Antofagasta Regulatory News (ANTO)

29 Aug 2006 07:02

Antofagasta PLC29 August 2006 Antofagasta plc Interim Results Announcement for the six months ended 30 June 2006 29 August 2006 HIGHLIGHTS • Record financial results: • Cash flows from operations up 36% to US$1.0 billion. • Profit before tax up 79% to US$1.3 billion. • Earnings per share up 77% to 66.2 cents*. • Strong copper prices have benefited the Group, offsetting an 8.6% decrease in copper production in line with budget to 207,900 tonnes and higher operating costs: • Average LME copper price up 82% to 275.3 cents per pound. • The Group also benefited from significant adjustments on provisionally priced sales. • Average market molybdenum price decreased 29% to US$23.7 per pound, but remains well above historical levels. • Molybdenum production decreased 13% to 4,100 tonnes. • Group weighted average cash costs** were 46.9 cents per pound compared with negative 8.7 cents in the 2005 half year: • This mainly reflected lower by-product credits and higher tolling charges for concentrates at Los Pelambres. • Tolling charges were in particular affected by price participation with smelters due to high copper prices. • On-site costs were higher than the 2005 half year but in line with the Group's forecasts for this year. • Total interim dividend of 5.2 cents per share. This comprises an interim ordinary dividend of 3.2 cents together with a special dividend of 2.0 cents (2005 interim dividend - 3.2 cents*). • Full year production forecast of 455,000 tonnes of copper and 10,200 tonnes of molybdenum, based on higher expected processing levels and improved molybdenum grades in the second half. • Solid results from the railway and water businesses. • Continued progress at the Mauro dam and plant expansion at Los Pelambres, to be completed at a combined cost of US$0.7 billion. The plant expansion is expected to be substantially completed ahead of schedule by the end of this year. • Feasibility work commenced at Esperanza, expected to be completed by April 2007. • Acquisition of Tethyan Copper Company finalised in the first half of 2006 at an eventual total cost of US$230 million (including the US$60 million cancellation of the BHP Billiton claw-back right). The proposed joint venture with Barrick is expected to be completed in the second half of this year. • Announced takeover offer to acquire Equatorial Mining in August, at a cost of approximately US$401 million. Acceptances of 97% have been received and the takeover offer is now unconditional. The acquisition of Equatorial will increase the Group's interest in El Tesoro to 100%. SIX MONTHS TO 30 JUNE 2006 2005 % Change-------------------------- -------- ------- ------- --------Group turnover US$'m 1,846.9 1,123.6 64.4%Cash flows from operations US$'m 1,045.4 767.1 36.3%Profit before tax US$'m 1,325.3 739.5 79.2%Earnings per share* cents 66.2 37.3 77.5%Dividend per share* cents 5.2 3.2 62.5%(2006 - interim 3.2 cents; special 2.0 cents) LME copper price (per pound) cents 275.3 151.1 82.2%Market molybdenum price (per pound) US$ 23.7 33.4 (29.0%) Group copper production '000 tonnes 207.9 227.4 (8.6%)Group molybdenum production '000 tonnes 4.1 4.7 (12.8%) Marcelo Awad, Chief Executive Officer of Antofagasta Minerals S.A., commented, "These are another set of excellent results for Antofagasta, with high metalprices supporting a sound operating performance. Following an already strongyear in 2005, results in the 2006 first half increased by over 75% compared withthe same period last year. Antofagasta continues to enhance its overall growthprofile, both by developing its existing assets and by securing rights toworld-class mining assets, helped by the Group's strong financial position." Antofagasta is a Chilean-based mining group listed in the United Kingdom and isa constituent of the FTSE-100 index. In addition to copper mining, its interestsinclude rail and road transport networks and a water distribution system. * Earnings per share and dividends per share have been restated for the effectsof the 4-for-1 bonus issue on 16 June 2006. Dividends are paid in either sterling or US dollars. The conversion rate fordividends to be paid in sterling will be set on 26 September 2006. ** 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 26(b)(iii) to the Interim Results Announcement. Enquiries - London Enquiries -Santiago Antofagasta plc Antofagasta Minerals S.A.Tel: +44 20 7808 0988 Tel +562 377 5145www.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 DIRECTORS' COMMENTS FOR THE HALF YEAR TO 30 JUNE 2006 The Group achieved record results for a six month period, benefiting fromcontinued strong market conditions. Profit before tax was up 79.2% to US$1,325.3million (2005 half year - US$739.5 million) with earnings per share up 77.5% to66.2 cents per share (2005 half year - 37.3 cents per share). LME copper pricesaveraged 275.3 cents per pound (2005 - 151.1 cents per pound), while the Groupalso benefited from significant pricing adjustments on provisionally invoicedsales in respect of both the current and previous year, resulting in an averagedrealised price of 353.4 cents per pound (2005 half year - 159.1 cents perpound). Molybdenum market prices, although still well above historical levels,were lower than the previous period at US$23.7 per pound (2005 half year -US$33.4 per pound). As expected, Group copper production decreased by 8.6% to 207,900 tonnes (2005half year - 227,400 tonnes) mainly as a result of lower processing levels at LosPelambres and lower ore grades at El Tesoro. Molybdenum production was 4,100tonnes compared with 4,700 tonnes in the first half of 2005. Weighted averagecash costs were 46.9 cents per pound compared with negative 8.7 cents per poundin the first six months of 2005. This was mainly due to lower by-product creditsas a result of lower molybdenum prices and production and higher tolling chargesfor concentrates, due to increased price participation with smelters as a resultof the higher copper price. On-site costs at the Group's three mines increasedcompared with the 2005 first half, but remained in line with its forecasts forthe full year. The Group's transport and water operations achieved good resultswith continued strong volumes. In the 2006 first half, the Group continued with its capital projects and growthplans. Los Pelambres progressed the construction of the Mauro tailings dam andthe expansion of the concentrator plant to 140,000 tonnes per day of orethroughput. The combined capital cost of these projects is expected to beapproximately US$715 million, of which US$290.4 million had been spent by 30June 2006. The tailings dam is expected to be completed on time by the end of2007 while the plant expansion is now expected to be substantially completed bythe end of 2006, ahead of the original schedule of the second quarter of 2007.Pre-feasibility work has now been completed at Esperanza, with a feasibilitystudy expected to be completed by April 2007, after which an environmentalimpact assessment for the project could be submitted. In June 2006, the Group completed its acquisition of Tethyan Copper CompanyLimited, an Australian company with copper-gold interests in Pakistan at a totalcost of US$230.4 million (including US$60 million payable to BHP Billiton forthe cancellation of its rights to claw-back an interest in Tethyan's deposits).The Group has announced that it has agreed to establish a 50:50 joint venturewith Barrick Gold Corporation which is expected to be finalised in the secondhalf of this year. Barrick Gold will reimburse the Group for 50% of theacquisition cost of Tethyan and the claw-back right. During the first half of2006, the Group also acquired the Antucoya deposit from Soquimich. In July 2006,it announced a Head of Terms agreement with AngloGold Ashanti Limited toestablish a joint venture to explore an area of interest in southern Colombia.In August, the Group announced a takeover offer for Equatorial Mining Limited("Equatorial"), a company listed on the Australian Stock Exchange andmajority-owned by AMP Life Limited ("AMP"). The offer has been successful; theGroup has acceptances of 97% and the offer is now unconditional. Totalconsideration payable will be approximately $401million. Equatorial's principalasset is a 39% interest in El Tesoro, in which the Group holds the remaining61%. Cash flows from operations in the 2006 half year were US$1,045.4 million (2005half year - US$767.1 million). In the six months to 30 June 2006, other net cashoutflows amounted to US$1,123.5 million (2005 half year - US$581.1 million) andaccordingly cash and cash equivalents decreased by US$78.1 million (2005 halfyear - increase of US$186.0 million). This included capital expenditure,acquisition costs of Tethyan, dividends paid to Group and minority shareholders,taxes paid and debt repayment. Net cash at 30 June 2006 was US$821.7 million (30June 2005 - US$539.9 million) which compares with US$851.5 million at thebeginning of the year. These cash reserves will fund the Group's capitalexpenditure programmes, including the Mauro dam and plant expansion projects atLos Pelambres, the feasibility study at Esperanza, the acquisition of EquatorialMining Limited and other new opportunities which may arise. The Board has declared an interim ordinary dividend of 3.2 cents per share (2005half year - 3.2 cents per share). In view of the exceptional results this halfyear, the Board has also decided to pay a special dividend of 2.0 cents pershare (2005 half year - nil). Review of Operations Los Pelambres Los Pelambres had a record six month period with operating profit up 77.0% atUS$1,097.6 million, compared with US$620.1 million in the first six months of2005. Realised copper prices were 376.8 cents per pound (2005 half year - 159.8cents per pound), reflecting strong LME prices and significant pricingadjustments on mark-to-market and close-out of provisional sales. Realisedmolybdenum prices decreased to US$22.7 per pound (2005 - US$36.0 per pound),reflecting lower market prices. Further details of pricing adjustments are givenin the financial commentary on page 13. Los Pelambres produced 141,600 tonnes of payable copper in the first six monthsof 2006, 8.6% below the first six months of last year when 154,900 tonnes wereproduced. The decrease was mainly due to a build-up of unfiltered copperconcentrate at the concentrator plant in May when repairs were carried out tothe slurry pipeline, reducing the volume available for filtration at the port inthat month. This concentrate was partly processed at the port in June with theremainder (approximately 11,000 tonnes) processed in July. The delay is notexpected to have any overall effect on production volumes for the full year. Thereduced production in the first half was also in part due to lower daily orethroughput and lower recoveries at the concentrator plant. Ore throughputaveraged 120,200 tonnes per day (tpd) compared with 126,500 tpd in the 2005 halfyear, as a result of a higher proportion of harder primary ore compared with2005 as well as programmed downtime to enable the construction of the 140,000tpd plant expansion. These factors were partly offset by the higher ore grade,which averaged 0.82% (2005 half year - 0.78%). Molybdenum production was 4,100 tonnes, in line with the year-to-date forecastbut 12.8% below the 4,700 tonnes produced in the first half of 2005. Thisdecrease was mainly due to changes in levels of partly-processed molybdenumconcentrate and, to a lesser extent, the lower ore throughput level and lowerrecoveries (resulting from the characteristics of the ore processed in theperiod). These factors were partly offset by the marginally higher ore grade. Cash costs, which are stated net of by-product credits and include tollingcharges, averaged 24.4 cents per pound in the first six months of 2006 comparedwith negative 48.1 cents in the first half of 2005; the increase was mainly dueto lower by-product credits (which decreased by 47.0 cents) and higher treatmentand refining charges (which increased by 13.8 cents). Lower by-product creditsresulted mainly from lower production and lower prices for molybdenum. Treatmentand refining charges increased mainly through price participation with smeltersas the average LME copper price rose significantly in the 2006 half year.On-site and shipping costs for the first six months of the year remain in linewith forecast, but were 11.7 cents per pound above the 2005 half year, due tolower production as well as higher costs for fuel, energy, explosives andservices. Los Pelambres continued to reduce its borrowings with repayments totallingUS$40.7 million. Total borrowings were US$355.3 million at 30 June 2006. Good progress was made with two major capital expenditure programmes, the Maurotailings dam project and expansion of the concentrator plant, both of which arebeing financed out of Los Pelambres' cash resources. The Mauro tailings dam will, together with the existing Quillayes tailings dam,provide Los Pelambres with sufficient storage capacity for its 2 billion tonnesof existing ore reserves, thereby supporting its mine plan to 2047. By the endof June this year, the construction of the Mauro tailings dam was 41% completeas to construction with costs to date (including initial