Antofagasta Regulatory News (ANTO)

29 Nov 2006 10:00

Antofagasta PLC29 November 2006 Antofagasta plc Unaudited Results for the Third Quarter ended 30 September 2006 London, 29 November 2006 Highlights Nine months Nine months ended ended 30 30 September September Full year 2006 2005 Change 2005 US$'m US$'m % US$'m Group turnover 2,980.4 1,752.8 70.0 2,445.3 ======== ======== ========Group EBITDA 2,297.0 1,231.8 86.5 1,674.1 ======== ======== ======== Turnover Group turnover in the nine months ended 30 September 2006 increased by 70.0% toUS$2,980.4 million, compared with US$1,752.8 million in the comparative periodin 2005. The significant increase was mainly due to higher LME copper prices, whichaveraged 299.9 cents per pound compared with 157.5 cents per pound in the ninemonths ended 30 September 2005. The Group also benefited from pricingadjustments on the close out of provisional sales due to the increase in thecopper price during the period, resulting in an average realised copper price of354.2 cents per pound (nine months ended 30 September 2005 - 170.9 cents perpound). Market molybdenum prices, which did not differ significantly from pricesrealised by Los Pelambres, were lower averaging US$24.5 per pound in the ninemonths ended 30 September 2006 (nine months ended 30 September 2005 - US$32.6per pound). The volume of copper sold was virtually unchanged at 339,100 tonnes (nine monthsended 30 September 2005 - 341,400 tonnes). Production decreased slightly to334,300 tonnes (nine months ended September 2005 - 343,400 tonnes) mainly due tolower processing levels at Los Pelambres and lower ore grades at El Tesoro.Molybdenum production and sales volumes were both higher at 7,000 tonnes and6,900 tonnes respectively (nine months ended 30 September 2005 - 6,700 tonnesand 6,500 tonnes respectively). In the case of both copper and molybdenum, salesvolumes vary from the production volumes reported on 31 October 2006 as a resultof timing differences in shipping and loading schedules. The transport and water divisions continued to perform well. Further details of production and sales volumes and realised prices by miningoperation are given in Note 2, and an analysis of turnover by business segmentis given in Note 3. EBITDA Group EBITDA in the nine months ended 30 September 2006 increased by 86.5% toUS$2,297.0 million (nine months ended 30 September 2005 - US$1,231.8 million).The improved EBITDA resulted from the higher realised copper prices as explainedin connection with turnover above. The benefit of higher copper prices waspartly offset by lower molybdenum prices as set out above, as well as higheroperating and hedging costs as compared with 2005. As reported on 31 October 2006, weighted average cash costs for the Group'smining operations, which are stated net of by-product credits, were 41.0 centsper pound in the nine months ended 30 September 2006. This compared with 4.8cents per pound in the comparative period in 2005 when Los Pelambres benefitedfrom exceptionally strong molybdenum prices. Weighted average cash costs excluding by-product credits were 95.7 cents perpound (nine months ended 30 September 2005 - 74.5 cents per pound). These costsinclude tolling charges and production costs for both copper and molybdenum.Compared with the same period in 2005, cost increases were mainly due to highertolling charges at Los Pelambres (mainly due to price participation withsmelters), general industry pressures and the lower production level at LosPelambres and El Tesoro. Nevertheless, with the exception of tolling chargeswhich have increased due to the copper price, cash costs for each mine remain inline with the Group's initial forecasts for the year. Total charges for the Group's commodity hedging programme amounted to US$94.7million in the nine months ended 30 September 2006, although the additionalcharge in the third quarter only amounted to US$5.0 million. This relates tocommodity instruments in place at the end of 2005 and which mature during 2006.No new hedges were entered during 2006. Further details of cash costs by mining operation are given in Note 2, and ananalysis of EBITDA by business segment