Antofagasta Regulatory News (ANTO)

13 Sep 2005 07:03

Antofagasta PLC13 September 2005 ANTOFAGASTA PLC Interim Results Announcement for the six months ended 30 June 2005 13 September 2005 • Turnover of US$1,123.6 million (2004 half year - US$753.4 million). • Operating cash flow of US$767.1 million (2004 half year - US$517.3 million). • Profit before tax of US$ 739.5 million (2004 half year - US$415.4 million). • Earnings per share of 186.4 cents (2004 half year -105.2 cents). • Interim dividend of 16 cents per share (2004 interim - 15 cents per share)*. LME copper prices were significantly stronger in the period, averaging 151.1cents per pound compared with 125.2 cents in the first half of 2004. Groupcopper production was 3.4% lower at 227,400 tonnes in this period (2004 halfyear - 235,400 tonnes). Group weighted average cash costs for copper ** reacheda record low of negative 8.7 cents per pound (2004 half year positive cash costsof 31.2 cents per pound), as significantly higher molybdenum revenues outweighedhigher operating costs. Group profit before tax increased to US$739.5 millionfrom US$415.4 million last period, and earnings per share rose to 186.4 centsfrom 105.2 cents. Jean-Paul Luksic, Chairman of Antofagasta, commented, "This is an excellentresult for Antofagasta with a strong operating performance supported by highmetal prices. Although some fundamentals for the future of continuing strongcopper and molybdenum markets are being questioned by analysts, we expect tocontinue to benefit from current strong demand for the rest of the year." Antofagasta is a Chilean-based mining group listed in the United Kingdom. Inaddition to copper mining, its interests include rail and road transportoperations and port management and water distribution. * The interim dividend is paid in either sterling or US dollars. A conversionrate of £1=US$1.8412 will be applied to the interim dividend givingshareholders who receive dividends in sterling an interim dividend of 8.69pence per share. ** Cash cost is a method used by the mining industry to express the cost ofproduction in cents per pound of copper, and is further explained in Note 2(d)(iii) to the Interim Results Announcement. Enquiries - London Enquiries - SantiagoAntofagasta plc Antofagasta Minerals S.A. Tel: +44 20 7808 0988 Tel +562 377 5145www.antofagasta.co.uk Desmond O'Conor Alejandro RiveraEmail: doconor@antofagasta.co.uk Chief Financial Officer Email: arivera@aminerals.cl Hussein BarmaChief Financial Officer (UK) Issued byEmail: hbarma@antofagasta.co.uk Bankside Consultants Tel: +44 20 7367 8873 Keith Irons Email: keith@bankside.com DIRECTORS' COMMENTS FOR THE HALF YEAR TO 30 JUNE 2005 The Group reported substantially improved results driven by higher copper andmolybdenum prices. Profit before tax was up 78% to US$739.5 million (2004 halfyear - US$415.4 million) with earnings per share up 77% to 186.4 cents (2004half year - 105.2 cents). LME copper prices averaged 151.1 cents per pound(2004 half year - 125.2 cents per pound) while molybdenum prices nearly trebledto average US$33.4 per pound (2004 half year - US$11.4 per pound). The Groupalso benefited from higher molybdenum production of 4,700 tonnes (2004 half year- 3,700 tonnes). Copper production decreased by 3.4% to 227,400 tonnes (2004half year - 235,400 tonnes) mainly because of lower ore grades at Los Pelambres,in part due to the maximisation of molybdenum production. The higher metalprices and increased molybdenum production offset increased operating costs.The Group's transport and water operations also had a satisfactory half yearwith increased volumes and potential for future growth. Interim Review of Operations Los Pelambres Los Pelambres produced 154,900 tonnes of payable copper in the first half of2005 compared with 165,000 tonnes in the 2004 first half. Lower ore gradesaveraged 0.78% (2004 half year - 0.88%) because of normal grade declineanticipated under the mine plan but also partly as a result of the decision tomaximise molybdenum production. The decrease was partly offset by higher orethroughput as average processing levels increased to 126,500 tonnes per day(tpd) of ore compared with 121,400 tpd in the first six months of 2004. Molybdenum