Antofagasta Regulatory News (ANTO)

15 Mar 2005 07:02

Antofagasta PLC15 March 2005 Preliminary Results Announcement for the year ended 31 December 2004 15 March 2005 • Turnover of US$1,908.7 million (2003 - US$978.0 million); up 95%. • Operating cash flow of US$1,253.5 million (2003 - US$510.2 million); up 146%. • Profit before tax of US$1,162.7 million (2003 - US$357.2 million); up 226%. • Earnings per share of 283.1 cents (2003 - 91.5 cents); up 209%. • Final dividend of 64 cents* per share, comprising: - an ordinary dividend of 24 cents (2003- 24 cents); and - a special dividend of 40 cents (2003 - nil). • Total dividend for year of 79 cents per share including specialdividend (2003 - 35 cents per share); total dividend up 126%; ordinary dividendfor the year up 11% . LME copper prices were significantly stronger in the year, averaging 130.0 centsper pound compared with 80.7 cents in 2003. Group copper production rose by5.6% to 498,400 tonnes (2003 - 471,800 tonnes). Group weighted average cashcosts** were 33.2% lower at 24.3 cents per pound (2003 - 36.4 cents per pound),as by-product credits at Los Pelambres increased significantly due to highermolybdenum prices. Group profit before tax increased from US$357.2 million in2003 to US$1,162.7 million, and earnings per share from 91.5 cents per share to283.1 cents. Jean-Paul Luksic, Chairman of Antofagasta, commented, "This is another good setof results for Antofagasta reflecting very strong copper and molybdenum pricesthroughout 2004. Strong demand for metals has continued into 2005 and wecontinue to benefit from these markets. " Antofagasta is a Chilean-based mining group listed in the United Kingdom. Inaddition to copper mining, its interests include rail and road transportoperations and water distribution. *Dividends are paid either in US dollars or sterling. A conversion rate of £1=US$1.9183 will be applied to the final dividend of 64 cents, giving shareholderswho receive dividends in sterling a final dividend of 33.3629p. **Cash cost is a method used by the mining industry to express the cost ofproduction in cents per pound of copper, and is further explained in Note 2(d)to the Preliminary Results Announcement. Enquiries - London Enquiries - SantiagoAntofagasta plc Antofagasta Minerals S.A.Tel: +44 20 7808 0988 Tel: +562 377 5145Desmond O'Conor Alejandro RiveraEmail: doconor@antofagasta.co.uk Email: arivera@aminerals.cl www.antofagasta.co.uk Issued by Bankside Consultants Ltd Keith Irons Email: keith@bankside.com Tel: +44 20 7444 4155 DIRECTORS' COMMENTS for the year to 31 December 2004 Group earnings increased significantly against a background of higher commodityprices. Profit before tax was US$1,162.7 million (2003 - US$357.2 million), up226% and earnings per share were 283.1 cents (2003 - 91.5 cents), up 209%. LMEcopper prices averaged 130.0 cents per pound (2003 - 80.7 cents per pound) whilemolybdenum prices averaged US$16.2 per pound (2003 - US$5.3 per pound). Groupcopper production increased 5.6% to 498,400 tonnes while weighted average cashcosts, which include by-product credits, were 33% lower mainly due to highmolybdenum prices which offset higher operating costs. During 2004, operating cash flow was US$1,253.5 million (2003 - US$510.2million) and the Group made net debt repayments of US$263.3 million. Thisincluded voluntary prepayments of US$74.1 million relating to the project loansat Los Pelambres and El Tesoro, both of which were refinanced at the end of theyear. Net cash at the year end was US$282.5 million (2003 - net debt US$661.8million), comprising cash and deposits of US$881.4 million and debt of US$598.8million and this will partly be used to fund the Group's capital expenditure,including the Mauro tailings dam which is estimated to cost US$450 millionbetween 2005 and 2007. The Board is also recommending a final dividend forpayment in June 2005 of 64 cents per ordinary share (2003 - 24 cents) whichcomprises an ordinary dividend of 24 cents and a special dividend of 40 cents.The total dividend for the year, including the interim dividend paid in October,is 79 cents (2003 - 35 cents). On 5 November 2004, Antofagasta announced that Mr. Andronico Luksic had steppeddown as Chairman of Antofagasta and had been invited to become HonoraryPresident in recognition of his contribution to the Group over many years. Mr.Jean-Paul Luksic, then Deputy Chairman, was elected Chairman. On 1 December2004, Mr. Marcelo Awad, previously Senior Commercial Vice-President ofAntofagasta Minerals S.A. ("AMSA"), the Group's mining division, was appointedChief Executive Officer of AMSA, the position previously held by Mr. Jean-PaulLuksic. Review of Operations Los Pelambres Los Pelambres produced 350,600 tonnes of payable copper, an increase of 7.3%over the 326,700 tonnes produced in 2003. The increase was mainly due to higherthroughput at the concentrator plant which averaged 125,900 tonnes per day (tpd)following the completion of modifications to the grinding lines at the end ofthe previous year (2003 - averaged 113,300 tpd). This higher processing levelcompensated for lower ore grades, which averaged 