is given in Note 3. Details of commodityinstruments are given in Note 5. Basis of Information The Group turnover and EBITDA figures included in this release for thenine-month period ended 30 September 2006 are presented on a basis consistentwith the accounting policies used in the Group's 2005 Annual Report andFinancial Statements under International Financial Reporting Standards andInterpretations ("IFRS"). The Group's three mining companies, Los Pelambres, El Tesoro and Michilla, willtoday also file quarterly financial statements under Chilean GAAP for thenine-month period ended 30 September 2006 with the Chilean securities regulator,the Superintendencia de Valores y Seguros de Chile ("SVS"). These filings are inaccordance with mining tax legislation introduced in Chile last year whichrequires companies that have elected to enter a new tax stability regime topublish quarterly financial information from the 2006 financial year. Thisrelease includes a summary of the Chilean GAAP income statement, balance sheetand cash flow statement for each of the three mining companies to be filed withthe SVS. The Group released its production report for this nine-month period on 31October 2006. Enquiries - London Enquiries - Santiago Antofagasta plc Antofagasta Minerals S.A.Tel: +44 20 7808 0988 Tel +562 377 5145 www.antofagasta.co.uk Alejandro RiveraDesmond O'Conor Email: arivera@aminerals.clEmail: doconor@antofagasta.co.uk Issued byHussein Barma Bankside ConsultantsEmail: hbarma@antofagasta.co.uk Tel: +44 20 7367 8873 Keith Irons Email: keith@bankside.com Oliver Winters Email: oliver.winters@bankside.com Notes 1. General information and accounting policies These unaudited third quarter results are for the nine-month period ending 30September 2006. The Group turnover and EBITDA information, including allcomparatives, have been prepared on the basis of the accounting policies set outin the Group's statutory accounts for the year to 31 December 2005 and inaccordance with applicable International Financial Reporting Standards andInterpretations (IFRS) which have been endorsed by the European Union. While the turnover and EBITDA information contained in this nine month resultsannouncement has been computed in accordance with IFRS, this announcement doesnot itself contain sufficient information to comply with IFRS. The informationincluded in this announcement for the nine month periods ending 30 September2005 and 30 September 2006 is unaudited. The information contained in this announcement for the year ended 31 December2005 does not constitute statutory accounts. The statutory accounts for thatyear have been approved by the Board and reported on by the auditors, and havebeen delivered to the Registrar of Companies. The auditors' report on thoseaccounts was unqualified and did not contain statements under section 237(2) ofthe Companies Act 1985 (regarding adequacy of accounting records and returns) orunder section 237(3) (regarding provision of necessary information andexplanations). The comparative information contained in Note 2 of thisannouncement is not derived from the statutory accounts for the year ended 31December 2005 and is accordingly not covered by the auditors' report. 2. Production and Sales Statistics (See notes following Note 2(b).) (a) Production and sales volumes for copper and molybdenum Production Sales ------------ ------- Nine Nine Nine Nine months months months months ended ended ended ended 30 September 30 September Full year 30 September 30 September Full year 2006 2005 2005 2006 2005 2005 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnesCopperLos Pelambres 230.4 235.9 322.8 233.2 233.5 319.1El Tesoro 68.4 73.8 98.1 69.6 74.3 96.1Michilla 35.4 33.7 46.4 36.3 33.6 45.3 -------- -------- -------- -------- -------- --------Group total 334.3 343.4 467.3 339.1 341.4 460.5 ======== ======== ======== ======== ======== ========MolybdenumLos Pelambres 7.0 6.7 8.7 6.9 6.5 8.5 ======== ======== ======== ======== ======== ======== (b) Cash costs per pound of copper produced and realised prices per pound of copper and molybdenum sold Cash cost Realised prices ----------- ----------------- Nine