnes of copper production(of which 60,000 tonnes relate to El Tesoro and 10,200tonnes relate to Michilla), covering a total period up to31 December 2009. The weighted average remainingperiod covered by these hedges calculated witheffect from 1 January 2008 is 11 months. Theinstruments have a weighted average floor ofUS 248.9 cents per pound and a weighted averagecap of US 389.2 cents per pound. The Group also hadfutures for 6,500 tonnes, to both buy and sell copperproduction at El Tesoro, with the effect of swappingCOMEX prices for LME prices without eliminatingunderlying market price exposure, covering a periodto 31 January 2009. The remaining weighted averageperiod covered by these instruments was 7 months.Between 31 December 2007 and the date of thisreport, Michilla entered into further min/maxinstruments for 15,000 tonnes of copper production,covering a total period up to 31 December 2008. Theweighted average remaining period covered by thesehedges calculated with effect from 1 January 2008 is6.5 months. The instruments have a weighted averagefloor of US 292.1 cents per pound and a weightedaverage cap of US 342.1 cents per pound.These instruments represent approximately 60% ofMichilla’s forecast production for 2008 and 33% ofEl Tesoro’s forecast production to the end of 2009,and the Group’s exposure to the copper price willbe limited to the extent of these instruments. Detailsof the mark-to-mark position of these instrumentsat 31 December 2007, together with details of anyinterest and exchange derivatives held by the Group,are given in Note 24(e) to the financial statements.Foreign Currency ExchangeDifferencesThe principal subsidiaries with a functionalcurrency other than the US dollar are Chilean pesodenominated,of which the most significant is Aguasde Antofagasta S.A. Exchange rates used to translatethe results of such subsidiaries are given in Note 36to the financial statements.The currency translation adjustment credit to netequity of US$13.5 million results mainly from thestrengthening in the Chilean peso during the yearfrom Ch$532 = US$1 at the start of 2007 to Ch$497= US$1 at the end of 2007. In 2006 the currencytranslation adjustment charge to net equity ofUS$4.3 million resulted mainly from the weakeningof the Chilean peso in the year, from Ch$513 = US$1at the beginning of 2006 to Ch$532 = US$1 at theend of 2006.FINANCIAL REVIEWAntofagasta plc Annual Report and Financial Statements 2007 31
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
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
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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
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22 Borrowings continued(ii)Other lo
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22 Borrowings continuedd) Maturity
Page 117 and 118:
24 Financial Instruments and Financ
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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
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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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