0.88% compared with 0.91% in2003 and slightly lower recoveries. Molybdenum production was 7,900 tonnes(2003 - 8,700 tonnes), due to lower molybdenum ore grades and lower recoveries. Cash costs, which include by-product credits, fell to 7.9 cents per pound ofcopper produced (2003 - 29.3 cents per pound), due to the very significantincrease in molybdenum prices. Cash costs in the year excluding by-productcredits were 53.7 cents per pound compared with 45.6 per pound cents in 2003.The increase was due to higher treatment and refining charges (TC/RCs), as wellas the effect of lower ore grades, higher shipping costs, the effect of thestronger peso and higher maintenance costs. These factors were partly offset bythe economies achieved by higher throughput levels. Realised copper prices were 142.2 cents (2003 - 84.6 cents per pound), due tohigher LME copper prices and also because Los Pelambres continued to benefitfrom positive adjustments on final settlement of concentrate sales. Realisedmolybdenum prices in the period were US$20.0 per pound (2003 - US$5.5 perpound), also due to higher market prices and similar positive adjustments onfinal settlement of molybdenum oxide concentrate sales. The combination ofhigher realised copper and molybdenum prices and higher copper production leveloffset the higher underlying costs and lower molybdenum volume to enable LosPelambres to increase operating profits by 208% to US$964.8 million comparedwith US$313.3 million in 2003. Capital expenditure in the year amounted to US$47.7 million, including US$17.0million relating to the Mauro dam. The dam will provide storage capacity forall tailings from the total mine plan, which were increased to 2.1 billiontonnes following the approval of the Environmental Impact Assessment during2004. The Mauro dam will cost approximately US$450 million, to be funded out ofGroup cash balances, and is expected to be completed by the end of 2007. During 2004, Los Pelambres examined alternatives for an expansion of theconcentrator plant. Engineering studies for an initial upgrade of up to 140,000tpd have been completed, for which a decision to proceed could be taken in thefirst half of 2005. Studies are also continuing for a possible expansion whichwould increase processing levels to 175,000 tpd compared with the current125,000 level of tpd. Project borrowings were reduced by US$134.9 million during the year, including avoluntary prepayment of US$50 million. Los Pelambres took advantage offavourable debt market conditions to refinance the outstanding balance of US$460million in December with a new unsecured corporate facility. The new loan,which is repayable in equal semi-annual instalments over six years, benefitsfrom lower interest rates and less restrictive covenants. In 2005, the ore processing level is expected to remain at around 125,000 tpdwhile the ore grade is expected to decrease to approximately 0.81%. As aresult, production of payable copper in 2005 is expected to be around 321,000tonnes. Molybdenum production in 2005 is forecast to be around 7,200 tonnesalso due to slightly lower grades. Cash costs before by-product credits areexpected to increase by approximately 9 cents, reflecting further increases intreatment and refining charges, higher shipping costs, the effect of the lowerore grade and other factors. Nevertheless, cash costs remain highly sensitiveto molybdenum prices, which are still at historical highs, and this shouldcontinue to benefit Los Pelambres. Capital expenditure is estimated at US$232.0million, which includes US$163.5 million relating to the Mauro project. El Tesoro Cathode production at El Tesoro reached 97,800 tonnes in 2004, 5.8% higher thanthe production level of 92,400 tonnes in 2003. Higher ore throughput, resultingfrom an optimisation of the crushing circuits in the year, compensated for lowerore grades which averaged 1.35% compared with 1.46% in 2003. Ore crushingcapacity is now at the 9.7 million tonnes per annum level compared to 9.0million tonnes per annum previously. Cash costs in the year were 52.4 cents perpound compared with 42.4 cents per pound in 2004, resulting from a combinationof lower ore grades, higher costs of sulphuric acid and fuel as well as a higherwaste to ore ratio in the mine. Higher copper prices and strong cathode premiums for El Tesoro's cathodes due totight market conditions offset the increase in cash costs, and enabled operatingprofit to reach US$152.0 million (2003 - US$58.5 million). Project borrowings at El Tesoro were reduced to US$100.0 million, afterrepayments of US$56.6 million during the year. This included a voluntaryprepayment of US$24.1 million. El Tesoro also refinanced its project borrowingsin December with an unsecured corporate facility to benefit from lower interestrates and less restrictive covenants. The new facility is repayable in equalsemi-annual instalments over 5 years. In January 2005, the finance leases ofUS$12.2 million relating to the purchase of the power line were fully repaid. In 2005, El Tesoro expects to maintain production at around 97,000 tonnes, withcash costs of 61 cents per pound. This reflects