Nine Nine Nine months months months months ended ended ended ended 30 September 30 September Full year 30 September 30 September Full year 2006 2005 2005 2006 2005 2005 US cents US cents US cents US cents US cents US centsCopperLos Pelambres 17.2 (29.7) (17.1) 369.1 173.2 189.2El Tesoro 78.3 63.5 66.1 320.5 165.7 175.7Michilla 123.9 117.3 118.8 322.8 166.0 177.1 -------- -------- -------- -------- -------- --------Group weightedaverage (net ofby-products) 41.0 4.8 13.9 354.2 170.9 185.2 ======== ======== ======== ======== ======== ======== Group weighted average (before deductingby-products) 95.7 74.5 77.3 ======== ======== ======== Cash costs at LosPelambres comprise:On-site and shipping cost 55.9 44.6 47.1Tolling charges forconcentrates 40.6 27.2 27.6 -------- -------- --------Cash costsbefore deductingby-product credits 96.5 71.8 74.7By-product credits (principally molybdenum) (79.4) (101.5) (91.8) -------- -------- --------Cash costs(net of by-product credits) 17.2 (29.7) (17.1) ======== ======== ======== LME average 299.9 157.5 167.1 ======== ======== ======== US$ US$ US$MolybdenumLos Pelambres 25.2 33.7 31.4 ======== ======== ========Market average price 24.5 32.6 32.0 ======== ======== ======== Notes to the production and sales statistics (i) The production and sales figures represent the actualamounts produced and sold, not the Group's share of each mine. The Group owns60% of Los Pelambres, 100% of El Tesoro (61% prior to 24 August 2006) and 74.2%of Michilla. (ii) Los Pelambres produces copper and molybdenum concentrates,and the figures for Los Pelambres are expressed in terms of payable metalcontained in concentrate. Los Pelambres is also credited for the gold and silvercontained in the copper concentrate sold. El Tesoro and Michilla producecathodes with no by-products. (iii) Cash costs are a measure of the cost of operationalproduction expressed in terms of cents per pound of payable copper produced.Cash costs are stated net of by-product credits and include tolling charges forconcentrates at Los Pelambres. Cash costs exclude depreciation, financial incomeand expenses, hedging gains and losses, exchange gains and losses andcorporation tax for all three operations. By-product calculations do not takeinto account mark-to-market gains for molybdenum at the beginning or end of eachperiod. (iv) Realised copper prices are determined by comparing turnoverfrom copper sales (grossing up for tolling charges for concentrates) with salesvolumes for each mine in the period. Realised molybdenum prices at Los Pelambresare calculated on a similar basis. Realised prices do not take into accountgains and losses (including those arising from fair value adjustments) oncommodity derivatives which are included in other operating income or expense asthe Group has not yet adopted the hedge accounting provisions of IAS 39"Financial Instruments: Recognition and Measurement". (v) The totals in the tables above may include some smallapparent differences as the specific individual figures have not been rounded. (vi) The production information in Note 2(a) and the cash costinformation in Note 2(b) is derived from the Group's production report for thethird quarter of 2006 published on 31 October 2006. 3. Turnover and EBITDA analysed by business segment Turnover EBITDA ---------- -------- Nine Nine Nine Nine months months months months ended ended ended ended 30 September 30 September Full year 30 September 30 September Full year 2006 2005 2005 2006 2005 2005 US$'m US$'m US$'m US$'m US$'m US$'m Los Pelambres 2,103.7 1,251.5 1,749.8 1,812.0 1,027.1 1,420.5El Tesoro 491.8 271.5 372.2 329.6 158.3 203.2Michilla 258.3 123.0 177.1 110.3 14.5 16.3Exploration - - - (14.9) (14.2) (22.4)Corporate andother items - - - (8.0) (11.1) (15.6) -------- -------- -------- -------- -------- --------Mining 2,853.8 1,646.0 2,299.1 2,229.0 1,174.6 1,602.0Railway and other transport services 79.5 68.3 92.5 32.4 30.1 38.2Water concession 47.1 38.5 53.7 35.6 27.1 33.9 -------- -------- -------- -------- -------- --------Group turnoverand EBITDA 2,980.4 1,752.8 2,445.3 2,297.0 1,231.8 1,674.1 ======== ======== ======== ======== ======== ======== Turnover