production increased to 4,700 tonnes (2004 half year - 3,700 tonnes)as selective mining resulted in higher grades and improved recoveries. Thiscombination enabled cash costs, which are stated net of by-product credits, toreach negative 48.1 cents per pound, as molybdenum revenues outweighed LosPelambres' operating costs. Excluding by-product credits, copper productioncash costs in the period increased to 69.9 cents per pound (2004 half year -53.0 cents per pound). This was due to higher treatment and refining chargesand higher input prices such as steel, energy and oil which, like the copperprice, have risen in the current strong economic environment. Costs were alsoaffected by the lower ore grade. Realised copper prices were 159.8 cents per pound (2004 half year - 134.1 centsper pound) and realised molybdenum prices were US$36.1 per pound (2004 half year- US$14.4 per pound). The combination of higher realised copper and molybdenumprices offset the lower production volumes and higher underlying costs. Thisenabled Los Pelambres to increase operating profits by 87.5% to US$620.1 millioncompared with US$330.8 million in the first half of 2004. After replacing its project finance loans with unsecured corporate loanfacilities at the end of 2004, Los Pelambres further reduced its borrowings witha repayment in June of US$38.3 million. Total borrowings were US$438.4 millionat 30 June 2005. Los Pelambres continues to have one of the best safety records in the Chileanmining industry with a lost time frequency index, including contractors, of 0.7accidents per million hours worked compared with an industry average in excessof 4.0 accidents per million hours worked. Work has begun on the infrastructure for the Mauro tailings dam followingenvironmental approval received in 2004. This approval allows Los Pelambres toincrease its mineable reserves to 2.1 billion tonnes of ore taking into accountthe increased storage capacity of this dam. The Mauro project, which will costapproximately US$450 million, is expected to be completed as planned by the endof 2007. In the second quarter of 2005 the Los Pelambres board also approved anexpansion of the concentrator plant to increase average ore throughput to140,000 tonnes per day, by increasing the power of the grinding lines and withthe installation of an additional fifth ball mill at the concentrator plant.Work on this project, which will cost approximately US$182 million, has alsobegun and is expected to be completed by mid-2007 with a marginal increase inthroughput expected in mid-2006. Both the Mauro dam and the expansion to140,000 tpd will be financed by Los Pelambres through its own cash resources. Copper production at Los Pelambres for the full year is expected to reach324,000 tonnes, marginally ahead of the Group's original forecast of 321,000tonnes. Excluding by-product credits, cash costs are expected to be around 69cents per pound, in line with the first half of the year. Molybdenum grades inthe second half are expected to decline slightly but production is expected toreach 8,300 tonnes for the year compared with an earlier forecast of 7,200tonnes. El Tesoro Production at El Tesoro increased 6.4% to 49,900 tonnes (2004 half year - 46,900tonnes) due to higher ore throughput and recoveries together with an increase inthe ore grade from 1.34% to 1.37%. Cash costs nonetheless rose to 58.9 centsper pound compared with 50.5 cents in the first six months of 2004 due to ahigher waste-to-ore ratio as well as increased input costs such as acid and fuelprices which have risen in the current economic environment. Higher copper prices, including premiums obtained for El Tesoro's LME Grade Acathodes, offset the increase in cash costs, and operating profits were US$97.6million (2004 half year - US$66.6 million). El Tesoro replaced its project finance loans with unsecured corporatefacilities. Following further repayments in the first half of this year ElTesoro's borrowings were US$74.3 million at 30 June 2005. During the first half of 2005 El Tesoro initiated a plant optimisation toincrease processing capacity to 10.5 million tonnes of ore annually, comparedwith the current level of 9.7 million tonnes. The increased processing capacityshould