the impact of higher operatingcosts, including a higher waste to ore ratio, slightly lower grades and higherinput costs including sulphuric acid and fuel prices. Michilla Michilla produced 50,000 tonnes of cathodes in 2004 compared with 52,700 tonnesthe previous year. The fall in production was caused by a reduction in gradesin the first half of the year when changes in the sequence of ore extracted weremade to avoid old mine workings in the vicinity of Michilla's open pit. Thisprevented Michilla from taking full advantage of the additional crushingcapacity installed during 2003. Cash costs increased from 69.8 cents per pound in 2003 to 85.6 cents in 2004.Once again, lower grades and higher sulphuric acid prices and fuel costs werethe principal reasons, together with a stronger Chilean peso. In addition,Michilla did not fully benefit from higher copper prices throughout the year, aspart of its production in the first quarter had been hedged in 2003 at a cost ofUS$9.3 million. Nevertheless, the strong copper prices overall outweighed theincrease in costs and hedging losses, enabling Michilla to achieve an operatingprofit of US$27.0 million compared with an operating loss of US$3.6 million in2003. Cathode production in 2005 is expected to reach 53,000 tonnes, while cash costsare expected to be around 89 cents per pound, mainly due to higher acid pricesand a higher waste to ore ratio at the Lince open pit, partly offset by betterore grades and higher production. In addition, Michilla has initiated anintensive US$10 million exploration programme in the Lince Este, Estefania Esteand Florida areas which, if successful, would lower operating costs and extendthe mine life beyond 2011. Exploration During 2004, the Group decided to advance its Esperanza project, located near ElTesoro, to pre-feasibility stage, at a cost of US$15.3 million. This includesthe construction of a 2.25 km long exploration decline to obtain bulk samplesfor detailed metallurgical testing and a 40,000 metre drilling programme toestablish proven and probable reserves. Drilling continued in the Conchi-Brujulinas area near El Abra, approximately 120km north-east of El Tesoro. A total of 30,549 metres was drilled as part of theon-going programme to explore these deposits in detail and to increase the oxidebase in the area. A 14,196 metre drilling programme was also conducted in thePolo Sur area south of El Tesoro. Exploration activities have also continued in southern Peru, where the Group andCVRD have a joint venture exploration programme. Drilling will continue atAntilla, the best prospect encountered to date, in 2005. The Group sold its 51%interest in the Magistral project in northern Peru for US$2.1 million inFebruary 2004. Exploration costs in 2004 amounted to US$10.3 million, which included US$1.7million at Esperanza and US$3.0 million at Michilla as part of the explorationprogramme described above. Railway and other transportation services The transport division maintained its strong performance, with the Railwaytransporting 4.5 million tons (2003 - 4.4 million tons) while turnover wasUS$85.7 million compared with US$75.8 million in 2003, mainly due to thestrengthening Chilean peso. Freight from existing customers and marginal mineexpansions should enable these tonnage levels to be maintained in 2005. Newmining projects in the area, including Spence and the Escondida sulphide leachproject in Chile and the San Cristobal polymetallic project in Bolivia, mayresult in further increases in tonnages. Water concession (Aguas de Antofagasta) Aguas de Antofagasta began to operate the water rights and distribution andtreatment facilities in Chile's Second Region on 29 December 2003. Programmeshave been implemented to reduce water losses, reduce costs and improve thequality of service to domestic customers. Water volumes amounted to 32.6million cu. M., a 5.3% increase over 2003 when controlled by ESSAN. Turnover in2004 was US$44.9 million. The outlook for Aguas remains good, and it is currently planning and designingthe water supply to two mining projects in the region - BHP Billiton's Spenceproject near El Tesoro, where initial supplies could start in 2005, and Norandaand Anglo-American's Collahuasi project near the border with Bolivia, wheresupplies could start in 2009 following a possible further expansion. Proposed tax on Chilean mining industry In December 2004, the Government of Chile proposed a new tax on miningcompanies' operating income of 4%-5% annually. This replaces the earlierproposal for a royalty on mining production which was rejected by the Senate.The revised tax proposal has been sent to Congress for approval and a decisionon the terms and implementation is expected during 2005. Dividends The Board is recommending a final dividend of 64 cents per ordinary sharepayable on 15 June 2005 to shareholders on the Register at the close of businesson 13 May 2005. The final dividend comprises an ordinary dividend of 24 centsand a special dividend of 40 cents. Dividends may be paid in either US dollarsor sterling, and shareholders receiving dividends in sterling will be paid afinal dividend