Annual Report 2007 - Antofagasta plc

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Financial Review continuedFINANCIAL REVIEWOre reserve and mineral resource estimationThe Group’s ore reserve and mineral resourceestimates are subject to a number of assumptions,including the price of commodities, production costsand recovery rates. Fluctuations in these variablesmay result in lower grade reserves being deemeduneconomic, and may ultimately lead to a reduction inreserves. A significant reduction could have a negativeimpact on the Group’s results, financial position andprospects.Mining operations and new projectsThe strong commodity cycle and large numbers ofprojects being developed in the resources industryhas led to increased demand for supplies, equipment,skilled personnel and contractors. This has resulted in,and could continue to result in, increased capital andoperating costs, which may impact the development ofnew projects, the expansion of existing operations, theresults of those operations and the Group’s financialcondition and prospects.Mining operations and project developments arealso subject to a number of circumstances not whollywithin the Group’s control, including damage to orbreakdown of equipment or infrastructure, naturaldisasters, unexpected geological variations andindustrial actions. Appropriate insurance can provideprotection from some, but not all, of the costs thatmay arise from unforeseen events.Failure to meet production targets may also resultin increased unit costs, particularly where operationshave a high level of fixed costs.Increasing regulatory and environmental approvalsand litigation could result in significant delays inconstruction and/or increases in construction costs.These events could materially and adversely affecta project’s economics or its successful completionand the Group’s earnings and cash flows. Similarly,withdrawal or variation of permits already granted andlitigation could affect production or costs at existingoperations, the results of these operations and theGroup’s financial condition and prospects.Decommissioning and restorationCosts associated with the decommissioning andrestoration of mine sites are estimated on the basisof a formal closure plan and are subject to regularformal review. Estimates may, however, beinsufficient, further issues may be identified orchanges in regulatory standards may occur. Anyunderestimated or unidentified costs will affectearnings and cash flows.AcquisitionsDifficulties may be experienced in successfullyintegrating acquired businesses, and the full benefits,cost savings or synergies identified at the time ofacquisition may not be achieved.Political environmentThe Group could be affected by any political orregulatory developments in any of the countries andjurisdictions in which it operates, including controlson imports, exports and prices, expropriation of assets,or new forms or rates of taxation and royalties.Health, safety and environmentThe Group operates in an industry that is subjectto numerous health, safety and environmental lawsand regulations as well as community expectations.Developments in regulatory standards andexpectations could result in increased costsand/or litigation, which could impact on earningsand cash flows.Critical accounting judgements and key sourcesof estimation uncertaintyDetermining many of the amounts included in thefinancial statements involves the use of judgementand/or estimation based on management’s bestknowledge of the relevant facts and circumstances,having regard to prior experience, but actual resultsmay differ from the amounts included in the financialstatements. Changes in judgements or the assumptionsunderlying estimates could result in a significantimpact on the financial statements. Details of principalaccounting policies are set out in Note 2 to the34Antofagasta plc Annual Report and Financial Statements 2007
financial statements and details of critical accountingjudgements and key sources of estimation uncertaintyare set out in Note 3 to the financial statements.Cautionary statement about forward lookingstatementsThe Annual Report and Financial Statements containcertain forward looking statements with respect tothe financial position, results of operations andbusiness of the Group. Examples of forward lookingstatements include those regarding ore reserve andmineral resource estimates, anticipated productionor construction commencement dates, costs,outputs, demand, trends in commodity prices,growth opportunities and productive lives ofassets or similar factors. The words “intend”,“aim”, “project”, “anticipate”, “estimate”, “plan”,“believe”, “expect”, “may”, “should”, “will”,“continue”, or similar expressions, commonlyidentify such forward looking statements.FINANCIAL REVIEWForward looking statements involve known andunknown risks, uncertainties, assumptions andother factors that are beyond the Group’s control. Forexample, future ore reserves will be based in part onlong term price assumptions that may vary significantlyfrom current levels. These may materially affect thetiming and feasibility of particular developments.Other factors include the ability to produce andtransport products profitably, demand for products,the effect of foreign currency exchange rates onmarket prices and operating costs, activities bygovernmental authorities, such as changes intaxation or regulation, and political uncertainty.Given these risks, uncertainties and assumptions,actual results could be materially different from anyfuture results expressed or implied by these forwardlooking statements which speak only as at the date ofthis report. Except as required by applicable regulationsor by law, the Group does not undertake any obligationto publicly update or revise any forward lookingstatements, whether as a result of new informationor future events. The Group cannot guarantee that itsforward looking statements will not differ materiallyfrom actual results.Antofagasta plc Annual Report and Financial Statements 2007 35
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
Page 99 and 100:
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
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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:
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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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Annual Report 2007 - Antofagasta plc

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