be completed by the fourth quarter of this year and formal environmentalpermits are expected to be issued in September. El Tesoro expects to produce 97,000 tonnes of cathodes with cash costs averagingapproximately 65 cents per pound. Michilla Michilla produced 22,600 tonnes of cathodes to 30 June 2005 compared with 23,500tonnes in the first half of 2004. Ore grades from the current phase of the openpit, which provides more than 50% of the ore for the crushing plant, have beenlower than expected. The area being mined, which is located near formerunderground workings, is geologically complex. During the first half of 2005,Michilla also experienced operational difficulties in the underground mine whichaffected grades and throughput. Costs have also risen due to higher sulphuricacid and other input prices, as well as the effect of a stronger peso. Thesefactors combined to increase cash costs to 112.2 cents per pound in the firsthalf of 2004 compared to 84.7 cents per pound in the first six months of lastyear. Strong copper prices compensated for increased costs and enabled Michilla tomake an operating profit of US$9.6 million (2004 half year - US$9.5 million). Michilla is continuing its exploration programme initiated at the end of 2004,in order to identify further ore resources with drilling concentrated on theunderground Estefania Este area. Higher processing levels should allow production for the year to reach around46,000 tonnes with cash costs expected at 115 cents per pound for the year. Projects and Exploration The Group spent US$8.0 million on exploration in the first six months to June2005. The principal focus was the Esperanza project, located approximately 5kilometres from El Tesoro. The project is advancing to the pre-feasibilitystage and includes a 40,000 metre drilling programme, the construction of a 2.25kilometre exploration decline, and metallurgical and engineering studies.Completion is expected by October 2006 at a budgeted cost of US$15.3 million.Approximately 800 metres of the decline has been constructed with the drillingprogramme expected to be completed by September 2005. The current drill-inferred sulphide resource at Esperanza is 469 million tonnes of copper with anaverage grade of 0.63% and 0.27 g/t of gold. Railway and Other Transport Services Rail volumes transported were steady at 2.2 million tons (2004 half year - 2.1million tons) and turnover was US$44.7 million compared with US$39.9 million in2004. Train Ltda., the road transport subsidiary, also continued to performwell. Operating results for the transport division were slightly down. The FCAB's medium-term prospects remain positive. During the first half of 2005the Railway signed two new contracts: firstly, with Apex Silver Mines' SanCristobal polymetallic project in southwest Bolivia and secondly with BHPBilliton's Spence copper project in Chile's Second Region near El Tesoro. Theseprojects should start to contribute to additional rail tonnages from the secondhalf of 2006, eventually increasing overall volumes by up to 20%. Aguas de Antofagasta Aguas de Antofagasta, which began operations in Chile's Second Region at the endof 2003, has continued to perform satisfactorily. Combined industrial anddomestic water sales increased from 16.0 million cu. m. in the first half of2004 to 16.6 million cu. m. Turnover in the first six months of 2005 wasUS$25.8 million, compared with US$22.1 million in the first six months of 2004.A programme to improve the quality of service and productivity levels isresulting in a progressive reduction in water losses. A contract has been signed with BHP Billiton's Spence project for the supply ofwater for the construction period and subsequently for its operations. Detailedengineering studies are underway to supply water for a possible future expansionof the Collahuasi mine owned by Noranda and Anglo American. Dividends An interim dividend of 16 cents (2004 interim - 15 cents) will be paid on 13October 2005 to ordinary shareholders on the register at the close of businesson 23 September 2005. Dividends are payable in either US dollars or sterling,and shareholders who receive dividends in sterling will be paid an interimdividend of 8.69 pence per