at Los Pelambres by mineral: Before deducting tolling charges Tolling charges Net of tolling charges ----------------------------- ----------------- ------------------------ Nine Nine Nine Nine Nine Nine months months months months months months ended ended ended ended ended ended 30 30 Full 30 30 Full 30 30 Full September September year September September year September September year 2006 2005 2005 2006 2005 2005 2006 2005 2005 US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m Copper 1,897.7 891.5 1,331.0 (192.5) (116.8) (166.9) 1,705.2 774.7 1,164.1Molybdenum 383.1 482.4 588.4 (16.0) (22.0) (25.6) 367.1 460.4 562.8Gold and silver 31.9 16.8 23.4 (0.5) (0.4) (0.5) 31.4 16.4 22.9 ------- ------- ------ ------- ------- ------ ------- ------- ------Los Pelambres 2,312.7 1.390.7 1,942.8 (209.0) (139.2) (193.0) 2,103.7 1,251.5 1,749.8 ======= ======= ====== ======= ======= ====== ======= ======= ====== Notes to turnover and EBITDA by business segment (i) Turnover from Railway and other transport services isstated after eliminating inter-segmental sales to the mining division of US$6.8million (nine months ended 30 September 2005 - US$6.3 million; full year 2005 -US$8.8 million). (ii) Turnover includes the effect of both final pricing andmark-to-market adjustments to provisionally priced sales of copper andmolybdenum concentrates and copper cathodes. Further details of such adjustmentsare given in Note 4. (iii) Turnover does not include the effect of gains and losses oncommodity derivatives, which are included as part of operating profit in otheroperating income or expense. Further details of such gains or losses are givenin Note 5. (iv) Los Pelambres produces and sells copper and molybdenumconcentrates. It is also credited for the gold and silver content in the copperconcentrate it sells. Turnover by type of metal is analysed below to showseparately the amounts prior to deduction of tolling charges, the tollingcharges involved and the net amounts included in turnover. El Tesoro andMichilla do not generate by-products from their copper cathode operations. (v) EBITDA is calculated by adding back depreciation,amortisation and disposals of plant, property and equipment and any impairmentcharges to operating profit from subsidiaries. (vi) EBITDA is stated after deducting losses on commodityderivatives (including both losses realised in each period and period-endmark-to-market adjustments) at El Tesoro of US$46.9 million (nine months ended30 September 2005 - US$10.5 million; full year 2005 - US$24.8 million); andMichilla of US$47.8 million (30 September 2005 - US$19.5 million; full year 2005- US$43.8 million). Further details are given in Note 5. 4. Embedded derivatives - provisionally priced sales Copper and molybdenum concentrate sale agreements and copper cathode saleagreements generally provide for provisional pricing of sales at the time ofshipment, with final pricing being based on the monthly average London MetalExchange copper price or monthly average molybdenum price for specified futureperiods. This normally ranges from 30 to 180 days after delivery to thecustomer. Under IFRS, both gains and losses from the marking-to-market of open sales arerecognised through adjustments to turnover in the income statement and to tradedebtors in the balance sheet. The Group determines mark-to-market prices usingforward prices at each period end for copper concentrate and cathode sales, andperiod-end month average prices for molybdenum concentrate sales due to theabsence of a futures market for that commodity. The mark-to-market adjustments at the end of each period and the effect onturnover in the income statement for each period are as follows: Balance sheet - Income statement - net mark to market effect on debtors net mark to market effect on turnover Nine months Nine months Full year ended ended 2005 30 September 30 September At 30.09.06 At 30.09.05 At 31.12.05 2006 2005 US$'m US$'m US$'m US$'m US$'m US$'mLos Pelambres- copper concentrate (2.7) 16.2 33.2 (35.9) (1.4) 15.6Los Pelambres- molybdenum concentrate 7.0 5.3 (12.6) 19.6 (27.6) (45.5)El Tesoro -copper cathodes 0.1 0.2 0.2 (0.1) (0.6) (0.6)Michilla -copper cathodes (0.1) - (0.1) - (0.4) (0.5) -------- -------- -------- -------- -------- -------- 4.3 21.7 20.7 (16.4) (30.0) (31.0) ======== ======== ======== ======== ======== ======== (a) Copper concentrate sales at Los Pelambres Revenues in the nine months to 30 September 2006 included total positive pricingadjustments of US$368.0 million, representing the difference between reportedrevenues and initially invoiced amounts. This comprised actual pricingadjustments compared with initial provisionally invoiced prices of US$403.9million (of which US$169.2 million related to sales of concentrate open at 31December 2005 and US$234.7 million related to sales of concentrate during 2006),together with net mark-to-market adjustments of US$35.9 million as disclosedabove. At 30 September 2006, copper concentrate sales at Los Pelambres totalling117,300 tonnes remained open as to price, with an average mark-to-market priceof 342.4 cents per pound. (b) Molybdenum concentrate sales at Los Pelambres Revenues in the nine months to 30 September 2006 included total negative pricingadjustments of US$0.1 million, representing the difference between reportedrevenues and initially invoiced amounts. This comprised negative actual pricingadjustments compared with initial provisionally invoiced prices of US$19.7million (of which a negative adjustment of US$27.5 million related to sales ofconcentrate open at 31 December 2005 and a positive adjustment of US$7.8 millionrelated to sales of concentrate during 2006) together with net positivemark-to-market adjustments of US$19.6 million as disclosed above. At 30September 2006, molybdenum concentrate sales at Los Pelambres totalling 1,723.7tonnes remained open as to price, with an average mark-to-market price ofUS$27.6 per pound. 5. Commodity derivatives The Group periodically uses derivative financial instruments to reduce exposureto commodity price movements. The Group does not use such derivative instrumentsfor speculative trading purposes. The Group has not yet adopted the hedgeaccounting provisions of IAS 39 "Financial Instruments: Recognition andMeasurement". Accordingly, under IFRS, derivatives are measured at each balancesheet date at fair value. Gains and losses arising from changes in fair valueare included in the income statement for the year, within operating profit andEBITDA. The mark-to-market adjustments at the end of each period and the effect onoperating profit and net finance costs in the income statement for each periodare as follows: Balance sheet - Income statement net mark to market effect on creditors net mark to market effect on EBITDA --------------------------------------- ------------------------------------- At 30.09.06 At 30.09.05 At 31.12.05 Nine months Nine months Full year ended ended 2005 30 September 30 September 2006 2005 US$'m US$'m US$'m US$'m US$'m US$'mEl Tesoro (19.5) (10.0) (17.0) (2.5) (10.0) (17.0)Michilla (8.9) (15.5) (27.5) 18.6 (15.7) (27.7) -------- -------- -------- -------- -------- -------- (28.4) (25.5) (44.5) 16.1 (25.7) (44.7) ======== ======== ======== ======== ======== ======== The balance sheet mark-to-market effect is stated before taking into account anypayments on account of margin calls. During the nine months ended 30 September 2006, the amount charged to operatingprofit on commodity derivatives was US$94.7 million, comprising US$46.9 millionat El Tesoro and US$47.8 million at Michilla. This comprised losses onderivatives which matured in the nine months ended 30 September 2006 of US$110.8million and net mark-to-market gains in the period of US$16.1 million. The Group had min/max instruments at 30 September 2006 for 6,450 tonnes ofcopper production, with a weighted average floor of 113.0 cents per pound and aweighted average cap of 140.9 cents per pound. These instruments covered aperiod of 3 months. 