of 33.3629p, based on an exchange rate of £1=US$1.9183. Dividends for the year are as follows: US Dollars 2004 2003 % increase cents centsOrdinaryInterim 15 11Final 24 24 39 35 11.4%SpecialFinal 40 - Total 79 35 125.7% In 2003, a dividend in specie of shares in Andsberg Limited was also declared,which carried a redemption right of US$1.11 per share. Further details are given in Note 9 to the Preliminary Announcement. Current Trading Prospects Copper prices remain at historic highs, averaging slightly over 145 cents perpound in the first two months of 2005, and with recent spot prices over 150cents. Inventory levels still remain very low, with total visible stocks justunder 140,000 tonnes, compared with over 800,000 tonnes at the start of 2004. Most commentators expect the copper market to be in balance this year, as mineproduction has begun to respond to high metal prices and operational issuesexperienced in 2004, for example at Grasberg, have now been resolved.Nevertheless, although the growth in global copper consumption of over 8% lastyear is unlikely to be repeated, demand remains healthy, underpinned bycontinued growth in China, Russia and India. The current low level of visiblestocks, long-term economic growth rates and the absence of significant new mineproduction in the near term indicate that copper prices should remain strong in2005. Group copper production is expected to be around 470,000 tonnes in 2005.Although some increase in cash costs is expected as a result of cost pressuresat all mines, molybdenum prices remain high and should continue to favour LosPelambres. As a low cost producer, Antofagasta should continue to benefit fromcurrent strength in metal prices. 15 March 2005 FINANCIAL COMMENTARY for the year to 31 December 2004 Results Group turnover increased from US$978.0 million in 2003 to US$1,908.7 million in2004. Turnover from the mining division increased by US$876.3 million.Turnover from the transport division (FCAB) increased by US$9.9 million whileAguas contributed US$44.9 million in its first full year of operations, comparedwith US$0.4 million last year. The significant increase in turnover from themining division was mainly due to higher copper and molybdenum prices. Coppersales increased to 500,700 tonnes compared with 477,400 tonnes in 2003, due tothe higher production levels at Los Pelambres and El Tesoro. The Group's realised copper price averaged 139.8 cents per pound (2003 - 83.9cents per pound), while the realised molybdenum price averaged US$20.0 per pound(2003 - US$5.5 per pound). Realised copper prices and molybdenum pricesexceeded market prices mainly because, in line with industry practice,concentrate sales agreements at Los Pelambres generally provide for provisionalpricing at the time of shipment with final pricing based on the average marketprice for specified future periods. Revenues on provisionally priced shipmentsare adjusted monthly until final settlement. Turnover from copper sales at LosPelambres in 2004 included positive net pricing adjustments of US$ 94.5 million.These include positive adjustments of US$62.5 million relating to sales openat the beginning of 2004, and a further US$32.0 million for sales both invoicedand settled in the year. Molybdenum sales at Los Pelambres in the first half ofthis year also included positive net pricing adjustments of US$78.5 million.This included US$8.2 million relating to sales open at the beginning of 2004 andUS$70.3 million relating to sales both invoiced and settled in the year. Group operating profits were US$1,175.2 million compared with US$387.3 millionin 2003. Operating profits at the mining division increased by US$769.8million, mainly due to the impact of higher copper and molybdenum pricestogether with higher copper sales volume, offset by higher operating costs.Operating profits at the transport division decreased by US$3.4 million comparedto 2003 which included other operating income of US$6.5 million received from athird party relating to a contract cancellation. Aguas de Antofagastacontributed US$21.7 million compared with US$0.2 million after acquisition atthe end of 2003. EBITDA (earnings before interest, tax, and amortisation) for the year wasUS$1,328.8 million (2003 - US$524.3 million). This is calculated by adding backdepreciation and amortisation of US$134.5 million (2003 - US$136.8 million) andother amounts written off fixed assets of US$19.1 million (2003 - US$0.2million) to operating profit. Interest costs relate mainly to the project borrowings at Los Pelambres and ElTesoro. Net interest expense was US$12.5 million, compared with US$31.3 millionin 2003. This was partly due to lower interest cost with regular principalrepayments of project debt, higher interest income with the increased cashbalances in the Group and income of US$7.5 million relating to gains undercurrency swaps in the period. The resulting profit before tax was US$1,162.7 million compared with US$357.2million in 2003. Tax (including deferred tax) amounted to US$238.7 million (2003 - US$64.4million), reflecting the increased profit for the year. The tax chargecomprises current