share, based on an exchange rate of £1=US$1.8412.Further details are given in Note 9 to this Interim Report. Current Trading Prospects Copper prices remain at historically high levels having averaged just under 170cents per pound since the end of June, traditionally a weaker summer period.Visible inventory levels remain low at around 120,000 tonnes representing lessthan three days of world consumption. The copper market remains volatile,against a background of strong global economic growth, a weak dollar, smeltingconstraints and supply disruption; market commentators remain divided about thefuture direction of prices. Most commentators expect the market to move towardsa balance of supply and demand during 2006 and prices to ease back from thecurrent levels as higher mine production and greater smelting capacity becomesavailable. The tight inventory position suggests, nevertheless, that the marketremains vulnerable to any supply disruption or delays in the limited number ofnew mines or expansions currently underway. Although molybdenum prices have retreated from the peak of US$39 per poundreached at the beginning of June 2005, they remain at exceptionally highhistorical levels, averaging US$30 per pound since the end of June. Increasesin supply from primary producers in North America and from copper minesproducing molybdenum as a by-product have been offset by disruption toproduction in China due to a number of factors, particularly safety andenvironmental issues. Demand also remains strong, both in the stainless steelsector and in non-metallurgical applications. Prices should eventually ease assupply responds to the current highs and existing production difficulties inChina are resolved. Group copper production is expected to be just under 470,000 tonnes this yearand molybdenum production around 8,300 tonnes. Although underlying cash costshave increased as a result of pressures affecting all mines, copper andmolybdenum prices remain robust. Antofagasta should continue to benefit fromcurrent strength in metals prices. 12 September 2005 FINANCIAL COMMENTARY FOR THE HALF YEAR TO 30 JUNE 2005 Results Turnover increased by 49.1% to US$1,123.6 million, compared with US$753.4million in the first six months of 2004. The increase was mainly due to highermetal prices and higher sales volumes at all three mines, which enabled turnoverfrom the mining division to increase by US$361.7 million. Copper sales volumeincreased by 6.9% from 209,800 tonnes in the first six months of 2004, when someshipments of concentrate were delayed until the second half of that year, to224,300 tonnes in the first six months of this year. Molybdenum sales volumesalso increased by 16.2% to 4,300 tonnes compared with 3,700 tonnes in the sameperiod of last year. The Group's realised copper price averaged 159.1 cents perpound (2004 half year - 133.1 cents per pound) while the realised molybdenumprice increased significantly from US$14.4 per pound in the first half of 2004to US$36.0 per pound. Realised copper and molybdenum prices are determined bycomparing turnover (gross of tolling charges for concentrates) with sales volumein the period. Realised prices exceeded market prices mainly because, in linewith industry practice, concentrate sales agreements at Los Pelambres generallyprovide for provisional pricing at the time of shipment with final pricing basedon the average market price for future periods (normally 30 to 180 days afterdelivery to the customer). These pricing adjustments were positive as copperand molybdenum prices generally increased during the first half. Sales ofLME-registered cathodes by El Tesoro and Michilla also benefited from strongcathode premiums, reflecting tight market conditions. Turnover from thetransport division (FCAB) increased by US$4.8 million to US$44.7 million, whileAguas de Antofagasta, which operates the Group's water business, increased byUS$3.7 million to US$25.8 million, reflecting higher transport tonnages andwater sales volumes respectively. Excluding by-product credits (which are reported as part of turnover), weightedaverage cash costs for the Group as a whole increased from 55.7 cents per poundin the first half of 2004 to 71.7 cents per pound, reflecting the