6. Summary of mining companies' Chilean GAAP financial statements (See notes following Note 6(c)). The balance sheets, income statements and cash flow statements prepared underChilean GAAP and to be filed with the SVS are summarised below. (a) Balance sheets Los Pelambres El Tesoro Michilla At At At 30.09.2006 30.09.2006 30.09.2006 US$'m US$'m US$'m Cash and cash equivalents 539.2 116.7 36.4Trade and other receivables 420.3 65.0 19.8Inventories 46.9 51.4 2.3Current and deferred tax assets 6.5 2.9 17.9 ---------- ---------- ---------- Current assets 1,012.9 236.0 76.4 Fixed assets 1,406.2 259.6 59.2 Other non-current assets 149.8 54.7 0.6 ---------- ---------- ---------- TOTAL ASSETS 2,568.9 550.3 136.2 ========== ========== ========== Short term borrowings 87.4 14.6 -Trade and other payables 116.4 37.2 21.4Current and deferred taxliabilities 92.1 29.3 10.6 ---------- ---------- ---------- Current liabilities 295.9 81.1 32.0 ---------- ---------- ----------Medium and long termborrowings 273.1 21.0 -Trade and other payables 13.9 6.2 7.5Deferred tax liabilities 135.9 30.3 - ---------- ---------- ---------- Non-current liabilities 422.9 57.5 7.5 ---------- ---------- ---------- Total liabilities 718.8 138.6 39.5 ---------- ---------- ---------- Share capital 373.8 91.0 78.4Reserves 1,476.3 320.7 18.3 ---------- ---------- ---------- Total shareholders' equity 1,850.1 411.7 96.7 ---------- ---------- ----------TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,568.9 550.3 136.2 ========== ========== ========== (b) Income statements Los Pelambres El Tesoro Michilla Nine months Nine months Nine months ended ended ended 30 September 30 September 30 September 2006 2006 2006 US$'m US$'m US$'m Turnover 2,130.0 447.6 192.0 Operating costs (288.8) (129.1) (102.9) ---------- ---------- ---------- Operating margin 1,841.2 318.5 89.1 Administrative anddistributionexpenses (54.3) (20.2) (11.9) ---------- ---------- ---------- Operating profit 1,786.9 298.3 77.2 ---------- ---------- ---------- Other income 0.7 0.2 0.3Financial income 26.8 1.8 1.2Financial expenses (16.4) (2.4) (0.2)Other expenses (1.4) (1.1) (0.4)Exchange difference 1.1 2.2 0.8 ---------- ---------- ----------Net non-operating income 10.8 0.7 1.7 ---------- ---------- ---------- Profit before tax 1,797.7 299.0 78.9 Income tax expense (333.1) (55.8) (15.2) ---------- ---------- ----------Profit for the financial period 1,464.6 243.2 63.7 ========== ========== ========== (c) Cash flow statements Los Pelambres El Tesoro Michilla Nine months Nine months Nine months ended ended ended 30 September 30 September 30 September 2006 2006 2006 US$'m US$'m US$'mNet cash flow fromoperating activities 1,435.1 238.1 79.5 ---------- ---------- ---------- Investing activitiesAdditions to fixed assets (344.9) (8.9) (8.2)Disposals of fixed assets 1.4 - -Other items - - (0.1) ---------- ---------- ----------Net cash used ininvesting activities (343.5) (8.9) (8.3) ---------- ---------- ----------Financing activitiesDividends paid (1,070.0) (95.0) (50.0)Loans repaid (43.1) (21.0) - ---------- ---------- ---------- Net cash used infinancing activities (1,113.1) (116.0) (50.0) ---------- ---------- ----------Net increase incash and cash equivalents (21.5) 113.2 21.2 Cash and cash equivalents at the beginning of the period 560.7 3.5 15.2 ---------- ---------- ---------- Cash and cash equivalents at the end of the period 539.2 116.7 36.4 ========== ========== ========== Notes to Chilean GAAP financial statements (i) The above balance sheets, income statements and cash flowstatements have been derived from the quarterly financial statements of LosPelambres, El Tesoro and Michilla to be filed with the SVS in Chile. Certaindetailed lines in the individual statements have been combined for convenience. (ii) The balance sheets, income statements and cash flowstatements above have been prepared under Chilean GAAP and therefore do notnecessarily equate to the amounts that would be included in the Group'sconsolidated financial statements for a corresponding period either as tomeasurement or classification. (iii) The amounts disclosed above represent the full amount foreach company and not the Group's attributable share. The Group owns 60% of LosPelambres, 100% of El Tesoro (61% prior to 24 August 2006) and 74.2% ofMichilla. (iv) A translation into English of the full quarterly financialstatements for each company shown in summary form above will be available on theGroup's