tax of US$183.9 million (2003 - US$9.6 million) and deferredtax of US$54.8 million (2003 - US$54.8 million). The current tax component hasincreased because, during this year, Los Pelambres and El Tesoro have absorbedthe tax losses which derived from the start up of their operations in 1999 and2001 respectively. Deferred tax includes provision for withholding taxes ofUS$36.0 million for profits earned in Chile which are expected to be remittedabroad for dividend payments, and is the principal reason the effective tax rateof 20.5% (2003 - 18.0%) exceeded the Chilean statutory tax rate of 17%. Minority interests were US$365.7 million (2003 - US$112.1 million), reflectingtheir share of increased profits, principally at Los Pelambres and El Tesoro. Earnings per share were 283.1 cents in 2004 compared with 91.5 cents theprevious year, reflecting the higher profit after tax and minority interests. Commodity price sensitivities Based on 2004 production volumes, and without taking into account the effects ofprovisional pricing and any hedging activity, a one-cent change in the averagecopper price would affect turnover and profit before tax by US$11.0 million, andearnings per share by 2.9 cents. Similarly, a one-dollar change in the averagemolybdenum price would affect profit before tax by US$17.4 million and earningsper share by 4.4 cents per share. Cash Flows, Cash and Debt Net cash inflow from operating activities was US$1,253.5 million compared withUS$510.2 million in 2003, reflecting the improved operating result adjusted fordepreciation, other amounts written off fixed assets and normal working capitalmovements. Net capital expenditure was US$80.1 million. Of this amount, US$47.7 millionrelated to Los Pelambres, which included initial expenditures on the El Maurodam project. Net expenditure in 2003 was US$78.2 million. Net debt repayment in the year amounted to US$263.3 million (2003 - US$111.4million), and this included voluntary prepayments of US$74.1 million at LosPelambres and El Tesoro. Details of other cash inflows and outflows in the yearare contained in the Consolidated Cash Flow Statement on page 13. At 31 December 2004, the Group held cash and deposits of US$881.4 million (2003- US$195.7 million). After taking into account the minority share of non-whollyowned operations, the Group's share of the total balance was US$655.8 million. Total Group debt at 31 December was US$598.9 million (2003 - US$857.5 million).Of this amount, US$362.6 million (2003 - US$518.0 million) is proportionatelyattributable after taking into account the minority share of partly-ownedoperations. Balance Sheet Shareholders' funds increased from US$905.9 million at the beginning of the yearto US$1,322.7 million, principally reflecting the profit attributable toshareholders and exchange movements less dividends for the year. Furtherdetails are given in Note 16 to the Preliminary Announcement. Minority interests increased from US$343.1 million at the beginning of the yearto US$588.9 million, principally reflecting the minority's share of profit aftertax less minority share of distributions from the partly owned operations. 15 March 2005 Consolidated Profit and Loss Account Notes Unaudited Restated year to year to 31.12.04 31.12.03 US$'m US$'m Turnover 1,3 1,908.7 978.0 Operating profit 3,5 1,175.2 387.3 Income from fixed asset investments - 0.1Profit on disposal of fixed asset investments - 1.1Net interest payable 6 (12.5) (31.3)Profit on ordinary activities before tax 1,162.7 357.2 Tax on profit on ordinary activities 7 (238.7) (64.4) Profit on ordinary activities after tax 924.0 292.8Minority interests - equity (365.7) (112.1)Profit for the financial year 558.3 180.7DividendsPreference shares - non equity (0.2) (0.2) Ordinary shares - equity (155.8) (69.0) (including special dividend in 2004; excluding demergerdividend in 2003)Demerger dividend - equity - (181.5)Transferred to/(from) reserves 402.3 (70.0)Earnings per share 8 283.1c 91.5c Dividend per ordinary share (excluding demerger dividend in 9 79.0c 35.0c2003) Turnover and operating profit are derived from continuing operations. Asexplained in Note 1(b), turnover has been stated after deducting tolling chargesfor concentrate sales and prior year comparatives have been restatedaccordingly. The dividend per ordinary share in 2004 of 79 cents (2003 - 35 cents) includes aspecial dividend of 40 cents (2003 - nil). Further details are given in Note 9. Other recognised gains and losses Other recognised gains and losses in the year (foreign currency exchangedifferences) amounted to a gain of US$14.5 million (2003 - US$15.5 million) andare shown in Note 16 together with other movements in shareholders' funds. Consolidated Balance Sheet Notes Unaudited Audited 31.12.04 31.12.03 US$'m US$'mFixed assetsIntangible asset 10 93.2 90.6Tangible assets 11 1,804.3 1,863.2Investment in associate 12 2.9 -Other investments 13 0.3 0.4 1,900.7 1,954.2Current assetsStocks 69.9 60.5Debtors - amounts falling due after more than 24.5 29.0one yearDebtors - amounts falling due within one year 274.8 166.7Current asset investments (term deposits) 877.0 