basic engineeringcosts) of US$218.3 million; of this amount, US$146.5 million was spent in thefirst half of 2006. As announced earlier in the year, the total forecast costfor this project is now US$534 million (before exchange rate effects), comparedwith an original budget of US$457 million. This cost increase reflects highersteel prices, as well as higher project costs including tunnelling and impact ofthe delay of environmental permits mainly in 2005. Construction of the tailingsdam is on time and expected to be completed as planned by the end of 2007. Expansion of the plant to 140,000 tpd was started in 2005, and will be achievedby re-powering the grinding lines and installing a fifth ball mill at theconcentrator plant. By 30 June 2006, the expansion project was 53% complete withcumulative expenditure to that date of US$72.1 million. Of these costs US$61.5million was incurred in the first half of 2006. The project remains within theoriginal budget of US$181 million. The repowering of the SAG mills was completedin the first half of 2006, and the additional flotation cells in August. Thestart-up of the fifth ball mill is expected by the end of this year, ahead ofthe original schedule of April 2007. Los Pelambres continues to review optionsfor possible further expansion. As part of this review, it has started anexploration programme which is further described under "Projects, explorationand new opportunities" below. Copper production at Los Pelambres for the full year is expected to beapproximately 320,000 tonnes, ahead of the original forecast of 308,000 tonnes.Average throughput for 2006 is expected to be 128,000 tpd as the plant benefitsfrom the initial stages of the plant expansion in the second half of this year.On-site and shipping costs are expected to be in line with forecast atapproximately 56.4 cents per pound, while changes in the level of tollingcharges (which were 39.8 cents per pound in the first half of 2006) are expectedto relate mainly to the effect of changes in the copper price on priceparticipation with smelters. Molybdenum production for the full year is expectedto be 10,200 tonnes, marginally below the original forecast of 10,800 tonnes. El Tesoro Operating profit at El Tesoro rose by 53.3% from US$97.6 million in the 2005half year to US$149.6 million. Realised copper prices were 301.2 cents per poundcompared with 157.9 cents in the 2005 half year, reflecting higher LME prices,strong cathode premiums due to the continuing tight cathode market and pricingadjustments on close-out of cathode sales. Production at El Tesoro was 42,500 tonnes (2005 half year - 49,900 tonnes). Thelower production was in line with forecast as higher processing levels(following the completion of the 10.5 million tonnes per year throughputexpansion at the beginning of the year) were offset by expected lower ore gradesand recoveries. Cash costs rose to 79.7 cents per pound compared with 58.9 cents per pound inthe 2005 half year, but remained in line with budget for this year. The highercash costs were due to the lower production level and higher waste-to-ore ratio,increased consumption of sulphuric acid due to a higher presence of carbonatesin the ore and higher input costs including fuel prices. El Tesoro's resultswere also affected by the effect of commodity hedging (including mark-to-marketadjustments), which reduced operating profit in the 2006 first half by US$43.5million (2005 half year - US$0.7 million). El Tesoro's borrowings were reduced by regular repayments of US$7.0 million, andamounted to US$49.1 million at 30 June 2006. Debt balances were further reducedby US$14 million with a voluntary prepayment in July 2006. El Tesoro expects to meet its production forecast of 91,600 tonnes for the fullyear, as grades and recoveries are expected to improve in the second half. Cashcosts are expected to be 79.5 cents per pound, marginally above the 78 centsforecast at the start of the year. Michilla Operating profit increased to US$44.3 million (2005 half year - US$9.6 million)as Michilla benefited from the strong commodity market. Realised copper priceswere 306.6 cents per pound (2005 half year - 157.1 cents per pound), reflectingstrong cathode premiums and positive pricing adjustments in addition to strongLME prices. Michilla produced 23,800 tonnes of copper cathodes in the first sixmonths of 2006 (2005 half year - 22,600 tonnes). The increase of 1,200 tonneswas due mainly to higher grades, together with higher processing levels andbetter recoveries. Cash costs remained within forecast at 122.0 cents per pound, compared with112.2 cents per pound in the first six months of 2005, reflecting higher costsat the Florida and Estefania underground mines, higher prices for fuel andexplosives and the stronger Chilean peso. Hedging losses (includingmark-to-market adjustments) in the first half were US$46.2 million (2005 halfyear - US$3.7 million). Nevetheless, the higher costs and hedging losses wereoutweighed by improved prices and higher production. Cathode production is expected to be approximately 43,000 tonnes, marginallyabove the original estimate for the year at a similar cash cost estimate of 128cents per pound. Michilla is completing a technical review of its resources, with a revised mineplan to determine its future level of production now expected to be completed inthe last quarter of 2006. Railway and other transport services Rail and road transport volumes in the first half of 2006 were 2.1 million tons(2005 half year - 2.2 million tons) and 0.8 million tons (2005 half year - 0.7million tons) respectively. A slight reduction in rail tonnages was mainlybecause of marginal decreases from Codelco. Operating profit (excluding incomefrom associates) was similar at US$14.1 million (2005 half year - US$14.7million). The FCAB's medium to longer term prospects continue to be positive. New miningprojects for which the FCAB expects to transport cargo include Apex SilverMines' San Cristobal polymetallic project in south-western Bolivia, BHPBilliton's Spence copper project in Chile's Region II and Escondida's sulphideleach project. While no significant increase in tonnages is expected in 2006,these new mining projects should provide a significant uplift to existingtransport volumes through 2007 and 2008. Further opportunities may arise asmining activity continues to respond to the strength and duration of the currentcommodity cycle. Aguas de Antofagasta Aguas de Antofagasta had a good 2006 half year. Combined industrial and domesticwater sales increased from 16.6 million cu. m. in the 2005 first half to 18.5million cu. m. this period, with operating profit of US$16.4 million (2005 halfyear - US$11.9 million), as Aguas benefited from increased volumes as well asfrom the stronger Chilean peso, the currency in which revenues from domesticcustomers are received. Aguas de Antofagasta has started to supply water to BHPBilliton's Spence project during its construction phase and is continuing withstudies to supply water for a possible future expansion of the Collahuasi mineowned by Falconbridge and Anglo American. Projects, exploration and new opportunities The Group spent US$8.1 million on exploration activities in the first six monthsof 2006 (2005 half year - US$8.0 million). Esperanza The Group's principal new project is Esperanza, approximately 5 kilometres fromEl Tesoro, where US$4.4 million was spent in the first half of 2006.Pre-feasibility work has now been completed within the original budget ofUS$15.3 million, including completion of a 2.3 kilometre exploration decline. Asannounced in March following analysis of drill results, the drill-inferredsulphide resource at Esperanza was increased to 786 million tonnes of ore withan average copper grade of 0.53%, an average gold grade of 0.20 g/t, and anaverage molybdenum grade of 0.0123%, compared with a previous estimate of 469million tonnes of ore with an average copper grade of 0.63% and 0.27 g/t ofgold. Both the current and previous resource estimates are based on a cut offgrade of 0.3% copper. Feasibility work has now begun and Esperanza expects to complete a feasibilitystudy by April 2007 with a budget of US$16.9 million, which will enable it tosubmit an Environmental Impact Assessment to the appropriate authorities. Boardand Environmental approvals could be obtained by the end of 2007. Esperanza wasinitially expected to be developed as a 50,000 tpd project producing 120,000tonnes of copper in concentrates and 170,000 ounces of gold annually in thefirst five years of its mine life. However, the size of the potential operationcould be increased following the feasibility study based on the larger resourcebase recently established. Los Pelambres As part of its review of options for possible expansion, Los Pelambres hasstarted a two-year programme to identify additional deposits beyond the existing3.1 billion tonne resource. A first stage was completed by 30 June 2006 at acost of US$1.3 million, which included an 8,500 metres drilling programme. Asecond stage including an additional 7,500 metres drilling programme is expectedto be completed by the end of this year. Reko Diq (Tethyan Copper Company Limited) In February 2006, the Group announced a recommended cash offer for TethyanCopper Company Limited ("Tethyan"), a company then listed on the AustralianStock Exchange with copper-gold interests in Pakistan. The Group also enteredinto an agreement with BHP Billiton whereby BHP Billiton's rights to claw-back amaterial interest in certain of Tethyan's mineral interests would beextinguished for a consideration of US$60 million. An agreement was also enteredinto with Barrick Gold Corporation ("Barrick Gold") to support the takeoveroffer and to establish a 50:50 joint venture whereby Barrick Gold will reimbursethe Group for 50% of the acquisition cost of Tethyan and the claw-back right. The offer was declared unconditional on 20 April, when the Group's interestincluding acceptances exceeded 50%; Tethyan was delisted from the AustralianStock Exchange in May and all of the remaining shares were acquired by the endof June. The total cost of the acquisition was US$170.4 million, with a furtherUS$60 million expected to be paid to BHP Billiton in the second half of 2006 toextinguish the claw-back right. The Group is currently in discussions withBarrick Gold on the terms of the proposed joint venture, which is also expectedto be finalised in the second half of 2006 when the reimbursement ofapproximately US$115 million should be received. Tethyan's principal assets are a 75% interest in the exploration licenceencompassing the Reko Diq prospect in the Chagai Hills region of South-WestPakistan, which includes the Tanjeel Mineral Resource and the WesternPorphyries, and a 100% interest in certain other licences in the region. Tethyanhas reported total indicated and inferred mineral resource estimates at theseproperties of 2.4 billion tonnes with a copper grade of 0.51% and a gold gradeof 0.27g/t. A budget of US$27.3 million has been set to cover an 18-monthperiod, to include exploration and drilling and, in the later stages, initialpre-feasibility work on the prospects identified. Costs incurred to 30 June 2006following acquisition of control in April amounted to US$1.1 million. Antucoya During the first half of 2006, the Group acquired the Antucoya property fromSoquimich for US$8.0 million plus a future net smelter return. Antucoya isestimated to contain 322 million tonnes of oxide ore with an average coppergrade of 0.4%, and is adjacent to Buey Muerto, a deposit in which the Group hasa controlling interest and which is estimated to contain 138 million tonnes ofoxide ore with a grade of 0.43%. The Group intends to conduct furtherexploration and technical studies to examine the viability of on-site leachingof the deposits to provide enriched solution to utilise any excess capacity atMichilla's SX-EW plant. Joint venture with AngloGold Ashanti in Colombia In July 2006, the Group signed a Head of Terms agreement with AngloGold AshantiLimited ("AngloGold"), one of the world's largest gold producers. This agreementsets out the terms of a proposed joint venture, the Southern Colombia JointVenture ("the JV"), to explore, discover, and develop copper and gold miningprojects in an area of interest in southern Colombia extending approximately30,000 square kilometres. Under the agreement, AngloGold will contribute itsmineral interests in the area covered by the JV and Antofagasta will commit tofunding US$1.3 million in exploration costs over a period of one year.Antofagasta may decide to fund an additional US$6.7 million in exploration costswithin four years (representing a total contribution of US$8.0 million), inorder to earn a 50% interest in the JV. Acquisition of Equatorial Mining Limited On 15 August 2006, the Group announced that it had entered into an agreement toacquire a 19.99% shareholding in Equatorial Mining Limited ("Equatorial") atA$8.00 per share and had made a cash takeover offer of A$11.20 per share for allof the issued shares of Equatorial. On 24 August 2006 the Group announced it hadsecured an interest in 97% of Equatorial's issued shares and that its takeoveroffer was unconditional. The Group also announced its intention to compulsorilyacquire any