Annual Report 2003 - Antofagasta plc

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Notes to the Financial Statements18 Financial Instruments and Risk Management (continued)c) Commodity price hedging (continued)At 31 December 2003, the Group had hedged 3,000 tonnes of copper production using futures with a weighted averageprice of 80.1 cents per pound and an average outstanding duration of one month. The Group had hedged 7,500 tonnesof production using min/max options with a weighted average floor and ceiling of 80.0 cents and 85.1 cents respectivelyand an average outstanding duration of two months. The unrealised mark-to-market loss at that date was US$2.1 million.The actual losses recognised in respect of these hedges in the first three months of 2004 amounted to US$9.3 million,due to the improvement in copper prices since the year end.No further hedges were entered into between 31 December 2003 and the date of this report.d) Interest rate swap and zero cost collar agreementsThe majority of the Group’s borrowings are subject to variable interest rates as explained in Note 17 and details of fixedand floating rate loans and applicable interest rates are given in Notes 17(a) to (d).At 1 January 2003, the Group had zero cost collars for US$168.8 million, and the unrealised mark-to-market loss at thatdate was US$12.2 million.During the year, interest costs included US$6.6 million relating to the losses recognised in the year relating to the zerocost collars.At 31 December 2003, the Group had zero cost collars outstanding for US$166 million, and the unrealised mark-to-marketloss was US$9.4 million, of which US$5.0 million is expected to be realised in 2004. Details of the duration and rates ofthese collars are given in Notes 17(a) and (b).e) Forward exchange contractsThe Group periodically enters into forward foreign exchange contracts to reduce the foreign currency exposure of theGroup’s operations. The terms of currency forward exchange contracts are typically less than one year.ANTOFAGASTA PLC Annual Report and Financial Statements 200376At 1 January 2003, the Group had forward exchange contracts to buy US dollars and sell Chilean pesos with a net valueof US$1 million and a weighted average outstanding duration of three months. The unrealised mark-to-market lossat 31 December 2002 was less than US$0.1 million and this loss was realised in 2003.At 31 December 2003, the Group had forward exchange contracts to buy US dollars and sell Chilean pesos with a netvalue of US$100.0 million and a weighted average outstanding duration of less than one month. The unrealised mark-tomarketloss at 31 December 2003 was US$0.4 million and this loss has been realised in 2004.f) Foreign currency exposuresThe table below shows the Group’s foreign currency exposures at 31 December 2003. These exposures comprise monetaryassets and liabilities of the Group that are not denominated in the functional currency of the operating company involvedand give rise to the net currency gains and losses recognised in the profit and loss account. These exposures excludeintercompany balances which are eliminated on consolidation.
18 Financial Instruments and Risk Management (continued)f) Foreign currency exposures (continued)Net foreign currency monetary assets/(liabilities)2003 2002US Chilean US ChileanDollar Peso Total Dollar Peso TotalUS$m US$m US$m US$m US$m US$mFunctional currency of Group operationUS Dollar – (7.4) (7.4) – 1.7 1.7Chilean Peso (2.6) – (2.6) – – –g) Fair value of financial instrumentsThe fair values of financial instruments are the amount at which the instruments could be exchanged in a currenttransaction between willing parties, other than in a forced or liquidation sale. The book values are included in the Groupbalance sheet under the indicated headings. The fair value of the Group’s financial instruments is as follows:Book value Fair value Book value Fair value2003 2003 2002 2002US$m US$m US$m US$mFinancial assetsOther investments 0.4 0.4 187.4 179.1Current asset investments and cash at bank and in hand 195.7 195.7 252.4 252.4Debtors due after one year 29.0 29.0 4.8 4.8225.1 225.1 444.6 436.3Financial liabilitiesShort-term loans (166.7) (172.6) (124.0) (129.8)Long-term loans (690.8) (695.3) (841.3) (849.4)Preference shares (3.5) (2.3) (3.2) (1.8)Severance indemnities provision (15.7) (15.7) (10.6) (10.6)(876.7) (885.9) (979.1) (991.6)Market values, where available, have been used to determine fair values. Where market values are not available, fair valueshave been calculated by discounting cash flows at prevailing interest rates.h) HedgesThe Group uses derivative financial instruments to reduce exposure to foreign exchange, interest rate and commodityprice movements and these are accounted for in accordance with the accounting policy set out in Note 1.The Board does not expect to alter the Group’s policies on the use of financial instruments during the course of theforthcoming year.ANTOFAGASTA PLC Annual Report and Financial Statements 200377
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Copper 1 a malleable ductile reddis
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Highlights 2003Total copper product
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Selected Financial and Operating Da
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consumption and low interest rates
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y an amount equivalent to 16.3 cent
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Selected Data for Mining Operations
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Exploration Projects - 2004KEYMININ
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FCAB Rail NetworkKEY85-90 POUND RAI
Page 17 and 18:
Demerger of Quiñenco S.A.Following
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Cash Costs and Realised Copper Pric
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In 2003, sales of copper concentrat
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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
Page 71 and 72: 12 Investment in Subsidiaries (cont
Page 73 and 74: 14 StocksGroup Group2003 2002US$m U
Page 75 and 76: 17 Loans (continued)b) (continued)U
Page 77: 18 Financial Instruments and Risk M
Page 81 and 82: 20 Called Up Share Capital (continu
Page 83 and 84: 22 Notes to the Consolidated Cash F
Page 85 and 86: 23 Acquisition (continued)The asset
Page 87 and 88: 24 Demerger of Andsberg Limited (co
Page 89 and 90: 28 Ultimate Parent CompanyAt 31 Dec
Page 91 and 92: 2003 2002 2001 2000 1999Consolidate
Page 93 and 94: a) will expire 15 months after the
Page 95 and 96: f) Article 83 be amended by inserti
Page 97 and 98: A notice given under this Article 1
Page 99 and 100: Produced by Royle Financial Print L
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