Annual Report 2003 - Antofagasta plc

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Financial ReviewCash CostsCash costs are a measure of the operational cost of copper production expressed in terms of cents perpound of payable copper produced. Cash costs include by-product credits and exclude depreciation, financialincome and expenses, exchange gains and losses and corporation tax.Group weighted average cash costs in 2003 decreased by 6.4% to 36.4 cents per pound (2002 – 38.9 centsper pound), as lower cash costs at Los Pelambres offset higher cash costs at El Tesoro and Michilla.Cash costs at Los Pelambres, which include by-product credits, decreased by 16.1% to 29.3 cents per pound(2002 – 34.9 cents per pound) as a result of higher molybdenum prices and higher production. Molybdenumprices averaged US$5.30 per pound in 2003 (2002 – US$3.70 per pound), while production was 8,700 tonnes(2002 – 7,800 tonnes). Consequently, by-product credits were 16.3 cents per pound compared with 11.0 centsin 2002. Los Pelambres also continued to benefit from low treatment and refining charges (TC/RCs) which,at 13.5 cents per pound, were 1.9 cents lower than 2002.Cash costs increased at both El Tesoro and Michilla compared with 2002. At El Tesoro, cash costs increasedby 3.9% to 42.4 cents per pound (2002 – 40.8 cents per pound), mainly due to higher haulage costs incurredin mixing of ores and the addition of dry waste material to reduce humidity at the tailings dumps. AtMichilla, cash costs increased by 13.7% to 69.8 cents per pound (2002 – 61.4 cents per pound). The highercosts resulted partly from the disruption to production at the start of the year when the additional capacitywas installed, but also due to the lower ore grade and higher waste to ore ratio as expected under thecurrent phase of the mine plan.Review of PerformanceTurnover, EBITDA, depreciation and amortisation, operating profit, capital expenditure and net assets areanalysed on a segmental basis for each mine and the transport division in Note 2 to the financial statements.Turnover 2003 2002US$mUS$mANTOFAGASTA PLC Annual Report and Financial Statements 2003Turnover 1,076.2 863.1Group turnover increased by 24.7% to US$1,076.2 million in 2003. The increase was due mainly to betterrealised copper prices at all three mines, following the improvement of LME copper prices compared with2002, together with higher sales volumes. The reasons for the improved prices and volumes are explained inthe Key Operating Statistics above. As a result, overall turnover from copper sales reached US$883.3 million,compared with US$715.3 million in 2002. By-product revenues at Los Pelambres increased to US$116.7million (2002 – US$77.4 million) as a result of higher production of molybdenum and higher prices.Turnover at the transport division was also up by 7.7% to US$75.8 million, mainly due to increasedtransport volumes. The water concession, acquired on 29 December 2003, contributed US$0.4 million.18
In 2003, sales of copper concentrate and copper cathodes represented 82% of Group turnover and thereforerevenues depend significantly on LME and realised copper prices. Based on production volumes in 2003,and without taking into account the effects of provisional pricing and hedging activity, a one cent changein the average copper price for the year would affect turnover and profit before tax by US$10.4 million,and earnings per share by 2.6 cents.By-product sales at Los Pelambres (principally molybdenum concentrate) represented 11% of Groupturnover. A 10 cent change in the average molybdenum price in the year would affect turnover and profitbefore tax by US$1.9 million, and earnings per share by 0.5 cents.The transport division represented 7% of total turnover. The water concession, acquired at the end ofDecember 2003, did not have a material effect on turnover or profits in the year.Metal sales (both copper and by-products) are denominated in US dollars and transport revenues aredenominated in both Chilean pesos and US dollars. Sales at the water concession are denominatedprincipally in Chilean pesos.EBITDA and Operating Profit 2003 2002US$m US$mEBITDA 524.3 349.7Depreciation (136.8) (128.7)Loss on disposal of fixed assets included in operating profit (0.2) (7.1)Operating profit 387.3 213.9Operating profit increased 81% to US$387.3 million compared with 