remaining Equatorial shares in due course to reach 100% ownership. The total consideration payable by the Group to acquire all of Equatorial'sshares is expected to be approximately US$401 million. Equatorial reported cashbalances of approximately US$97 million as at 30 June 2006. Equatorial iscompany listed on the Australian Stock Exchange whose principal asset is a 39%ownership interest in El Tesoro. The acquisition of Equatorial will increase theGroup's interest in the El Tesoro mine to 100%. Sierra Gorda district The Group will continue examining its prospects in the Sierra Gorda district,where the acquisition of Equatorial will consolidate the Group's land positionthrough the addition of mining properties located between the Telegrafo andCentinela deposits which are controlled by the Group. Dividends The Board has declared an interim ordinary dividend of 3.2 cents per share (2005half year - 3.2 cents per share). In view of the exceptional results this halfyear, the Board has also decided to pay a special dividend of 2.0 cents pershare (2005 half year - nil). Accordingly, a total interim dividend of 5.2 centsper share will be paid on 12 October 2006 to ordinary shareholders on theregister at the close of business on 22 September 2006. Dividends are payable ineither US dollars or sterling, and the exchange rate to be applied to dividendsto be paid in sterling will be set on 26 September 2006. Current Trading Prospects Copper prices on the LME have remained very strong through 2006, increasing fromjust over 200 cents per pound at the beginning of the year to around 340 centsat the end of June, and peaking at just under 400 cents in mid-May. Since 30June, prices have remained strong, averaging just over 350 cents. Demand remainsfirm, supported by increased demand for commodities as an investment alternativeby institutional and mainstream investors, and visible inventories have remainedvery low at around 170,000 tonnes, representing less than two weeks of worldconsumption. The combination of strong demand and supply disruptions andconstraints has resulted in a deficit market since 2002. Most commentators nowexpect this deficit to persist into 2006 and possibly into 2007. Consequentlywhile commodity markets continue to be volatile, prices could remain well abovehistorical levels with current consensus price estimates of over 280 cents perpound in 2006 and 250 cents per pound in 2007. The concentrates market has also continued to improve in favour of producers assmelting capacity increases and risks of mine supply disruption continue. Adeficit market in copper concentrates has developed, which is expected tocontinue through 2007 and into 2008. The year-end negotiations of annualcontracts between producers and smelters could therefore show improvements infavour of producers. It is also possible that changes in the price participationstructure could occur; this has already become the main focus of discussionsduring the current mid-year negotiations. Molybdenum prices have retreated from their peak of almost US$40 per pound in2005, but have remained relatively stable at the US$20-US$25 range in the firsthalf of 2006, averaging US$25 since the beginning of July. Demand remainsstrong, both in the steel sector and non-metallurgical applications, while nosignificant further increases in supply are expected in the next 12 months.While the direction of molybdenum prices remains difficult to predict, thesefactors suggest that prices could remain at present levels into 2007. Group copper production for 2006 is expected to be around 455,000 tonnes,compared with the original forecast of 440,000 tonnes with molybdenum productionat about 10,600 tonnes. On-site and shipping costs for the Group's three minesremain in line with forecasts for the year, and any changes in the level ofsmelting costs should depend mainly on the level of copper prices. Given theduration of existing agreements, no labour negotiations are due at the Group'smining operations until September 2007. In the second half of 2006, the Groupwill continue to advance its capital projects including the plant expansion andtailings dam projects at Los Pelambres, the feasibility study at Esperanza andits exploration activities including the newly acquired Reko Diq copper-goldprospect in Pakistan. The acquisition of Equatorial will also increaseattributable cathode production. The Group has substantial operations in Chile and its financial position remainsstrong. It will continue to enhance its growth profile by developing itsexisting assets and properties and by seeking opportunities globally to secureworld-class mining assets. FINANCIAL COMMENTARY FOR THE HALF YEAR TO 30 JUNE 2006 Results Turnover Group turnover increased by 64.4% to US$1,846.9 million, compared withUS$1,123.6 million in the first six months of 2005. The increase was mainly dueto very strong LME copper prices, which increased to an average of 275.3 centsper pound, 82.2% above the 2005 half year. Turnover from copper concentrate sales and copper cathode sales from the Group'sthree mines increased by 114.8% to US$1,537.4 million compared with US$715.7million in the 2005 half year. The Group's average realised copper price was353.4 cents per pound (2005 half year - 159.1 cents per pound), reflectingmainly the higher LME price but also pricing adjustments to initially invoicedsales in the period. Realised copper prices are determined by comparing turnover(gross of tolling charges) with sales volumes in the period. Realised copperprices exceeded market prices mainly because, in line with industry practice,concentrate and cathode sales agreements generally provide for provisionalpricing at the time of shipment with final pricing based on the average marketprice for future periods (normally about 30 days after delivery to the customerin the case of cathode sales and up to 180 days after delivery to the customerin the case of concentrate sales). In the case of Los Pelambres, pricingadjustments added US$348.8 million to initially invoiced sales (before adjustingfor tolling charges), comprising US$124.0 million in respect of sales invoicedin 2005 (net of mark-to-market adjustments at the end of 2005) which werefinally priced in 2006 and US$224.8 million in respect of sales invoiced in 2006(including mark-to-market adjustments for open sales at the end of the period ofUS$103.9 million). Pricing adjustments for the first half of 2006 (which relatealmost entirely to sales invoiced in 2006) added US$20.7 million and US$12.7million at El Tesoro and Michilla respectively. El Tesoro and Michilla alsocontinued to benefit from strong cathode premiums reflecting tight marketconditions. The benefit of high copper prices and significant pricing adjustments werepartly offset by the decline in copper sales which decreased by 4.9% from224,300 tonnes in the 2005 half year to 213,200 tonnes this half year, primarilyas a result of lower processing levels at Los Pelambres and lower ore grades atEl Tesoro. Tolling charges for copper concentrates at Los Pelambres increasedfrom US$71.0 million in the 2005 half year to US$123.6 million, mainly as aresult of the effect of the higher copper price on price participation bysmelters. Tolling charges are deducted from concentrate sales in reportingturnover and hence also partly offset the effect of higher copper prices. Turnover from by-products at Los Pelambres decreased by 32.3% to US$228.5million in the 2006 half year compared with US$337.4 million in the 2005 halfyear, mainly due to lower molybdenum market prices. The realised molybdenumprice averaged US$22.7 per pound (2005 half year - US$36.0 per pound).Molybdenum sales are also subject to provisional pricing and as prices weakenedin the early part of this year, realised prices were marginally lower than theaverage market price of US$23.7 per pound (2005 half year - US$33.4 per pound),in contrast to strengthening prices in the first half of 2005. Sales of 4,400tonnes were slightly higher than sales of 4,300 tonnes in the first half of2005. Turnover from the transport division (FCAB) increased by US$4.1 million or 9.2%to US$48.8 million on similar volumes to the previous comparative period, mainlybecause rail tariffs are indexed to cost factors including inflation, thepeso-dollar exchange rate and fuel costs which increased compared with the firsthalf of 2005. Turnover at Aguas de Antofagasta, which operates the Group's waterbusiness, increased by US$6.4 million or 24.8% to US$32.2 million, due to acombination of increased volumes and the stronger Chilean peso. Operating profit from subsidiaries and EBITDA Operating profit from subsidiaries increased by 76.6% from US$739.0 million inthe 2005 half year to US$1,304.9 million in the 2006 half year. Operating profit at the mining division increased by 78.9% from US$712.4 millionto US$1,274.4 million, mainly as the result of strong copper prices. This waspartly offset by lower copper sales volume and lower molybdenum prices asdescribed above and also increased operating costs. Excluding by-product credits(which are reported as part of turnover) and tolling charges for concentrates(which are deducted from turnover), weighted average cash costs for the Group(comprising on site and shipping costs in the case of Los Pelambres and cashcosts in the case of the other two operations) increased from 54.0 cents perpound in the 2005 half year to 68.1 cents in the 2006 half year, reflecting theimpact of higher input costs as well as lower production. Operating profits werealso affected by losses on commodity derivatives (including net mark-to-marketadjustments) of US$89.7 million at Michilla and El Tesoro (2005 half year -US$4.4 million). Operating profits (excluding income from associates) at the transport divisionwere similar at US$14.1 million (2005 half year - US$14.7 million) as volumesremained similar in both periods. Aguas de Antofagasta (whose revenues and costsare mainly denominated in Chilean pesos) contributed US$16.4 million comparedwith US$11.9 million, benefiting from higher sales and the stronger exchangerate. EBITDA (earnings before interest, tax, depreciation and amortisation) in the2006 half year was US$1,374.7 million, compared with US$806.4 million, up 70.5%.This is calculated by adding back to operating profit from subsidiaries theitems of depreciation and amortisation of US$65.3 million (2005 half year -US$63.6 million) and loss on disposals of property, plant and equipment ofUS$4.5 million (2005 half year - US$3.8 million). The Group's share of net profit from its 30% investment in Antofagasta TerminalInternacional S.A. ("ATI") was unchanged at US$0.5 million. Net finance income Net finance income in the 2006 half year was US$19.9 million, compared with nilin the 2005 half year. Interest receivable increased from US$15.4 million to US$34.5 million, due tothe higher level of cash and deposit balances and higher market interest ratescompared with the 2005 half year. Interest expense (excluding the mark-to-marketeffect of interest rate derivatives) remained similar at US$13.2 million (2005half year - US$13.1 million), as regular loan repayments which decreased thelevel of borrowings were offset by the effect of higher interest rates. Other finance items (mark-to-market effect of interest rate derivatives andforeign exchange losses included in finance items) amounted to a charge ofUS$1.4 million (2005 half year - US$2.3 million). Profit before tax The resulting profit before tax for the period was US$1,325.3 million comparedwith US$739.5 million in the first half of 2005, reflecting the improvedoperating results and increased finance income. Income tax expense The rate of first category (i.e. corporation) tax in Chile is 17% for both 2006and 2005. During 2005, new tax legislation on Chilean mining companies waspassed into law with effect from 1 January 2006. The legislation sets anadditional tax of up to 5% of tax-adjusted operating profit, with the option formining companies to elect for a lower rate of 4% by entering into a taxstability regime for a period of 12 years, after which the rate of 5% willapply. For 2006 and 2007, 50% of the new mining tax can be offset against firstcategory tax and the remaining 50% is tax deductible (i.e. an allowable expensein determining liability to first category tax). From 2008, when the ability tooffset will no longer be available, 100% of the new mining tax will be taxdeductible. Los Pelambres, El Tesoro and Michilla have opted to enter into thisnew tax stability agreement, and hence the effect of the legislation is toincrease the effective tax rate of these three operations (before taking intoaccount deductibility against corporation tax) by approximately 2% in 2006 and2007 and 4% thereafter. In addition to first category tax and the new miningtax, the Group incurs withholding taxes on the remittance of profits from Chile. Tax (including deferred tax) amounted to US$255.0 million (2005 half year -US$132.0 million), mainly reflecting the increased profit for the period.Including both current and deferred taxes, this comprises corporate tax ofUS$221.6 million (2005 half year - US$131.2 million), the new Chilean mining taxof US$24.4 million (2005 half year - nil) and provision for withholding taxes ofUS$9.6 million (2005 half year - US$8.7 million). This was partly offset byexchange gains on corporate tax balances of US$0.6 million (2005 half year -US$7.9 million). As a result of these factors, the effective tax rate for the Group for the sixmonths ended 30 June 2006 was 19.2% (2005 half year - 17.9%), compared with theChilean statutory tax rate of 17%. Earnings per share Basic earnings per share were 66.2 cents compared with 37.3 cents for the 2005half year reflecting the higher profit after tax and minority interests.Earnings per share have been restated to reflect the impact of the 4-for-1 bonusissue on 16 June 2006. Derivative financial instruments The Group uses derivative financial instruments to reduce exposure to foreignexchange, interest rate and commodity price movements. The Group does not usesuch derivative instruments for speculative trading purposes, but as it did notyet apply the hedge accounting provisions of IAS 39 "Financial Instruments:Recognition and Measurement" in the first half of 2006, derivatives weremeasured at fair value in the balance sheet with changes in value recognised inthe income statement. The impact of such instruments on the Group's results forthe period is set out above in the sections on operating profit fromsubsidiaries and net finance income and in Notes 4(b) and 5 to the interimfinancial statements. At 30 June 2006, the Group had min/max instruments for 12,900 tonnes of copperproduction, with a weighted average floor of 113.1 cents per pound and aweighted average cap of 140.9 cents per pound. These instruments had an averageduration of three and a half months and a total duration of six months. TheGroup's exposure to the copper price up to this level of production will belimited for the remainder of 2006 to the extent that market prices exceed thecap or fall below the floor at each relevant exercise date. Cash flows, cash and debt Cash flows from operations were US$1,045.4 million in the first six months of2006 compared with US$767.1 million in the same period last year, reflecting theimproved operating results adjusted for depreciation, amortisation and normalworking capital movements. A dividend of US$0.3 million (2005 half year - US$1.0million) was received from the Group's investment in ATI. Cash tax payments comprising monthly payments on account were also made inrespect of current year profits (including payments in respect of the new miningtax), settlement of the outstanding balance for the previous year andwithholding tax payments. Payments in the period were US$265.4 million, comparedwith US$191.5 million in the first six months of 2005. The increased paymentsreflect higher profits in each successive year from 2004 (thereby increasingboth monthly payments on account for the current year as well as settlement ofthe outstanding balance for the previous year), higher withholding tax paymentsand, to a lesser extent, monthly payments on account in 2006 for the new miningtax. In the 2006 first half, corporation tax payments for both the current andprevious year amounted to US$208.9 million (2005 half year - US$190.1 million),withholding taxes amounted to US$52.6 million (2005 half year - US$1.4 million)and payments on account relating to the new mining tax amounted to US$3.9million (2005 half year - nil). During the first half of 2006, the Group acquired a 100% interest in the TethyanCopper Company Limited. The net cash outflow arising on acquisition was US$166.3million, being total consideration (including directly attributable costs) ofUS$170.4 million, less cash and cash equivalents acquired of US$1.1 million andcosts provided but not yet paid of US$3.0 million. Capital expenditure was US$279.6 million in the period (2005 half year - US$79.2million). Expenditure in the first six months of 2006 included US$146.5 millionrelating to the Mauro tailings dam project and US$61.5 million relating to theplant expansion, both at Los Pelambres. Dividends paid to ordinary shareholders of the Company in the first six monthsof this year were US$185.3 million (2005 half year - US$124.3 million), whichrelated to the final dividend (including the special dividend) declared inrespect of each respective previous year. Dividends paid by subsidiaries tominority shareholders were US$204.2 million (2005 half year - US$114.3 million),principally due to increased distributions by Los Pelambres. Repayment of borrowings and finance leasing obligations in the first six monthsof 2006, mainly at Los Pelambres and El Tesoro, were US$48.7 million, mainlyreflecting regular repayments of corporate facilities at Los Pelambres and ElTesoro. In the 2005 half year, repayments amounted to US$79.8 million andincluded voluntary prepayments of US$28.2 million at El Tesoro. Details of other cash inflows and outflows in the period are contained in theConsolidated Cash Flow Statement. At 30 June 2006, the Group had cash and cash equivalents of US$1,238.8 million(2005 half year - US$1,064.6 million), which included cash balances held by LosPelambres to finance the remainder of the Mauro tailings dam and the plantexpansion projects. Excluding the minority share in each partly-owned operation,the Group's share of this balance was US$1,009.3 million (2005 half year -US$793.6 million). Total Group borrowings at 30 June 2006 were US$417.1 million (2005 half year -US$524.7 million); of this, US$254.6 million (2005 half year - US$319.4 million)is proportionally attributable to the Group after excluding the minorityshareholdings in partly-owned operations. The decrease in debt is mainly due tofurther principal repayments at Los Pelambres and El Tesoro as explained above. Balance Sheet Net equity (i.e. equity attributable to ordinary shareholders of the Company)increased from US$2,041.7 million at the beginning of the year to US$2,502.8million, relating mainly to profit after tax and minority interests for theperiod less the ordinary dividend for 2005 which was approved and paid in thefirst half of 2006. During the first half of 2006, a 4-for-1 bonus issue of ordinary shares wasimplemented through the capitalisation of US$73.2 million of the balance on theshare premium account. This did not have any effect on net equity. Furtherdetails are given in Note 18 to the interim financial statements. Minority interests increased from US$721.3 million at the beginning of the yearto US$934.9 million, principally reflecting the minority's share of profit aftertax less the minority's share of the dividends approved or paid by subsidiariesin the period. Consolidated Income Statement Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 Notes US$'m US$'m US$'m Group turnover 2,3 1,846.9 1,123.6 2,445.3 Total operating costs 2,3 (542.0) (384.6) (938.9) -------- ------- --------Operating profit from subsidiaries 3 1,304.9 739.0 1,506.4 Share of income from associate 12 0.5 0.5 0.9 -------- ------- --------Total profit from operations and associates 1,305.4 739.5 1,507.3 -------- ------- --------Investment income 34.5 15.4 39.7Interest expense (13.2) (13.1) (26.0)Other finance items (1.4) (2.3) 15.3 -------- ------- -------- Net finance income 5 19.9 - 29.0 -------- ------- --------Profit before tax 1,325.3 739.5 1,536.3 Income tax expense 6 (255.0) (132.0) (308.1) -------- ------- --------Profit for the financial period 1,070.3 607.5 1,228.2 ======== ======= ======== Attributable to: -------- ------- --------Minority interests 417.7 240.0 502.4 Equity holders of the Company (net earnings) 652.6 367.5 725.8 -------- ------- -------- US cents Restated Restated US cents US cents Basic earnings per share 7 66.2 37.3 73.6 ======== ======= ======== Dividends per share to ordinary shareholders of the Company Dividends per share proposed in relation to the period 8 - Ordinary dividend (interim) 3.2 3.2 3.2 - Ordinary dividend (final) - - 4.8 - Special dividend (interim) 2.0 - - - Special dividend (final) - - 14.0 -------- ------- -------- 5.2 3.2 22.0 ======== ======= ======== Dividends per share paid in the period and deducted from net equity - Ordinary dividend (interim) - - 3.2 - Ordinary dividend (final) 4.8 4.8 4.8 - Special dividend (final) 14.0 8.0 8.0 -------- ------- -------- 18.8 12.8 16.0 ======== ======= ======== Dividends in aggregate to ordinary shareholders of the Company US$'m US$'m US$'m Dividends proposed in relation to the period 8 51.3 31.5 216.9 ======== ======= ======== Dividends paid in the period and deducted from net equity 185.3 126.2 157.7 ======== ======= ======== Turnover and operating profit are derived from continuing operations. Earnings per share and dividends per share have been restated for the effect ofthe 4-for-1 bonus issue on 16 June 2006. There was no potential dilution ofearnings per share in any period set out above. Consolidated Balance Sheet At 30.06.06 At 30.06.05 At 31.12.05 Notes US$'m US$'m US$'mNon-current assets Intangible assets 9 321.2 88.1 97.7Property, plant and equipment 10 2,025.4 1,807.1 1,820.0Investment property 11 3.2 3.1 3.4Investment in associate 12 3.0 2.4 2.8Available for sale investments 13 0.2 0.2 0.1Deferred tax assets 17 6.8 2.5 6.6 -------- -------- -------- 2,359.8 1,903.4 1,930.6 -------- -------- -------- Current assets Inventories 116.1 87.3 98.8Trade and other receivables 756.4 340.1 428.1Current tax assets 4.6 1.6 5.3Derivative financial instruments 4 - 0.9 -Cash and cash equivalents 20 1,238.8 1,064.6 1,316.8 -------- -------- -------- 2,115.9 1,494.5 1,849.0 -------- -------- -------- Total assets 4,475.7 3,397.9 3,779.6 ======== ======== ======== Current liabilities Short-term borrowings 14,20 (97.0) (103.3) (97.2)Derivative financial instruments 4 (43.8) (6.2) (40.3)Trade and other payables (220.6) (113.5) (142.9)Current tax liabilities (121.1) (87.8) (108.7) -------- -------- -------- (482.5) (310.8) (389.1) -------- -------- -------- Non-current liabilities Medium and long term borrowings 14,20 (320.1) (421.4) (368.1)Trade and other payables (3.2) (3.1) (3.5)Post-employment benefit obligations 15 (20.6) (16.8) (20.6)Long-term provisions 16 (10.0) (10.2) (9.8)Deferred tax liabilities 17 (201.6) (210.7) (225.5) -------- -------- -------- (555.5) (662.2) (627.5) -------- -------- -------- Total liabilities (1,038.0) (973.0) (1,016.6) ======== ======== ======== Net assets 3,437.7 2,424.9 2,763.0 ======== ======== ======== EquityShare capital 18 89.8 16.6 16.6Share premium 18 199.2 272.4 272.4Translation reserves 10.4 4.4 16.6Retained earnings 2,203.4 1,409.3 1,736.1 -------- -------- --------Net equity attributableto equity holders of the Company 2,502.8 1,702.7 2,041.7 Minority interests 934.9 722.2 721.3 -------- -------- --------Total equity 3,437.7 2,424.9 2,763.0 ======== ======== ======== The interim financial information was approved by the Board of Directors on 25August 2006. Consolidated Cash Flow Statement Six months Six months Year ended ended 30.06.06 ended 30.06.05 31.12.05 Note US$'m US$'m US$'m Cash flows fromoperations 19 1,045.4 767.1 1,647.5Dividends from associate 12 0.3 1.0 1.0Income tax paid (265.4) (191.5) (343.8) ------- ------- -------Net cash flow from operating activities 780.3 576.6 1,304.7 ------- ------- ------- Investing activities Acquisition of subsidiary 21 (166.3) - -Recovery of Chilean VATpaid on purchase of water concession 5.4 3.8 7.7Purchases of property, plant and equipment (279.6) (79.2) (223.0)Proceeds from sale of property, plant and equipment - 0.4 4.1 ------- ------- -------Net cash used in investing activities (440.5) (75.0) (211.2) ------- ------- ------- Financing activities Dividends paid to equity holders of the Company (185.3) (124.3) (155.4)Dividends paid to preferenceshareholders of the Company (0.1) (0.1) (0.2)Dividends paid to minority interests (204.2) (114.3) (385.6)Interest paid, including payments underinterest derivatives (14.1) (11.8) (23.3)Interest received 34.5 14.7 37.9Net proceeds from issue of new borrowings - - 0.2Repayments of borrowings (48.0) (67.1) (126.2)Repayments of obligations under finance leases (0.7) (12.7) (13.4) ------- ------- -------Net cash used in financing activities 417.9) (315.6) (666.0) ------- ------- ------- Net (decrease)/increase in cashand cash equivalents (78.1) 186.0 427.5 ======= ======= ======= Cash and cash equivalents atbeginning of period 1,316.8 881.4 881.4Net (decrease)/increase in cashand cash equivalents (78.1) 186.0 427.5Effect of foreignexchange rate changes 0.1 (2.8) 7.9 ------- ------- -------Cash and cash equivalents atend of period 20 1,238.8 1,064.6 1,316.8 ======= ======= ======= Consolidated Statement of Changes in Equity For the six months ended 30 June 2005 Share Share Translation Retained Net Minority Total capital premium reserves earnings equity interests US$'m US$'m US$'m US$'m US$'m US$'m US$'m Balance at 1 January 2005 16.6 272.4 8.5 1,168.0 1,465.5 604.5 2,070.0 Profit for the financial period - - - 367.5 367.5 240.0 607.5Currency translation adjustment - - (4.1) - (4.1) (0.2) (4.3)Dividends - - - (126.2) (126.2) (122.1) (248.3) ------ ------ ------ ------ ------ ------ ------Balance at 30 June 2005 16.6 272.4 4.4 1,409.3 1,702.7 722.2 2,424.9 ====== ====== ====== ====== ====== ====== ====== For the year ended 31 December 2005 Share Share Translation Retained Net Minority Total capital premium reserves earnings equity