website www.antofagasta.co.uk. 7. Reconciliation of Chilean GAAP results to Turnover and EBITDA under IFRSfor individual business segments (a) Turnover Los Pelambres El Tesoro Michilla Nine months Nine months Nine months ended ended ended 30 September 30 September 30 September 2006 2006 2006 Notes US$'m US$'m US$'m Chilean GAAP - Turnover 2,130.0 447.6 192.0 Mark-to-market of provisionally priced sales 7(i) (26.2) (0.2) (0.1) Reclassification of realisedlosses on commodityderivatives toother operating expense 7(ii) - 44.4 66.4 ---------- ---------- ----------IFRS - Turnover 2,103.7 491.8 258.3 ========== ========== ========== (b) EBITDA Los Pelambres El Tesoro Michilla Nine months Nine months Nine months ended ended ended 30 September 30 September 30 September 2006 2006 2006 Notes US$'m US$'m US$'m Chilean GAAP - Operating profit 1,786.9 298.3 77.2 Depreciation & amortisation 52.6 29.5 13.6 ---------- ---------- ---------- Chilean GAAP - EBITDA 1,839.5 327.8 90.9 Mark-to-marketof provisionallypriced sales 7(i) (26.2) (0.2) (0.1) Mark-to-marketof financial derivatives 7(ii) 0.3 (2.5) 18.6 Other IFRS andconsolidation adjustments 7(iii) (1.6) 4.5 0.9 ---------- ---------- ----------IFRS - EBITDA 1,812.0 329.6 110.3 ========== ========== ========== Notes to reconciliation of turnover and EBITDA (i) Copper and molybdenum concentrate sale agreements and copper cathode saleagreements generally provide for provisional pricing of sales at the time ofshipment, with final pricing being based on the monthly average London MetalExchange copper price or monthly average molybdenum price for specified futureperiods. This normally ranges from 30 to 180 days after delivery to thecustomer. Under Chilean GAAP, the Group's accounting treatment is to value sales, whichremain open as to final pricing at the period end, in aggregate at the lower ofprovisional invoice prices and mark-to-market prices at the balance sheet date.The Group determines mark-to-market prices using forward prices at each periodend for copper concentrate and cathode sales, and period-end month averageprices for molybdenum concentrate sales due to the absence of a futures marketfor that commodity. Under IFRS, both gains and losses from the marking-to-market of open sales arerecognised through adjustments to turnover in the income statement and to tradedebtors in the balance sheet. Under IFRS, the Group determines mark-to-marketprices in the same way as under Chilean GAAP. This results in a GAAP adjustment in cases where the mark-to-market prices arehigher than the provisional invoice prices. For Los Pelambres this results in acharge of US$33.2 million in respect of copper concentrate sales, and a creditof US$7.0 million in respect of molybdenum concentrate sales. The adjustment inrespect of El Tesoro is a charge of US$0.2 million, and the adjustment inrespect of Michilla is a charge of US$0.1 million. (ii) The Group uses derivative financial instruments to reduce exposure tocommodity price movements. The Group does not use such derivative instrumentsfor trading purposes. Under Chilean GAAP, such derivatives are held off the balance sheet. Gains orlosses on derivative instruments are matched in the income statement against theitem intended to be hedged. Such gains or losses are reflected by way ofadjustment to turnover. To date, the Group has not yet adopted the hedge accounting provisions of IAS 39"Financial Instruments: Recognition and Measurement", although this decisionwill be kept under review. Accordingly, under IFRS, derivatives are initiallymeasured at cost including transaction costs (which may be nil), and measured atsubsequent reporting dates at fair value. Gains and losses arising from changesin fair value, or from derivatives which mature or are liquidated in the period,are included in the income statement for the period as part of other operatingincome or expense. Any amounts included in turnover under Chilean GAAP arereclassified accordingly. (iii) Other IFRS and consolidation adjustments are not material eitherindividually or in aggregate. This information is provided by RNS The company news service from the London Stock Exchange