impact ofhigher treatment and refining charges and input costs, as well as lower gradesand higher waste-to-ore ratios. Nevertheless, the strong metal prices andhigher sales volumes enabled Group operating profits to increase by 73.1% toUS$739.0 million (2004 half year - US$426.9 million), despite these higheroperating costs. Operating profits at the transport division decreased byUS$1.5 million compared to the 2004 despite improved transport tonnages, mainlydue to lower revenues from ancillary services. Aguas de Antofagasta contributedUS$11.9 million compared to US$ 10.4 million in the same period last year. EBITDA (earnings before interest, depreciation, tax and amortisation) in thefirst half of 2005 was US$806.4 million, compared with US$505.7 million in thefirst half of 2004. This is calculated by adding back depreciation andamortisation of US$63.6 million (2004 first half - US$71.5 million) and otheramounts written off plant, property and equipment of US$3.8 million (2004 halfyear - US$7.3 million). The Group's share of net profit from its 30% investment in Antofagasta TerminalInternacional S.A. ("ATI"), acquired at the end of 2004, was US$0.5 million.This compares with an acquisition cost of US$2.9 million. Net finance costs in the period were nil, as interest receivable of US$15.4million offset interest payable of US$12.2 million and other net financecharges, including net foreign exchange losses, of US$3.2 million. Thiscompared with net finance costs of US$11.5 million in the first half of 2004,comprising interest receivable of US$9.8 million, interest payable of US$14.9million and other net finance charges, including net foreign exchange losses, ofUS$6.4 million. Higher interest receivable resulted mainly from higher cash anddeposit balances held by the Group, while interest payable decreased with loanrepayments, including prepayments made in the second half of 2005. As the Groupwas in a net cash position during 2004, it also benefited from the increase inmarket interest rates. The resulting profit before tax for the period was US$739.5 million compared toUS$415.4 million in the first six months of 2004. Tax (including deferred tax) amounted to US$132.0 million (2004 half year -US$79.2 million), reflecting the increased profit for the period. The taxcharge comprises current tax of US$118.3 million (2004 half year - US$75.7million) and deferred tax of US$13.7 million (US$3.5 million). The tax chargein the first half of 2005 includes a provision of US$8.7 million for withholdingtaxes, and is the principal reason the effective tax rate of 17.9% exceeds theChilean statutory tax rate of 17%. The effective tax rate in the first half of2004 was 19.1% mainly due to non-deductible costs incurred by the operations. Earnings per share were 186.4 cents compared with 105.2 cents for thecorresponding period last year, reflecting the higher profit after tax andminority interests. 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 trading purposes, but as it has not applied thehedge accounting provisions of IAS 39 "Financial Instruments: Recognition andMeasurement", derivatives are measured at fair value in the balance sheet withchanges in value recognised in the income statement. At 30 June 2005, Group had min/max instruments for 78,150 tonnes of copperproduction, with a weighted average floor of 117.7 cents per pound and aweighted average cap of 151.7 cents per pound. These instruments had an averageduration of four months. The Group's exposure to the copper price up to thislevel of production will be limited to the extent that market prices exceed thecap or fall below the floor at each relevant exercise date. Details of the mark-to-market position of these instruments, together withdetails of interest and commodity derivatives held by the Group, are given inNote 5 to this Interim Report. Cash Flows, Cash and Debt Net cash inflow from operating activities was US$767.1 million in the first sixmonths of 2005 compared with US$517.3 million in the same period last year,reflecting the improved operating results adjusted for depreciation,amortisation and normal working capital movements. A dividend of US$1.0 millionwas received from the Group's investment in ATI, acquired