interests US$'m US$'m US$'m US$'m US$'m US$'m US$'m Balance at 1 January 2005 16.6 272.4 8.5 1,168.0 1,465.5 604.5 2,070.0 Profit for the financial year - - - 725.8 725.8 502.4 1,228.2Currency translation adjustment - - 8.1 - 8.1 - 8.1Dividends - - - (157.7) (157.7) (385.6) (543.3) ------ ------ ------ ------ ------ ------ ------Balance at 31 December 2005 16.6 272.4 16.6 1,736.1 2,041.7 721.3 2,763.0 ====== ====== ====== ====== ====== ====== ====== For the six months ended 30 June 2006 Share Share Translation Retained Net Minority Total capital premium reserves earnings equity interests US$'m US$'m US$'m US$'m US$'m US$'m US$'m Balance at 1 January 2006 16.6 272.4 16.6 1,736.1 2,041.7 721.3 2,763.0 Profit for the financial period - - - 652.6 652.6 417.7 1,070.3Currency translation adjustment - - (6.2) - (6.2) 0.1 (6.1)Capitalisation of share premium on bonusissue of ordinary shares (see Note 18) 73.2 (73.2) - - - - -Dividends - - - (185.3) (185.3) (204.2) (389.5) ------ ------ ------ ------ ------ ------ ------Balance at 30 June 2006 89.8 199.2 10.4 2,203.4 2,502.8 934.9 3,437.7 ====== ====== ====== ====== ====== ====== ====== There were no items of recognised income and expense in any period other thanthe profit for the financial period and the currency translation adjustment. Notes 1. General information and accounting policies a) General information These June 2006 interim consolidated financial statements ("the interimfinancial statements") are for the six months ended 30 June 2006. The interimfinancial statements are unaudited. The information for the year ended 31 December 2005 does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. A copyof the statutory accounts for that year has been delivered to the Registrar ofCompanies. The auditors' report on these accounts was unqualified and did notcontain a statement under section 237(2) (regarding adequacy of accountingrecords and returns) or section 237(3) (regarding provision of necessaryinformation and explanations) of the Companies Act 1985. b) Accounting policies The interim financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRSs") including IAS 34 "InterimFinancial Reporting". For these purposes, IFRSs comprise the Standards issued bythe International Accounting Standards Board ("IASB") and Interpretations issuedby the International Financial Reporting Interpretations Committee ("IFRIC")that have been endorsed by the European Union. The interim financial information has also been prepared on the basis ofaccounting policies consistent with those applied in the financial statementsfor the year ended 31 December 2005. Any Standards or Interpretations which apply or are expected to apply for thefirst time for the year ended 31 December 2006 are not considered to have anymaterial impact on the Group. c) Restatement of comparative amounts for bonus issue Comparatives for earnings per share and dividend per share amounts have beenrestated for the effect of the 4-for-1 bonus issue of ordinary shares on 16 June2006 (see Note 18). 2. Total profit from operations and associates Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m Turnover 1,846.9 1,123.6 2,445.3Cost of sales (367.3) (311.7) (685.6) ------ ------ -------Gross profit 1,479.6 811.9 1,759.7 Administrative expenses (70.6) (59.3) (132.0)Closure provision (0.2) 3.9 3.4Severance charges (4.6) (2.5) (3.9)Exploration costs (8.1) (8.0) (22.4)Other operating income 0.8 2.1 5.4Other operating expenses (92.0) (9.1) (103.8) ------ ------ -------Group operating profit 1,304.9 739.0 1,506.4 Share of income from associate 0.5 0.5 0.9 ------ ------ -------Total profit from operations andassociates 1,305.4 739.5 1,507.3 ====== ====== ======= 3. Segmental analysis Based on risks and returns, the Directors consider the primary reporting formatis by business segment and the secondary reporting format is by geographicalsegment. The Group considers its business segments to be Los Pelambres, ElTesoro, Michilla, Exploration, Railway and other transport services and theWater Concession. Corporate and other items principally relate to the costsincurred by the Company and Antofagasta Minerals S.A., the Group's miningcorporate centre, which are not allocated to any individual business segment.The classification reflects the Group's management structure. The amountspresented for each business segment exclude any amounts relating to theinvestment in Antofagasta Terminal Internacional S.A., an associate which isheld through the Railway and other transport services segment. a) Turnover, EBITDA and operating profit /(loss) from subsidiaries analysed by business segment Operating profit/(loss) Turnover EBITDA from subsidiaries Six months Year Six months Year Six months Year ended ended ended ended ended ended 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m Los Pelambres 1,312.8 797.0 1,749.8 1,130.5 655.4 1,420.5 1,097.6 620.1 1,350.4El Tesoro 287.5 176.1 372.2 168.2 110.8 203.2 149.6 97.6 172.9Michilla 165.6 80.0 177.1 51.5 18.0 16.3 44.3 9.6 (31.1)Exploration - - - (8.1) (8.0) (22.4) (8.1) (8.0) (22.4)Corporate and other items - - - (8.4) (6.7) (15.6) (9.0) (6.9) (15.9) ------ ------ ------ ------ ------ ------ ------ ------ -------Mining 1,765.9 1,053.1 2,299.1 1,333.7 769.5 1,602.0 1,274.4 712.4 1,453.9Railway and othertransport services 48.8 44.7 92.5 19.3 19.8 38.2 14.1 14.7 27.4Water concession 32.2 25.8 53.7 21.7 17.1 33.9 16.4 11.9 25.1 ------ ------ ------ ------ ------ ------ ------ ------ -------Group turnover(segment revenue),EBITDA and operatingprofit fromsubsidiaries(segment result) 1,846.9 1,123.6 2,445.3 1,374.7 806.4 1,674.1 1,304.9 739.0 1,506.4 ====== ====== ====== ====== ====== ====== ====== ====== ======= Notes to turnover by business segment (segment revenue) (i) Turnover by business segment equates to segment revenue asdefined by IAS 14. Turnover from Railway and other transport services is statedafter eliminating inter-segmental sales to the mining division of US$4.5 million(2005 half year - US$4.1 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(a). (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 4(b). (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. Notes to EBITDA and operating profit from subsidiaries by business segment(segment result) (v) Operating profit for the separate businesses equates tosegment result as defined by IAS 14. This excludes the share of income fromassociate of US$0.5 million (2005 half year - US$0.5 million). (vi) EBITDA is calculated by adding back depreciation,amortisation and disposals of property, plant and equipment and impairmentcharges (see Note 3(b)) to operating profit from subsidiaries. (vii) EBITDA and operating profit are stated after deducting losseson commodity derivatives (including both losses realised in each period andperiod-end mark-to-market adjustments) at El Tesoro of US$43.5 million (2005half year - US$0.7 million) and Michilla of US$46.2 million (2005 half year -US$4.4 million). Further details are given in Note 4(b). (viii) Operating profit for the year ended 31 December 2005 wasstated after deducting an impairment charge against the carrying value ofproperty, plant and equipment at Michilla of US$30 million (see Note 3(b)).There was no comparable impairment charge in the six months ended 30 June 2005or six months ended 30 June 2006. Turnover at Los Pelambres by mineral: Before deducting tolling charges Tolling charges Net of tolling charges --------------------------- ----------------- ------------------------ Six months ended Year ended Six months ended Year ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m Copper 1,207.9 530.6 1,331.0 (123.6) (71.0) (166.9) 1,084.3 459.6 1,164.1Molybdenum 220.4 341.7 588.4 (10.4) (13.6) (25.6) 210.0 328.1 562.8Gold and silver 18.8 9.5 23.4 (0.3) (0.2) (0.5) 18.5 9.3 22.9 ------ ------ ------- ------ ------ ------- ------ ------ -------Los Pelambres 1,447.1 881.8 1,942.8 (134.3) (84.8) (193.0) 1,312.8 797.0 1,749.8 ====== ====== ======= ====== ====== ======= ====== ====== ======= b) Depreciation and amortisation, loss on disposal of property, plant and equipment and impairment charges by operation Depreciation and amortisation Loss on disposals Impairment charge --------------------------- ------------------- ------------------- Six months ended Year ended Six months ended Year ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m Los Pelambres 32.5 34.8 66.6 0.4 0.9 3.5 - - -El Tesoro 17.8 13.1 29.1 0.8 0.1 1.2 - - -Michilla 4.9 6.9 13.8 2.3 1.5 3.6 - - 30.0Corporate andother items 0.2 0.2 0.3 0.4 - - - - - ------ ------ ------- ------ ------ ------- ------ ------ ------Mining 55.4 55.0 109.8 3.9 2.5 8.3 - - 30.0Railway andothertransport services 4.7 4.5 9.5 0.5 0.2 1.3 - - -Water concession 5.2 4.1 8.7 0.1 1.1 0.1 - - - ------ ------ ------- ------ ------ ------- ------ ------ ------ 65.3 63.6 128.0 4.5 3.8 9.7 - - 30.0 ====== ====== ======= ====== ====== ======= ====== ====== ====== Other non-cash expenses relate to severance and closure costs and are disclosedfor the Group in Note 2. c) Capital expenditure, assets and liabilities by business segment Capital expenditure --------------------- Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'mLos Pelambres 243.2 35.4 101.4El Tesoro 4.7 28.7 39.6Michilla 6.5 7.1 18.7Corporate and other items 8.9 1.2 1.6 ------- ------- -------Mining 263.3 72.4 161.3Railway and other transport services 11.6 7.0 23.2Water concession 2.0 1.6 1.8 ------- ------- ------- 276.9 81.0 186.3 ======= ======= ======= Capital expenditure represents purchases of property, plant and equipment statedon an accruals basis (see Note 10) and may therefore differ from the amountincluded in the cash flow statement. Segment assets Segment liabilities Segment net assets ---------------- --------------------- -------------------- Six months ended Year ended Six months ended Year ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'mLos Pelambres 2,149.2 1,538.2 1,648.2 (79.2) (54.9) (72.5) 2,070.0 1,483.3 1,575.7El Tesoro 416.3 390.7 392.6 (73.9) (41.7) (56.5) 342.4 349.0 336.1Michilla 76.9 87.7 61.6 (48.3) (26.9) (47.5) 28.6 60.8 14.1Corporate andother items 251.0 5.7 8.5 (72.3) (4.6) (11.4) 178.7 1.1 (2.9) ------ ------ ------- ------ ------ ------- ------ ------ -------Mining 2,893.4 2,022.3 2,110.9 (273.7) (128.1) (187.9) 2,619.7 1,894.2 1,923.0Railway andothertransport services 142.7 117.5 133.8 (17.0) (15.8) (21.7) 125.7 101.7 112.1Water concession 183.0 182.8 199.9 (7.5) (5.9) (7.5) 175.5 176.9 192.4 ------ ------ ------- ------ ------ ------- ------ ------ ------- 3,219.1 2,322.6 2,444.6 (298.2) (149.8) (217.1) 2,920.9 2,172.8 2,227.5 ====== ====== ======= ====== ====== ======= ====== ====== ======= Assets and liabilities of Tethyan Copper Company Limited (See Note 21) have beenincluded within Corporate and other items. Segment assets and liabilities are reconciled to entity assets and liabilitiesthrough unallocated items as follows: Segment assets Segment liabilities Segment net assets ---------------- --------------------- -------------------- Six months ended Year ended Six months ended Year ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'mSegmentassets/(liabilities) 3,219.1 2,322.6 2,444.6 (298.2) (149.8) (217.1) 2,920.9 2,172.8 2,227.5Investmentproperty 3.2 3.1 3.4 - - - 3.2 3.1 3.4Investmentin associate 3.0 2.4 2.8 - - - 3.0 2.4 2.8Available for sale investments 0.2 0.2 0.1 - - - 0.2 0.2 0.1Derivative financialinstruments - 0.9 - - - - - 0.9 -Deferredtax assets/(liabilities) 6.8 2.5 6.6 (201.6) (210.7) (225.5) (194.8) (208.2) (218.9)Current taxassets/(liabilities) 4.6 1.6 5.3 (121.1) (87.8) (108.7) (116.5) (86.2) (103.4)Cash and cashequivalents /(borrowings) 1,238.8 1,064.6 1,316.8 (417.1) (524.7) (465.3) 821.7 539.9 851.5 ------ ------ ------- ------ ------ ------- ------ ------ -------Entityassets/(liabilities) 4,475.7 3,397.9 3,779.6 (1,038.0) (973.0) (1,016.6) 3,437.7 2,424.9 2,763.0 ====== ====== ======= ====== ====== ======= ====== ====== ======= d) Geographical analysis of turnover by location of customer(geographical segment) Sales ------- Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'mEurope - United Kingdom - 20.0 34.2 - Rest of Europe 580.4 273.7 675.6Latin America - Chile 161.4 183.7 326.6 - Rest of Latin America 80.0 33.3 87.8 North America 246.9 232.9 471.3Asia (mainly Japan) 778.2 380.0 849.8 ------- ------- ------- 1,846.9 1,123.6 2,445.3 ======= ======= ======= 4. Derivatives and embedded derivatives a) Embedded derivatives - provisionally priced sales Copper and molybdenum concentrate sale agreements and copper cathode saleagreements generally provide for provisional pricing of sales at the time ofshipment, with final pricing being based on the monthly average London MetalExchange copper price or monthly average molybdenum price for specified futureperiods. This normally ranges from 30 to 180 days after delivery to thecustomer. Under IFRS, both gains and losses from the marking-to-market of open sales arerecognised through adjustments to turnover in the income statement and to tradedebtors in the balance sheet. The Group determines mark-to-market prices usingforward prices at each period end for copper concentrate and cathode sales, andperiod-end month average prices for molybdenum