188.1Cash at bank and in hand 4.4 7.6 1,250.6 451.9Creditors - amounts falling due within one yearLoans 14 (104.7) (166.7)Trade and other creditors (297.5) (94.9)Dividends 9 (126.2) (47.3) (528.4) (308.9)Net current assets 722.2 143.0Total assets less current liabilities 2,622.9 2,097.2Creditors - amounts falling due after more thanone yearLoans 14 (494.2) (690.8)Provisions for liabilities and charges 15 (217.1) (157.4) 1,911.6 1,249.0 Capital and reserves 1(a) Preference share capital called up - non-equity 3.9 3.5Ordinary share capital called up - equity 18.9 17.5Share premium - equity 326.3 300.4Revaluation reserve - equity 16.3 15.7Profit and loss reserve 957.3 568.8Shareholders' funds - including non-equity 16 1,322.7 905.9interestsMinority interests - equity 588.9 343.1 1,911.6 1,249.0 Approved by the Board of Directors and signed on their behalf by P J Adeane,Director. 15 March, 2005 Consolidated Cash Flow Statement Notes Unaudited Audited year to year to 31.12.04 31.12.03 US$'m US$'m Net cash inflow from operating activities 17 1,253.5 510.2 Dividends received from other fixed asset investments - 0.1Interest received 11.1 4.7Realised gains from currency swaps 7.5 -Interest paid (32.5) (31.6)Dividends paid to minority interests (120.8) (81.7)Preference dividends paid (0.2) (0.2)Net cash outflow from returns on investment and servicing of finance (134.9) (108.7)Tax paid (14.3) (12.9)Purchase of tangible fixed assets (80.4) (91.7)Purchase of fixed asset investments - (1.3)Sale of tangible fixed assets 0.2 5.4Sale of fixed asset investments 0.1 9.4Net cash outflow from capital expenditure and financial investment (80.1) (78.2)Purchase of subsidiary (0.1) -Purchase of interest in associate 12 (2.9) -Purchase of water concession - (193.8)Recovery of IVA (Chilean VAT) previously paid on purchase of water 5.8 -concessionCash balances included in demerged assets - (1.4)Net cash inflow/(outflow) from acquisitions and disposals 2.8 (195.2)Equity dividends paid (76.5) (58.2)Cash inflow before management of liquid resources and financing 950.5 57.0Management of liquid resources - Net (increase)/decrease in (689.4) 52.9term depositsNew loans drawn down 558.0 41.4Repayment of amounts borrowed (818.4) (149.5)Repayment of principal element of finance leases (2.9) (3.3)Net cash outflow from financing (263.3) (111.4)Net cash outflow in the year 18 (2.2) (1.5) Notes 1 Reporting currency and accounting policies a) Reporting currency The functional reporting currency of the Group is US dollars, the principalcurrency in which the Group operates and in which assets and liabilities areheld. Share capital is denominated in sterling and, for the purposes ofreporting in US dollars, share capital and share premium are translated at theperiod end rate of exchange. As explained in Note 9, dividends are paid ineither US dollars or sterling. b) Accounting policies The profit and loss account, balance sheet and cash flow statement for the yearto 31 December 2004 have been prepared on the basis of the accounting policiesset out in the Group's statutory accounts for the year to 31 December 2003except in relation to turnover as explained below. Turnover has been shown after deducting tolling charges for concentrates sold byLos Pelambres and prior year comparatives have been restated accordingly.Previously, such charges were included in cost of sales. The effect of thisrestatement on turnover is as follows: Year to Year to 31.12.04 31.12.03 US'$m US$'m Group turnover - previous basis 2,037.1 1,076.2Tolling charges previously included in cost of sales (128.4) (98.2)Group turnover - revised basis 1,908.7 978.0 The change in presentation has no effect on either EBITDA, operating profit,profit before tax, net assets or shareholders' funds. 2 Production and sales statistics (neither audited nor reviewed) (See notes following Note 2(d).) a) Copper production volumes Year to Year to 31.12.04 31.12.03 '000 tonnes '000 tonnes Los Pelambres 350.6 326.7El Tesoro 97.8 92.4Michilla 50.0 52.7Group total 498.4 471.8 b) Copper sales volumes Year to Year to 31.12.04 31.12.03 '000 tonnes '000 tonnes Los Pelambres 352.2 332.8El Tesoro 98.3 92.0Michilla 50.2 52.6Group total 500.7 477.4 c) Cash costs per pound Year to Year to 31.12.04 31.12.03 cents cents Los Pelambres 7.9 29.3El Tesoro 52.4 42.4Michilla 85.6 69.8Group weighted average 24.3 36.4 d) LME and realised copper price per pound Year to Year to 31.12.04 31.12.03 cents cents Los Pelambres 142.2 84.6El Tesoro 136.9 82.5Michilla 129.2 82.5 Group weighted average 139.8 83.9 LME average 130.0 80.7 Notes to the production and sales statistics (i) The production and sales figures represent the actual amounts producedand sold, not the Group's share of each mine. The Group owns 60% of LosPelambres, 61% of El Tesoro and 74.2% of Michilla. (ii) Los Pelambres produces copper concentrate, and the figures for LosPelambres are expressed in terms of payable copper contained in concentrate. LosPelambres also produces molybdenum concentrate, and production in 2004 amountedto 7,900 tonnes (2003 - 8,700 tonnes). Los Pelambres is also credited for thegold and