at the end of 2004. Tax payments in the period were US$191.5 million, compared with US$4.8 millionin the first six months of 2004. The significant increase arose because at thebeginning of 2004, Los Pelambres and El Tesoro absorbed the tax losses whichderived from the start up of their operations in 1999 and 2001 respectively.The current tax liability for these operations in respect of 2004 was paid inthe first half of 2005. Capital expenditure was US$79.2 million in the period. This included firstexpenditures on the Mauro tailings dam project at Los Pelambres and theinvestment in additional ore processing capacity at El Tesoro. Dividends paid to ordinary shareholders of the Company in the first six monthsof this year were US$124.3 million (2004 half year - US$47.0 million), whichrelated to the final dividend declared in respect of 2004 including a specialdividend of 40 cents per ordinary share. Dividends paid by subsidiaries tominority shareholders were US$114.3 million (2004 half year - US$18.8 million),principally due to increased distributions by Los Pelambres. Repayment of borrowings, mainly at Los Pelambres and El Tesoro, were US$67.1million compared with US$111.5 million in the first half of 2004. Regularrepayments are now lower following the prepayments and refinancings which tookplace at the end of 2004. The repayments in the first half of 2004 alsoincluded repayment of short-term facilities of US$41.5 million drawn down theprevious year. Details of other cash inflows and outflows in the period are contained in theConsolidated Cash Flow Statement on page 13. At 30 June 2005, the Group had cash and cash equivalents of US$1,064.6 million(2004 - US$491.3 million), which includes cash balances held by Los Pelambres tofinance the Mauro tailings dam and the plant expansion projects. Excluding theminority share in each partly-owned operation, the Group's share of this balancewas US$793.6 million (2004 - US$351.4 million). Total Group borrowings at 30 June 2005 were US$524.7 million (2004 - US$749.1million); of this, US$319.4 million (2004 - US$448.9 million) is proportionallyattributable to the Group after excluding the minority shareholdings inpartly-owned operations. The decrease in debt is mainly due to furtherprincipal 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$1,465.5 million at the beginning of the year to US$1,702.7million, relating mainly to profit after tax and minority interests for theperiod less the ordinary dividend for 2004 which was approved and paid in thefirst half of 2005. Minority interests increased from US$604.5 million at the beginning of the yearto US$722.2 million, principally reflecting the minority's share of profit aftertax less the minority's share of the dividends approved or paid by subsidiariesin the period. International Financial Reporting Standards The financial information contained in this Interim Report, including allcomparatives, has been prepared in accordance with International FinancialReporting Standards ("IFRS") in place of UK GAAP. Further details are given inNotes 1 and 21 to this Interim Report. The Group also published financialinformation in accordance with IFRS for 2004 on 13 September 2005. The newsrelease, together with the full statement "Adoption of International FinancialReporting Standards and Restatements for 2004", is available on the Company'swebsite and from the Company's registered office. The statement includesexplanations and quantifications of the significant UK GAAP to IFRS differences,a summary of which is contained in Note 21 to this Interim Report. 12 September 2005 Consolidated Income Statement Six months ended Six months Year ended 30.6.05 ended 31.12.04 30.6.04 Notes US$'m US$'m US$'m Group turnover 3,4 1,123.6 753.4 1,942.1 Total operating 3,4 (384.6) (326.5) (738.7)costs Group operating profit 739.0 426.9 1,203.4 Share of income from associate 13 0.5 - - Total profit from operations and associates 4 739.5 426.9 1,203.4 Net finance costs 6 - (11.5) (4.9) Profit before tax 739.5 415.4 1,198.5 Income tax expense 7 (132.0) (79.2) (241.9) Profit for the financial year 607.5 336.2 956.6 Attributable to: Minority interests 240.0 128.7 377.1 Equity holders of the Company (net earnings) 