concentrate sales due to theabsence of a futures market for that commodity. The mark-to-market adjustments at the end of each period and the effect onturnover in the income statement for each period are as follows: Balance sheet net mark to Income statement net mark to market effect on debtors market effect on turnover Six months ended Year ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m US$'m US$'m US$'m Los Pelambres- copper concentrate 97.8 2.1 33.2 64.6 (15.5) 15.6Los Pelambres- molybdenumconcentrate 4.4 14.9 (12.6) 17.0 (18.0) (45.5)El Tesoro -copper cathodes 1.0 (0.4) 0.2 0.8 (1.2) (0.6)Michilla -copper cathodes 0.7 (0.4) (0.1) 0.8 (0.8) (0.5) ------- ------- -------- -------- ------- -------- 103.9 16.2 20.7 83.2 (35.5) (31.0) ======= ======= ======== ======== ======= ======== Copper concentrate sales at Los Pelambres Revenues in the period to 30 June 2006 included total positive pricingadjustments of US$348.8 million, representing the difference between reportedrevenues and initially invoiced amounts. This comprised actual pricingadjustments compared with initial provisionally invoiced prices of US$278.1million (of which US$157.2 million related to sales of concentrate open at 31December 2005 and US$120.9 million related to sales of concentrate during 2006)together with net mark-to-market adjustments of US$70.7 million (of whichUS$64.6 million is disclosed above and US$6.1 million is included in tollingcharges). At 30 June 2006, copper concentrate sales at Los Pelambres totalling104,400 tonnes remained open as to price, with an average mark-to-market priceof 333.3 cents per pound. Revenues in the period to 30 June 2005 included total positive pricingadjustments of US$29.7 million, representing the difference between reportedrevenues and initially invoiced amounts. This comprised actual pricingadjustments compared with initial provisionally invoiced prices of US$46.1million (of which US$41.4 million related to sales of concentrate open at 31December 2004 and US$4.7 million related to sales of concentrate during 2005)together with net negative mark-to-market adjustments of US$16.4 million (ofwhich US$15.5 million is disclosed above and US$0.9 million is included intolling charges). At 30 June 2005, copper concentrate sales at Los Pelambrestotalling 112,900 tonnes remained open as to price, with an averagemark-to-market price of 152.9 cents per pound. Molybdenum concentrate sales at Los Pelambres Revenues in the period to 30 June 2006 included total negative pricingadjustments of US$9.3 million, representing the difference between reportedrevenues and initially invoiced amounts. This comprised negative actual pricingadjustments compared with initial provisionally invoiced prices of US$26.3million (of which negative US$27.5 million related to sales of concentrate openat 31 December 2005 and positive US$1.2 million related to sales of concentrateduring 2006) together with net positive mark-to-market adjustments of US$17.0million as disclosed above. At 30 June 2006, molybdenum concentrate sales at LosPelambres totalling 1,451 tonnes remained open as to price, with an averagemark-to-market price of US$25.2 per pound. Revenues in the period to 30 June 2005 included total positive pricingadjustments of US$30.7 million, representing the difference between reportedrevenues and initially invoiced amounts. This comprised actual pricingadjustments compared with initial provisionally invoiced prices of US$48.7million (of which US$32.9 million related to sales of concentrate open at 31December 2004 and US$15.8 million related to sales of concentrate during 2005)together with net negative mark-to-market adjustments of US$18 million asdisclosed above. At 30 June 2005, molybdenum concentrate sales at Los Pelambrestotalling 1,700 tonnes remained open as to price, with an average mark-to-marketprice of US$37.4 per pound. b) Derivative financial instruments The Group uses derivative financial instruments to reduce exposure to foreignexchange, interest rate and commodity price movements. The Group does not usesuch derivative instruments for speculative trading purposes. The Group did notadopt the hedge accounting provisions of IAS 39 "Financial Instruments:Recognition and Measurement" in the six months ended 30 June 2006. Accordingly,derivatives are measured at each balance sheet date at fair value and gains andlosses arising from changes in fair value are included in the income statementfor the year, within operating profit from subsidiaries for commodityderivatives and within net finance costs for exchange and interest derivatives. The mark-to-market adjustments at the end of each period and the effect onoperating profit and net finance costs in the income statement for each year areas follows: Balance sheet net mark to market Income statement net mark to market ---------------------------------- ------------------------------------- effect on debtors/(creditors) effect operating profit/finance cost ------------------------------- -------------------------------------- Six months ended Year ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m US$'m US$'m US$'m Commodity (43.8) (3.8) (40.0) (8.3) (4.0) (44.7)Interest - (1.5) (0.3) 0.3 0.7 1.9Exchange - - - - 0.1 0.1 -------- -------- -------- -------- -------- -------- (43.8) (5.3) (40.3) (8.0) (3.2) (42.7) ======== ======== ======== ======== ======== ======== Commodity derivatives The Group periodically uses commodity derivatives to reduce its exposure to thecopper price. During the six months ended 30 June 2006, the amount charged tooperating profit on commodity derivatives was US$89.7 million, comprisingUS$43.5 million at El Tesoro and US$46.2 million at Michilla (2005 half year -US$4.4 million, comprising US$0.7 million at El Tesoro and US$3.7 million atMichilla). This comprised losses on derivatives which matured in the first sixmonths of 2006 of US$81.3 million (2005 half year - US$0.6 million) andmark-to-market losses at 30 June 2006 of US$52.9 million (2005 half year -US$3.8 million) in respect of derivatives maturing after the period end, lessreversal of opening mark to market provisions of US$44.5 million (2005 half year- nil). Net of margin calls of US$9.1 million in respect of these derivatives,this results in a net balance sheet position at 30 June 2006 of US$43.8 million(2005 half year - margin calls were nil). The Group had min/max instruments at 30 June 2006 for 12,900 tonnes of copperproduction (2005 half year - 78,150 tonnes), with a weighted average floor of113.1 cents per pound and a weighted average cap of 140.9 cents per pound (2005half year - weighted average floor 117.7 cents per pound; weighted average cap151.7 cents per pound). These instruments had a weighted average duration of 3.5months and covered a period of 6 months. It also had futures to buy and sell2,000 tonnes of copper production with an average price of 185.1 cents, with aweighted average duration of four months. Interest derivatives The Group had interest rate collars at 30 June 2006 with a notional principalamount of US$ 7.1 million, with a weighted average floor of 4.83% and a weightedaverage cap of 6.00%. These instruments had a remaining duration of six months.The mark-to-market gain at 30 June 2006 was US$0.3 million, and the effect onthe income statement is included within other finance items - see Note 5. Exchange derivatives There were no outstanding exchange derivative instruments at 30 June 2006. At 30June 2005, the net value of outstanding exchange swaps was US$ 3 million andmark-to-market value was nil. 5. Net finance income/(expense) Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m Investment incomeInterest receivable 34.5 15.4 39.7 -------- -------- -------- Interest expenseInterest payable (12.4) (12.0) (23.8)Amortisation of deferred finance costs (0.2) (0.2) (0.4)Discount charge relating to provisions (0.5) (0.8) (1.6)Preference dividends (0.1) (0.1) (0.2) -------- -------- -------- (13.2) (13.1) (26.0) -------- -------- -------- Other finance itemsMark-to-market effect of derivatives 0.3 0.8 2.0Foreign exchange (1.7) (3.1) 13.3 -------- -------- -------- (1.4) (2.3) 15.3 -------- -------- -------- Net finance income 19.9 - 29.0 ======== ======== ======== 6. Taxation The tax charge for the period comprised the following: Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m Current tax chargeCorporate tax (principally firstcategory tax in Chile) (202.6) (126.2) (296.6)Mining tax (Royalty) (23.8) - -Withholding tax (52.7) - (8.6)Exchange gains on corporate tax balances 0.6 7.9 20.2 ------- ------ ------- (278.5) (118.3) (285.0) ------- ------ ------- Deferred tax chargeCorporate tax (principally firstcategory tax in Chile) (19.0) (5.0) 28.7Mining tax (Royalty) (0.6) - (0.5)Withholding tax provision 43.1 (8.7) (51.3) ------- ------ ------- 23.5 (13.7) (23.1) ------- ------ ------- Total tax charge (Income tax expense) (255.0) (132.0) (308.1) ======= ====== ======= Current tax is based on taxable profit for the period. Deferred tax is the taxexpected to be payable or recoverable on temporary differences (i.e. differencesbetween the carrying amount of assets and liabilities in the financialstatements and the corresponding tax basis used in the computation of taxableprofit). Deferred tax is accounted for using the balance sheet liability methodand is provided on all temporary differences with certain limited exceptions.The Group incurs withholding taxes on the remittance of profits from Chile anddeferred tax is provided on undistributed earnings to the extent that remittanceis probable in the foreseeable future. The rate of first category (i.e. corporation) tax in Chile is 17% for both 2006and 2005. During 2005, new tax legislation on Chilean mining companies waspassed into law with effect from 1 January 2006. The legislation sets anadditional tax of up to 5% of tax-adjusted operating profit, with the option formining companies to elect for a lower rate of 4% by entering into a taxstability regime for a period of 12 years, after which the rate of 5% willapply. For 2006 and 2007, 50% of the new mining tax can be offset against firstcategory tax and the remaining 50% is tax deductible (i.e. an allowable expensein determining liability to first category tax). From 2008, when the ability tooffset will no longer be available, 100% of the new mining tax will be taxdeductible. Los Pelambres, El Tesoro and Michilla have opted to enter into thisnew tax stability agreement, and hence the effect of the legislation is toincrease the effective tax rate of these three operations (before taking intoaccount deductibility against corporation tax) by approximately 2% in 2006 and2007 and 4% thereafter. The effective tax rate for the six months ended 30 June 2006 was 19.2%, comparedwith the Chilean statutory tax rate of 17%. The increase in the effective taxrate above the statutory tax rate was principally due to the effect of the newmining tax, which resulted in a charge of US$24.4 million, and the provision ofadditional withholding tax of US$9.6 million. The effective tax rate for the sixmonths ended 30 June 2005 was 17.9% principally due to the provision of US$8.7million made in respect of withholding taxes during that period. 7. Basic earnings per share Basic earnings per share is calculated on profit after tax and minority interestgiving net earnings of US$652.6 million (2005 half year - US$367.5 million) andbased on 985,856,695 ordinary shares, being the number of ordinary sharesfollowing the 4-for-1 bonus issue on 16 June 2006 (see Note 18). Comparativeamounts for basic earnings per share have been restated for the effects of thebonus issue. There were no other changes in ordinary shares in issue, nor was there anypotential dilution of ordinary shares in any period. 8. Dividends The Board has declared an interim dividend of 5.2 cents per ordinary share (2005half year - 3.2 cents) for payment on 12 October 2006 to shareholders on theregister at the close of business on 22 September 2006. The 2006 interimdividend comprises an ordinary dividend of 3.2 cents per share and a specialdividend of 2.0 cents per share (2005 half year - ordinary dividend of 3.2cents). Dividends are declared and paid gross. Dividends per share actually paid in the period and recognised as a deductionfrom net equity under IFRS were 18.8 cents (2005 half year - 12.8 cents),representing the final dividend (including the special dividend) declared inrespect of the previous year. Comparative amounts for dividends per share have been adjusted for the effectsof the 4-for-1 bonus issue on 16 June 2006 (see Note 18). Dividends are declared in US dollars but may be paid in either dollars orsterling. Shareholders on the register of members with an address in the UnitedKingdom receive dividend payments in sterling, unless they elect to be paid indollars. All other shareholders are paid by cheque in dollars, unless they havepreviously instructed the Company's registrar to pay dividends by bank transferto a sterling bank account, or they elect for payment by cheque in sterling. TheCompany's registrar must receive any such election before the record date of 22September 2006. The exchange rate to be applied to dividends to be paid insterling will be set on 26 September 2006. 