2002. This reflected the combinedeffect of higher production and improved copper prices, together with lower cash costs at Los Pelambreswhich are explained in the Key Operating Statistics above. Consequently, operating profit increased byUS$147.4 million at Los Pelambres and US$22.1 million at El Tesoro. Michilla’s operating loss, however,increased marginally to US$3.6 million as the benefits of a higher copper price were outweighed byhedging losses of US$3.9 million and higher cash costs. Operating profit at the transport division ofUS$34.0 million included other operating income of US$6.5 million for the cancellation of a contractfor additional tonnages in the first half of the year. Excluding this, operating profits increased in linewith higher transport volumes.Operating profit is stated after depreciation and loss on disposal of fixed assets of US$137.0 million(2002 – US$135.8 million), giving EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation)of US$524.3 million (2002 – US$349.7 million).Net capital expenditure and financial investment amounted to US$78.2 million (2002 – US$67.3 million)and is further explained under Cash Flows on page 23.ANTOFAGASTA PLC Annual Report and Financial Statements 200319
Page 1 and 2: Copper 1 a malleable ductile reddis
Page 3 and 4: Highlights 2003Total copper product
Page 5 and 6: Selected Financial and Operating Da
Page 7 and 8: consumption and low interest rates
Page 9 and 10: y an amount equivalent to 16.3 cent
Page 11 and 12: Selected Data for Mining Operations
Page 13 and 14: Exploration Projects - 2004KEYMININ
Page 15 and 16: FCAB Rail NetworkKEY85-90 POUND RAI
Page 17 and 18: Demerger of Quiñenco S.A.Following
Page 19: Cash Costs and Realised Copper Pric
Page 23 and 24: The Group’s borrowings relate mai
Page 25 and 26: Acquisition of Water ConcessionIn N
Page 27 and 28: Balance SheetThe Group’s balance
Page 29 and 30: As explained in the Chairman’s Re
Page 31 and 32: The Group also commenced a process
Page 33 and 34: Mining Reserves and ResourcesAt 31
Page 35 and 36: DirectorsThe Directors who served d
Page 37 and 38: Special Business at the Annual Gene
Page 39 and 40: Corporate GovernanceThe Board of Di
Page 41 and 42: c) Relations with ShareholdersThe E
Page 43 and 44: Report on Remuneration and Related
Page 45 and 46: Between 8 March 2004 and 30 April 2
Page 47 and 48: In addition, the Group paid Jara de
Page 49 and 50: Basis of Audit OpinionWe conducted
Page 51 and 52: Consolidated Statement of Total Rec
Page 53 and 54: Parent Company Balance SheetAt 31 D
Page 55 and 56: Notes to the Financial Statements1
Page 57 and 58: 1 Accounting Policies (continued)De
Page 59 and 60: 1 Accounting Policies (continued)s)
Page 61 and 62: 2 Segmental Information (continued)
Page 63 and 64: 2 Segmental Information (continued)
Page 65 and 66: 5 Directors’ Remuneration2003 200
Page 67 and 68: 7 Dividends 2003 2003 2002 2002cent
Page 69 and 70: 11 Tangible Fixed AssetsLand Buildi
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12 Investment in Subsidiaries (cont
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14 StocksGroup Group2003 2002US$m U
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17 Loans (continued)b) (continued)U
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18 Financial Instruments and Risk M
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18 Financial Instruments and Risk M
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20 Called Up Share Capital (continu
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22 Notes to the Consolidated Cash F
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23 Acquisition (continued)The asset
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24 Demerger of Andsberg Limited (co
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28 Ultimate Parent CompanyAt 31 Dec
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2003 2002 2001 2000 1999Consolidate
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a) will expire 15 months after the
Page 95 and 96:
f) Article 83 be amended by inserti
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A notice given under this Article 1
Page 99 and 100:
Produced by Royle Financial Print L
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Annual Report 2003 - Antofagasta plc

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