silver contained in the copper concentrate sold. El Tesoro andMichilla produce copper cathodes with no by-products. (iii) Cash costs are a measure of the cost of operational productionexpressed in terms of cents per pound of payable copper produced. Cash costsinclude by-product credits and tolling charges for concentrates at Los Pelambresand exclude depreciation, financial income and expenses, exchange gains andlosses and corporation tax for all three operations. By-product credits at Los Pelambres in 2004 were 45.8 cents per pound (2003 -16.3 cents per pound). (iv) Realised copper prices are determined by comparing turnover from coppersales (grossing up for tolling charges for concentrates) with sales volumes foreach mine in the period. Calculated on a similar basis, the realised molybdenumprice at Los Pelambres in 2004 was US$20.0 per pound compared with an averagemarket price of US$16.2 per pound (2003 - a realised molybdenum prices ofUS$5.5 per pound compared with an average market price of US$5.3 per pound). (v) The individual figures are sometimes more specific than the roundednumbers shown; hence small differences may appear in the totals. 3 Segmental analysis a) Turnover by geographical destination Unaudited year Restated to 31.12.04 year to US$'m 31.12.03 US$'m UK 31.6 10.3Rest of Europe 619.2 294.4Chile 296.5 138.7Rest of Latin America 64.3 52.0 North America 179.9 55.3 Asia Pacific / other 717.2 427.3 1,908.7 978.0 b) Turnover by operation Unaudited Restated year to year to 31.12.04 31.12.03 US$'m US$'m Los Pelambres 1,338.5 639.0El Tesoro 296.7 167.2Michilla 142.9 95.6Mining 1,778.1 901.8Railway and other transport services 85.7 75.8Water concession (acquired 29 December 2003) 44.9 0.4 1,908.7 978.0 Notes to turnover by operation (i) Turnover from Railway and other transport services is stated aftereliminating inter-segmental sales to the mining division of US$6.9 million (2003- US$5.2 million). (ii) Los Pelambres produces and sells copper and molybdenum concentrates. Itis also credited for the gold and silver content in the copper concentrate itsells. Turnover by type of metal (net of tolling charges for concentrates) isanalysed below. El Tesoro and Michilla do not have by-products from theircopper cathode operations. Los Pelambres turnover by type of metal Unaudited Restated year to year to 31.12.04 31.12.03 US$'m US$'m Copper 991.1 531.0 Molybdenum 331.1 97.1 Gold and silver 16.3 10.9 1,338.5 639.0 c) Earnings before tax, interest, depreciation and amortisation(EBITDA) by operation Unaudited Audited year to year to 31.12.04 31.12.03 US$'m US$'m Los Pelambres 1,048.1 402.9El Tesoro 180.2 78.8Michilla 49.0 14.0Exploration (10.3) (3.5)Corporate and other items (10.1) (11.0)Mining 1,256.9 481.2Railway and other transport services 41.8 42.9Water concession (acquired 29 December 2003) 30.1 0.2 1,328.8 524.3 EBITDA is calculated by adding back depreciation, amortisation and other amountswritten off fixed assets (see Note 3(d) to operating profit (see Note 3 (e)). As explained in Note 3(e), in 2003, the Railway and other transport servicesdivision included other operating income of US$6.5 million. d) Depreciation and amortisation by operation Unaudited Audited year to year to 31.12.04 31.12.03 US$'m US$'m Los Pelambres 80.2 89.6El Tesoro 22.3 20.2Michilla 13.9 17.5Corporate and other items 0.4 0.6Mining 116.8 127.9Railway and other transport services 9.4 8.9Water concession (acquired 29 December 2003) 8.3 -Total depreciation and amortisation 134.5 136.8Other amounts written off fixed assets included in operating profit 19.1 0.2 153.6 137.0 e) Operating profit/ (loss) by operation Unaudited Audited year to year to 31.12.04 31.12.03 US$'m US$'m Los Pelambres 964.8 313.3El Tesoro 152.0 58.5Michilla 27.0 (3.6)Exploration (10.3) (3.5)Corporate and other items (10.6) (11.6)Mining 1,122.9 353.1Railway and other transport services 30.6 34.0Water concession (acquired 29 December 2003) 21.7 0.2 1,175.2 387.3 In 2003, operating profit at the Railway and other transport services divisionincluded other operating income of US$6.5 million for the cancellation of acontract for additional tonnages by a customer. f) Capital expenditure by operation Unaudited Audited year to year to 31.12.04 31.12.03 US$'m US$'m Los Pelambres 47.7 62.4El Tesoro 10.0 9.6Michilla 14.8 10.8Corporate and other items 0.2 0.2 Mining 72.7 83.0Railway and other transport services 7.1 9.9Water concession (acquired 29 December 2003) 1.4 - 81.2 92.9 Capital expenditure represents purchase of tangible fixed assets stated on anaccruals basis (see Note 11) and may therefore differ from the amount includedin the cash flow statement. g) Net assets by operation Unaudited Audited year to year to 31.12.04 31.12.03 US$'m US$'m Los Pelambres 1,123.4 1,240.1El Tesoro 306.1 337.1Michilla 68.3 75.1Corporate and other items (2.2) 2.1Mining 1,495.6 1,654.4Railway and other transport services 107.2 107.8Water concession 188.2 195.5Operating net assets 1,791.0 1,957.7Fixed asset investments 0.3 0.4Net cash / (debt) 282.5 (661.8) Unallocated liabilities - Group dividend and provision for withholding (162.2) (47.3)taxes 1,911.6 1,249.0Net assets Net assets are stated before deducting minority interests. The Railway andother transport services division includes US$2.9 million (2003 - nil) for thecarrying value of the investment in Antofagasta Terminal Internacional S.A. ("ATI") which was acquired in December 2004 and is treated as an investment inassociate (see Note 12). 