9. Intangible assets Concession Exploration Six months ended Year ended right licences 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m US$'m US$'mBalance at thebeginning ofthe period 97.7 - 97.7 93.2 93.2Acquisition - 230.0 230.0 - -Amortisation (1.9) - (1.9) (1.6) (3.5)Foreign currencyexchange difference (4.6) - (4.6) (3.5) 8.0 -------- -------- -------- ------- -------Balance at theend of the period 91.2 230.0 321.2 88.1 97.7 ======== ======== ======== ======= ====== The concession right relates to the 30 year concession to operate the waterrights and facilities in the Antofagasta Region of Chile which the Group'swholly-owned subsidiary, Aguas de Antofagasta S.A., acquired in December 2003.This intangible asset is being amortised on a straight-line basis over the lifeof the concession. The exploration licences relate to the value attributed to the rights acquiredon the purchase of Tethyan Copper Company Limited (see Note 21). 10. Property, plant and equipment Railway and Water Six months ended Year ended other Mining transport Concession 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m US$'m US$'m US$'m Balance at thebeginning ofthe period 1,638.3 110.4 71.3 1,820.0 1,796.1 1,796.1Additions 263.3 11.6 2.0 276.9 81.0 186.3Acquisition(see Note 21) 0.4 - - 0.4 - -Transfers andreclassifications - - - - (0.8) (0.8)Depreciation (55.4) (4.7) (3.3) (63.4) (62.0) (124.6)Disposals (3.9) (0.5) (0.1) (4.5) (4.2) (13.8)Impairment charge - - - - - (30.0)Foreign currencyexchange difference - (0.5) (3.5) (4.0) (3.0) 6.8 ------- -------- -------- -------- -------- --------Balance at theend of the period 1,842.7 116.3 66.4 2,025.4 1,807.1 1,820.0 ======= ======== ======== ======== ======== ======== 11. Investment property Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m Balance at the beginning of the period 3.4 3.2 3.2Foreign currency exchange difference (0.2) (0.1) 0.2 -------- -------- --------Balance at the end of the period 3.2 3.1 3.4 ======== ======== ======== Investment property represents the Group's forestry properties, which are heldfor long-term potential and accordingly classified as investment property heldat cost. 12. Investment in associate Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m Balance at the beginning of the period 2.8 2.9 2.9Share of profit before tax 0.6 0.6 1.1Share of tax (0.1) (0.1) (0.2)Dividends received (0.3) (1.0) (1.0) -------- -------- --------Balance at the end of the period 3.0 2.4 2.8 ======== ======== ======== The investment in associate refers to the Group's 30% interest in AntofagastaTerminal Internacional S.A. ("ATI"), which operates a concession to manageinstallations in the port of Antofagasta. 13. Available for sale investments Available for sale investments represent those investments which are notsubsidiaries, associates or joint ventures and are not held for tradingpurposes. The fair value of the available for sale investments held by the Groupdid not differ materially from cost at any period end. 14. Borrowings At 30.06.06 At 30.06.05 At 31.12.05 US$'m US$'m US$'m Los PelambresCorporate loans (343.4) (419.8) (381.5)Other loans (11.9) (16.7) (14.3) El TesoroCorporate loans (48.9) (73.7) (55.8)Finance leases (0.2) (0.3) (0.3) MichillaFinance leases (1.9) (3.2) (2.6) Railway and other transport servicesLoans (7.1) (7.4) (7.2) OtherPreference shares (3.7) (3.6) (3.6) -------- -------- --------Total (see Note 20) (417.1) (524.7) (465.3) ======== ======== ======== Loans at 30 June 2006 are shown net of deferred financing costs of US$2.0million (2005 half year - US$2.2 million). The amount in relation to LosPelambres was US$1.7 million (2005 half year - US$1.9 million). The amount inrelation to El Tesoro was US$0.3 million (2005 half year - US$0.3 million). Maturity of borrowings At 30.06.06 At 30.06.05 At 31.12.05 US$'m US$'m US$'m Short-term borrowings (97.0) (103.3) (97.2)Medium and long-term borrowings (320.1) (421.4) (368.1) -------- -------- --------Total (see Note 20) (417.1) (524.7) (465.3) ======== ======== ======== Loans are predominantly floating rate. However the Group periodically entersinto interest rate derivative contracts to manage its exposure to interestrates. Details of derivative instruments held by the Group are given in Note 4. 15. Post-employment benefit obligation Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m Balance at the beginning of the period (20.6) (16.2) (16.2)Charge to operating profit in the period (4.6) (2.5) (3.9)Release of discount to interest expense inthe period (0.2) (0.4) (1.0)Reclassification - 1.0 -Utilised in period 2.9 0.4 1.8Foreign currency exchange difference 1.9 0.9 (1.3) -------- -------- --------Balance at the end of the period (20.6) (16.8) (20.6) ======== ======== ======== The post employment benefit obligation relates to the provision for severanceindemnities which are payable when an employment contract comes to an end, inaccordance with normal employment practice in Chile and other countries in whichthe Group operates. The severance indemnity obligation is treated as an unfundeddefined benefit plan, and the calculation is based on valuations performed by anindependent actuary. 16. Long-term provisions Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m Balance at the beginning of the period (9.8) (13.2) (13.2)(Charge)/credit to operating profit inthe period (0.2) 3.9 3.4Release of discount to interest expensein the period (0.3) (0.5) (0.6)Amount capitalised - - 0.8Utilised in period 0.5 (0.4) -Foreign currency exchange difference (0.2) - (0.2) -------- -------- --------Balance at the end of the period (10.0) (10.2) (9.8) ======== ======== ======== Analysed as follows:Decommissioning and restoration (9.4) (10.0) (9.5)Termination of water concession (0.6) (0.2) (0.3) -------- -------- --------Balance at the end of the period (10.0) (10.2) (9.8) ======== ======== ======== Decommissioning and restoration costs relate to the Group's mining operations.Costs are estimated on the basis of a formal closure plan and are subject toregular formal review. The provision for the termination of the water concession relates to theprovision for items of plant, property and equipment and working capital itemsunder Aguas de Antofagasta's ownership to be transferred to the previousstate-owned operator ESSAN at the end of the concession period, and is based onthe net present value of the estimated value of those assets and liabilities inexistence at the end of the concession. 17. Deferred tax assets and liabilities Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m Net position at the beginning of the period (218.9) (194.5) (194.5)Credit/(charge) to tax on profit in year 23.5 (13.7) (23.1)Foreign currency exchange difference 0.6 - (1.3) -------- -------- --------Net position at the end of the period (194.8) (208.2) (218.9) ======== ======== ======== Analysed between:Deferred tax assets 6.8 2.5 6.6Deferred tax liabilities (201.6) (210.7) (225.5) -------- -------- --------Net position (194.8) (208.2) (218.9) ======== ======== ======== 18. Share capital and share premium At the Company's Annual General Meeting and the separate class meetings of theordinary and preference shareholders of the Company held on 14 June 2006,resolutions were passed to: • increase the authorised share capital from £12,727,000 to £67,000,000 by the creation of 1,085,460,000 ordinary shares of 5p each; • issue, by way of bonus issue, of four new ordinary shares of 5p each (credited as fully paid) for every one ordinary share held by the shareholders of the Company at the close of business on 16 June 2006, by applying £39.4 million from the Company's share premium account in paying up and allotting the new ordinary shares; and • increase the voting rights of each preference share from 20 votes to 100 votes, to prevent dilution of the voting rights of each preference share as a proportion of the total votes to be exercised at a general meeting. The ordinary shares were issued on the close of business on 16 June 2006, andthe effect of the bonus issue of ordinary shares is disclosed in theConsolidated Statement of Changes in Equity on page 22. The increase in ordinaryshare capital of US$73.2 million and corresponding reduction in the sharepremium account has been recorded at the sterling-US dollar closing exchangerate on 16 June 2006. 19. Reconciliation of profit before tax to net cash inflow from operatingactivities Six months ended Year ended 30.06.06 30.06.05 31.12.05 US$'m US$'m US$'m Profit before tax 1,325.3 739.5 1,536.3Depreciation and amortisation 65.3 63.6 128.0Loss on disposal of property, plant andequipment (including impairment charge) 4.5 3.8 39.7Net finance income (19.9) - (29.0)Share of profit of associate (0.5) (0.5) (0.9)Increase in inventories (17.4) (17.6) (28.9)(Increase)/decrease in debtors (386.2) 4.0 (36.3)Increase/(decrease) in creditors andprovisions 74.3 (25.7) 38.6 ------- ------- -------Cash flows from operations 1,045.4 767.1 1,647.5 ======= ======= ======= 20. Analysis of changes in net cash At 01.01.06 Cash flows Other Exchange At 30.06.06 US$'m US$'m US$'m US$'m US$'m Cash and cash equivalents 1,316.8 (78.1) - 0.1 1,238.8 -------- -------- ------- ------- -------- Bank borrowings duewithin one year (95.8) 48.0 (47.9) - (95.7)Bank borrowings dueafter one year (363.0) - 47.8 (0.3) (315.5)Finance leasesdue within one year (1.4) 0.6 (0.5) - (1.3)Finance leasesdue after one year (1.5) 0.1 0.4 0.1 (0.9)Preference shares (3.6) - (0.1) - (3.7) -------- -------- ------- ------- --------Total borrowings (465.3) 48.7 (0.3) (0.2) (417.1) -------- -------- ------- ------- --------Movement in net cash 851.5 (29.4) (0.3) (0.1) 821.7 ======== ======== ======= ======= ======== Net cash at the end of each period was as follows: At 30.06.06 At 30.06.05 At 31.12.05 US$'m US$'m US$'mCash and cash equivalents 1,238.8 1,064.6 1,316.8Total borrowings (417.1) (524.7) (465.3) ------- ------- --------Net cash 821.7 539.9 851.5 ======= ======= ======== 21. Acquisition of Tethyan Copper Company Limited On 14 February 2006, the Group announced that it had reached agreement withTethyan Copper Company Limited ('Tethyan'), a company listed on the AustralianStock Exchange with copper-gold interests in Pakistan, on the terms for therecommended cash offer of A$1.20 per share for the entire share capital ofTethyan ('the offer'), which was increased to A$1.40 per share on 23 March 2006.The Offer was declared unconditional on 20 April 2006 when the Group's interest(including acceptances) in Tethyan's shares reached 51.77%, and closed on 28April 2006, when its interest in Tethyan's shares exceeded 90%. The Groupcompulsorily acquired all remaining shares in June 2006 when payment for theacquisition was also completed and the Group's interest reached 100%. The cashconsideration for the acquisition amounted to US$170.4 million. The transaction has been accounted for by the purchase method of accounting withan acquisition date of 20 April 2006. Book value Adjustments Fair value US$'m US$'m US$'mNet assets acquired Intangible assets - exploration licences - 230.0 230.0Property, plant and equipment 0.4 - 0.4Exploration, evaluation and development 18.0 (18.0) -Trade and other receivables 0.8 - 0.8Cash and cash equivalents 1.1 - 1.1Trade and other payables (1.8) (60.0) (61.8)Long-term provisions (0.1) - (0.1) -------- -------- -------- 18.4 152.0 170.4 ======== ======== ======== Net cash outflow arising on acquisition Total consideration (including directly attributable costs) 170.4Cash and cash equivalents acquired (1.1)Directly attributable costs provided but not yet paid (3.0) -------- 166.3 ======== (a) The intangible assets represent the full unencumbered value attributedto the interests in the exploration licences held by Tethyan. These include a75% interest in the Reko Diq prospect in the Chagai Hills region of South-WestPakistan, which includes the Tanjeel Mineral resource and the WesternPorphyries, and a 100% interest in certain other licences in the region. (b) Exploration costs capitalised by Tethyan have been written off onacquisition in the consolidated financial statements in accordance with theGroup's accounting policies. (c) On 14 February 2006, the Group separately entered into an agreementwith BHP Billiton whereby BHP Billiton's rights to claw-back a material interestin certain of Tethyan's mineral interests ('Claw-Back Right') will beextinguished for a consideration of US$60 million. Trade and other payables havebeen adjusted to reflect this amount which results from the fair valuing of theencumbrance over the acquired exploration licences relating to the Claw-BackRight. (d) Total consideration includes directly attributable costs of US$6.1million. Tethyan incurred exploration costs of US$1.1 million between the date ofacquisition and 30 June 2006, which have been included as a charge against theGroup's profit before tax. Agreement with Barrick Gold Corporation to enter into a joint venture agreement On 14 February 2006, the Group also entered into an agreement with Barrick GoldCorporation ('Barrick Gold') to support Antofagasta's acquisition of Tethyan,whereby upon acquisition of Tethyan, Antofagasta and Barrick Gold intend toestablish a 50:50 joint venture in relation to Tethyan's copper-gold mineralinterests in Pakistan, and Barrick Gold will reimburse Antofagasta for 50% ofthe acquisition cost of Tethyan and the Claw-Back Right. The reimbursement isexpected to amount to approximately US$115 million. The Group is currently indiscussions with Barrick Gold on the terms of the proposed joint venture. The agreement is presently expected to be finalised in the second half of 2006,when this will be accounted for as a disposal of 50% of the Group's interest inTethyan, after which the remaining 50% interest is expected to be accounted forin accordance with IAS 31 "Interests in Joint Ventures". 