4 Provisional pricing and commodity hedging a) Provisional pricing Copper Copper concentrate agreements generally provide for provisional pricing at thetime of shipment with final pricing settlement based on the average LME copperprice for specified future periods, typically four months after shipment (knownas "M+4"). Copper revenues on provisionally priced tonnages are adjustedmonthly until final settlement. Sales volumes are also adjusted on the finalmetallurgical content of the concentrate. Revenues in the year to 31 December 2004 included total positive pricingadjustments of US$94.5 million, of which US$32.0 million related to sales ofconcentrates during 2004 and US$62.5 million related to sales of concentratesopen at 31 December 2003. Revenues in the year to 31 December 2003 includedtotal positive pricing adjustments of US$38.3 million, of which US$29.5 millionrelated to sales of concentrates during 2003 and US$8.8 million related to salesof concentrates open at 31 December 2002. At 31 December 2004, copper sales totalling 134,605 tonnes remained to befinally priced, and were recorded at that date at an average price of 137.7cents per pound based on provisional invoices. The average fair value price ofthese sales, based on forward prices at 31 December 2004, was 143.2 cents perpound, representing an unrecognised gain of US$16.5 million at that date (2003 -unrecognised gain of US$22.9 million). Molybdenum Molybdenum concentrate agreements generally provide for provisional pricing atthe month prior to shipment with final pricing settlement based on the averagemolybdenum prices for specified future periods, typically two months aftershipment. Molybdenum revenues on provisionally priced tonnages are adjustedmonthly until final settlement. Sales volumes are also adjusted on the finalmetallurgical content of the concentrate. Revenues in the year to 31 December 2004 included total positive pricingadjustments of US$78.5 million, of which US$70.3 million related to sales ofconcentrates during 2004 and US$8.2 million related to sales of concentratesopen at 31 December 2003. Revenues in the year to 31 December 2003 includedtotal positive pricing adjustments of US$7.1 million, of which US$7.0 millionrelated to sales of concentrates during 2003 and US$0.1 million related to salesof concentrates open at 31 December 2002. At 31 December 2004, molybdenum sales totalling 1,700 tonnes remained to befinally priced, and were recorded at that date at an average price of US$22.74per pound based on provisional invoices. The average fair value price, based onspot prices at 31 December 2004, was US$30.95 per pound, representing anunrecognised gain of US$30.7 million at that date (2003 - unrecognised gain ofUS$4.5 million). b) Commodity hedging The Group periodically enters into commodity hedging contracts to manage itsexposure to the copper price. Turnover for the mining division for the yearended 31 December 2004 included losses of US$9.3 million relating to commodityhedging activities. Turnover for the year ended 31 December 2003 includedlosses of US$11.1 million relating to commodity hedging. At 31 December 2004, the Group had hedged 6,000 tonnes of copper production atMichilla using put options with a weighted average minimum price of 121.8 centsper pound, covering a six month period to 30 June 2005 with a weighted averageduration of 3 months. Further put options and min/max instruments were enteredinto by Michilla after the year end. 5 Operating profit Unaudited Restated year to year to 31.12.04 31.12.03 US$'m US$'m Turnover 1,908.7 978.0Cost of sales (593.7) (490.2)Gross profit 1,315.0 487.8Administrative expenses (118.1) (88.6)Closure provisions (Note 15) (1.2) (1.1)Severance charges (Note 15) (3.2) (2.7)Exploration costs (10.3) (3.5)Other net operating expenses (7.0) (4.6)Operating profit 1,175.2 387.3 Depreciation and amortisation charges (before including other amounts writtenoff fixed assets) in 2004 amounted to US$ 134.5 million (2003 - US$136.8million). Of this amount, US$132.3 million (2003 - US$133.4 million) isincluded in cost of sales and US$2.2 million (2003 - US$3.4 million) is includedin administrative expenses. 6 Net interest payable Unaudited Audited year to year to 31.12.04 31.12.03 US$'m US$'m Interest receivable and similar income 19.2 4.6Interest payable and similar charges (34.0) (32.7)Foreign exchange 3.0 (2.1)Discount charge relating to provisions (Note 15) (0.7) (1.1) (12.5) (31.3) Interest receivable and similar income includes US$7.5 million relating to gainsunder currency swaps during 2004 (2003 - nil). 7 Tax The tax charge for the year is comprised as follows: Unaudited Audited year to year to 31.12.04 31.12.03 US$'m US$'m Current tax charge 183.9 9.6Deferred tax charge 54.8 54.8