22. Events after the balance sheet date On 15 August 2006, the Group announced that it had entered into an agreement toacquire a 19.99% shareholding in Equatorial Mining Limited ("Equatorial") atA$8.00 per share and had made a cash takeover offer of A$11.20 per share for allof the issued shares of Equatorial. On 24 August 2006 the Group announced it hadsecured an interest in 97% of Equatorial's issued shares and that its takeoveroffer was unconditional. The Group also announced its intention to compulsorilyacquire any remaining Equatorial shares in due course to reach 100% ownership. The total consideration payable by the Group to acquire all of Equatorial'sshares is expected to be approximately US$401 million. Equatorial reported cashbalances of approximately US$97 million as at 30 June 2006. Equatorial iscompany listed on the Australian Stock Exchange whose principal asset is its 39%ownership interest in Minera El Tesoro, in which the Group owns the remaining61%. 23. Other disclosures Contingent assets and liabilities There were no material contingent assets or liabilities in the period. Capital commitments Future capital commitments at 30 June 2006 were US$68.3 million. Changes in estimates Previously mining properties, including capitalised financing costs, weredepreciated in proportion to the volume of ore extracted in the year comparedwith total proven, probable and possible reserves at the beginning of the year.From 1 January 2006, such depreciation is based on comparison with proven andprobable reserves only at the beginning of the year. The effect of this changeis to increase the depreciation charge in the six months ended 30 June 2006 byUS$1.5 million. Related Party Transactions The ultimate parent company of the Group is Metalinvest Establishment, which iscontrolled by the E. Abaroa Foundation, in which members of the Luksic familyare interested. The Company's subsidiaries, in the ordinary course of business,enter into various sale and purchase transactions with companies also controlledby members of the Luksic family, including Banco de Chile S.A., Madeco S.A. andCompania Cervecerias Unidas S.A. which are subsidiaries of Quinenco S.A., aChilean industrial and financial conglomerate the shares of which are traded onthe Santiago and New York Stock Exchanges. These transactions are under normalcommercial terms that are at arm's length and no more favourable than thosearranged with third parties. These transactions, in total, are not considered tobe material. The Group has a 30% interest in Antofagasta Terminal Internacional S.A. ("ATI"),which is accounted for as an associate. The Group received dividends during theperiod of US$0.3 million (2005 half year - US$1.0 million), as disclosed in theConsolidated Cash Flow Statement on page 21. 24. Currency translation Assets and liabilities denominated in foreign currencies are translated intodollars and sterling at the period end rates of exchange. Results denominated inforeign currencies have been translated into dollars at the average rate foreach period. Period end rates Average rates 30.06.2006 US$1.8484 = £1; US$1 = Ch$539 US$1.7880 = £1; US$1 = Ch$527 30.06.2005 US$1.7905 = £1; US$1 = Ch$579 US$1.8737 = £1; US$1 = Ch$580 31.12.2005 US$1.7179 = £1; US$1 = Ch$513 US$1.8185 = £1; US$1 = Ch$560 25. Distribution These results will be sent by first class post to all shareholders in September.Copies of this report will be available for members of the public who are notshareholders at the Company's registered office, 5 Princes Gate, London SW7 1QJ(telephone: +44 20 7808 0988). INDEPENDENT REVIEW REPORT TO ANTOFAGASTA PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprise the consolidated incomestatement, the consolidated balance sheet, the consolidated statement of changesin equity, the consolidated cash flow statement and related Notes 1 to 25. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority and the requirements of IAS 34 whichrequire that the accounting policies and presentation applied to the interimfigures are consistent with those applied in preparing the preceding annualaccounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Deloitte & Touche LLP Chartered Accountants London 25 August 2006 26. Production and Sales Statistics (not subject to audit or review) a) Production and sales volumes for copper and molybdenum Production Sales ------------ ------- Six months ended Year ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnesCopperLos Pelambres 141.6 154.9 322.8 145.4 150.6 319.1El Tesoro 42.5 49.9 98.1 43.3 50.6 96.1Michilla 23.8 22.6 46.4 24.5 23.1 45.3 ------- -------- ------- ----- ------- ------ -------Group total 207.9 227.4 467.3 213.2 224.3 460.5 ======= ======== ======= ===== ======= ====== ======= MolybdenumLos Pelambres 4.1 4.7 8.7 4.4 4.3 8.5 ======= ======== ======= ===== ======= ====== ======= b) Cash costs per pound of copper produced and realised pricesper pound of copper and molybdenum sold Cash cost Realised prices ----------- ----------------- Six months ended Year ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05 USc USc USc USc USc UScCopperLos Pelambres 24.4 (48.1) (17.1) 376.8 159.8 189.2El Tesoro 79.7 58.9 66.1 301.2 157.9 175.7Michilla 122.0 112.2 118.8 306.6 157.1 177.1 ------- ------- ------- ------- ------- -------Group weightedaverage (including by-products) 46.9 (8.7) 13.9 353.4 159.1 185.2 ======= ======= ======= ======= ======= ======= Group weightedaverage (before deducting by-products) 95.2 71.7 77.3 ======= ======= ======= Cash costs at Los Pelambres comprise:On-site and shipping costs 55.6 43.9 47.1Tolling charges for concentrates 39.8 26.0 27.6 ------- ------- -------Cash costs before deductingby-product credits 95.4 69.9 74.7By-product credits (principally molybdenum) (71.0) (118.0) (91.8) ------- ------- -------Cash costs (net of by-product credits) 24.4 (48.1) (17.1) ======= ======= ======= LME average 275.3 151.1 167.1 ======= ======= ======= US$ US$ US$MolybdenumLos Pelambres 22.7 36.0 31.4 ======= ======= ======= Market average price 23.7 33.4 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. During eachrelevant period, the Group owned 60% of Los Pelambres, 61% of El Tesoro and74.2% 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 26(a) and the cash costinformation in Note 26(b) is derived from the Group's production report for thesecond quarter of 2006 published on 1 August 2006. 27. Summary of mining companies' Chilean GAAP financial statements (not subjectto audit or review) The Group's three mining companies, Los Pelambres, El Tesoro and Michilla, willtoday file financial statements under Chilean GAAP for the six-month periodended 30 June 2006 with the Chilean securities regulator, the Superintendenciade Valores y Seguros de Chile ("SVS"). These filings are in accordance withmining tax legislation introduced in Chile last year which requires companiesthat have elected to enter a new tax stability regime to publish financialinformation on a quarterly basis from the 2006 financial year. 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 30.06.2006 At 30.06.2006 At 30.06.2006 US$'m US$'m US$'m Cash and cash equivalents 473.4 74.5 42.9Trade and other receivables 496.0 53.5 23.4Inventories 51.8 46.3 16.6Current and deferred tax assets 8.7 3.2 2.5 ---------- ---------- ----------Current assets 1,029.9 177.5 85.4 Fixed assets 1,320.1 260.9 61.4 Other non-current assets 150.5 58.2 1.0 ---------- ---------- ---------- TOTAL ASSETS 2,500.5 496.6 147.8 ========== ========== ========== Short-term borrowings (82.6) (28.2) -Trade and other payables (112.9) (92.4) (28.7)Current and deferred taxliabilities (54.3) (14.4) (3.2) ---------- ---------- ---------- Current liabilities (249.8) (135.0) (31.9) ---------- ---------- ---------- Medium and long termborrowings (275.5) (21.1) -Trade and other payables (13.2) (6.0) (7.6)Deferred tax liabilities (133.8) (28.6) - ---------- ---------- ---------- Non-current liabilities (422.5) (55.7) (7.6) ---------- ---------- ---------- Total liabilities (672.3) (190.7) (39.5) ---------- ---------- ---------- Share capital (373.8) (91.0) (78.4)Reserves (1,454.4) (214.9) (29.9) ---------- ---------- ---------- Total shareholders' equity (1,828.2) (305.9) (108.3) ---------- ---------- ---------- TOTAL LIABILITIES ANDSHAREHOLDERS' EQUITY (2,500.5) (496.6) (147.8) ========== ========== ========== (b) Income statements Los Pelambres El Tesoro Michilla Six months Six months Six months ended 30.06.06 ended 30.06.06 ended 30.06.06 US$'m US$'m US$'m Turnover 1,243.8 262.6 107.7 Operating costs (180.9) (81.4) (70.2) ---------- ---------- ---------- Operating margin 1,062.9 181.2 37.5 Administrative anddistribution expenses (34.5) (13.0) (6.9) ---------- ---------- ---------- Operating profit 1,028.4 168.2 30.6 ---------- ---------- ---------- Other income 0.1 - 0.2Financial income 17.5 1.0 0.5Financial expenses (10.8) (1.7) (0.2)Other expenses (0.8) (0.9) (0.3)Exchange differences (0.7) 2.0 0.7 ---------- ---------- ---------- Netnon-operatingincome 5.3 0.4 0.9 ---------- ---------- ---------- Profit beforetax 1,033.7 168.6 31.5 Income taxexpense (191.0) (31.2) (6.2) ---------- ---------- ---------- Profit for thefinancialperiod 842.7 137.4 25.3 ========== ========== ========== (c) Cash flow statements Los Pelambres El Tesoro Michilla Six months Six months Six months ended 30.06.06 ended 30.06.06 ended 30.06.06 US$'m US$'m US$'m Net cash flow from operatingactivities 663.4 122.3 34.2 ---------- ---------- ---------- Investing activitiesAdditions to fixed assets (240.7) (4.3) (6.5)Disposals of fixed assets 0.7 - - ---------- ---------- ---------- Net cash usedin investing activities (240.0) (4.3) (6.5) ---------- ---------- ---------- Financing activitiesDividends paid (470.0) (40.0) -Loans repaid (40.7) (7.0) - ---------- ---------- ---------- Net cash usedin financing activities (510.7) (47.0) - ---------- ---------- ---------- Net (decrease)/inc rease in cash and cash equivalents (87.3) 71.0 27.7 Cash and cash equivalents atthe beginning of the period 560.7 3.5 15.2 ---------- ---------- ---------- Cash and cashequivalents atthe end of the period 473.4 74.5 42.9 ========== ========== ========== Notes to Chilean GAAP financial statements a. The above balance sheets, income statements and cash flowstatements have been derived from the financial statements of Los Pelambres, ElTesoro and Michilla for the six months ended 30 June 2006 to be filed with theSVS in Chile. Certain detailed lines in the individual statements have beencombined for convenience. b. 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. c. The amounts disclosed above represent the full amount foreach company and not the Group's attributable share. During each relevantperiod, the Group owns 60% of Los Pelambres, 61% of El Tesoro and 74.2% ofMichilla. d. 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. 28. Reconciliation of Chilean GAAP results to Turnover and EBITDA under IFRSfor individual business segments (a) Turnover Los Pelambres El Tesoro Michilla Six months Six months Six months ended 30.06.06 ended 30.06.06 ended 30.06.06 Notes US$'m US$'m US$'m Chilean GAAP -Turnover 1,243.8 262.6 107.7 Recognition ofmark-to-marketgain onprovisionallypriced sales (i) 69.0 0.8 0.7 Reclassification of realisedlosses on commodityderivatives toother operatingexpense (ii) - 24.1 57.2 ---------- ---------- ---------- IFRS - Turnover 1,312.8 287.5 165.6 ========== ========== ========== (b) EBITDA Los Pelambres El Tesoro Michilla Six months Six months Six months ended 30.06.06 ended 30.06.06 ended 30.06.06 Notes US$'m US$'m US$'m Chilean GAAP -Operating profit 1,028.4 168.2 30.6 Depreciation &amortisation 33.0 17.2 7.4 ---------- ---------- ---------- Chilean GAAP -EBITDA 1,061.4 185.4 38.0 Recognition ofmark-to-marketgain onprovisionallypriced sales (i) 69.0 0.8 0.7 Mark-to-marketof financialderivatives (ii) - (19.3) 11.0 Other IFRS andconsolidationadjustments (iii) 0.1 1.3 1.8 ---------- ---------- ---------- IFRS - EBITDA 1,130.5 168.2 51.5 ========== ========== ========== 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. (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. The Group did not adopt the hedge accounting provisions of IAS 39 "FinancialInstruments: Recognition and Measurement" in the six months ended 30 June 2006.Accordingly, under IFRS, derivatives have been initially measured at costincluding transaction costs (which may be nil), and measured at subsequentreporting dates at fair value. Gains and losses arising from changes in fairvalue, or from derivatives which mature or are liquidated in the period, areincluded 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