367.5 207.5 579.5 US cents US cents US cents Basic earnings per share 8 186.4 105.2 293.9 Dividends to ordinary shareholders of theCompany Per share US cents US cents US centsDividends per share proposed in relation to 9 the period 16.0 15.0 79.0Dividends per share paid in the period 64.0 24.0 39.0 In aggregate US$'m US$'m US$'mDividends proposed in relation to the period 9 31.5 29.6 155.8Dividends paid in the period 126.2 47.3 76.9 There was no potential dilution of earnings per share in any period set outabove. The results relate wholly to continuing operations. Consolidated Balance Sheet At 30.6.05 At 30.6.04 At 31.12.04 Notes US$'m US$'m US$'mNon-current assetsIntangible asset 10 88.1 83.1 93.2Property, plant and 11 1,807.1 1,807.1 1,796.1equipmentInvestment property 12 3.1 2.8 3.2Investment in associate 13 2.4 - 2.9Available for sale 14 0.2 0.2 0.1investmentsDeferred tax assets 18 2.5 1.5 1.6 1,903.4 1,894.7 1,897.1Current assetsInventories 87.3 80.9 69.9Trade and other 340.1 190.8 349.8receivablesCurrent tax assets 1.6 4.7 1.0Financial instruments -derivatives 5 0.9 - 0.2Cash and cash equivalents 20 1,064.6 491.3 881.4 1,494.5 767.7 1,302.3 Total assets 3,397.9 2,662.4 3,199.4 Current liabilitiesShort-term borrowings 15, 20 (103.3) (125.5) (104.7)Financial instruments -derivatives 5 (6.2) (6.3) (2.3)Trade and other payables (113.5) (106.7) (135.3)Current tax liabilities (87.8) (66.6) (162.2) (310.8) (305.1) (404.5)Non-current liabilitiesMedium and long term borrowings 15, 20 (421.4) (623.6) (498.1)Trade and other payables (3.1) (1.3) (1.3)Post-employment benefit obligations 16 (16.8) (12.8) (16.2)Long-term provisions 17 (10.2) (11.7) (13.2)Deferred tax liabilities 18 (210.7) (140.7) (196.1) (662.2) (790.1) (724.9) Total liabilities (973.0) (1,095.2) (1,129.4) Net assets 2,424.9 1,567.2 2,070.0 EquityShare 16.6 16.6 16.6capitalShare premium 272.4 272.4 272.4Translation reserves 4.4 (6.0) 8.5Retained earnings 1,409.3 825.6 1,168.0Net equity attributable to equity holders of the Company 1,702.7 1,108.6 1,465.5 Minority interests 722.2 458.6 604.5 Total equity 2,424.9 1,567.2 2,070.0 The interim financial information was approved by the Board of Directors on 12September 2005. Consolidated Cash Flow Statement Six months Six months Year ended ended 30.6.05 ended 30.6.04 31.12.04 Note US$'m US$'m US$'m Cash flows from 19 767.1 517.3 1,253.5operationsDividend from associate 1.0 - -Income tax paid (191.5) (4.8) (14.3) Net cash flow from operating activities 576.6 512.5 1,239.2 Investing activitiesAcquisition of subsidiary - - (0.1)Recovery of IVA (Chilean VAT) paid on purchase of water concession 3.8 - 5.8Acquisition of investment in associate - - (2.9)Purchases of property, plant and equipment (79.2) (31.1) (80.4)Proceeds from sale of property, plant and equipment 0.4 0.2 0.2Purchase of available for sale investments - (0.4) -Proceeds from disposal of available for sale investments - 0.1 0.1 Net cash used in investing activities (75.0) (31.2) (77.3) Financing activitiesDividends paid to equity holders of the Company (124.3) (47.0) (76.5)Dividends paid to preference shareholders of (0.1) (0.1) (0.2)the CompanyDividends paid to minority interests (114.3) (18.8) (120.8)Interest paid, including payments under (11.8) (14.2) (32.5)interest derivativesInterest received 14.7 2.2 11.1Realised gains from currency swaps - 7.5 7.5Net proceeds from issue of new borrowings - 0.3 558.0Repayments of borrowings (67.1) (111.5) (818.4)Repayments of obligations under finance leases (12.7) (1.7) (2.9)Movement on medium term deposits - 27.0 27.0 Net cash used in financing activities (315.6) (156.3) (447.7) Net increase in cash and cash equivalents 186.0 325.0 714.2 Cash and cash equivalents at beginning of period 881.4 168.7 168.7Net increase in cash and cash equivalents 186.0 325.0 714.2Effect of foreign exchange rate changes (2.8) (2.4) (1.5) Cash and cash equivalents at end of 20 period 1,064.6 491.3 881.4 Consolidated statements of changes in equity For the six months ended 30 June 2004 Share Share Translation Retained Net Minority Total capital premium reserves earnings equity interests US$'m US$'m US$'m US$'m US$'m US$'m US$'m Balance at 1 January 2004 16.6 272.4 - 665.4 954.4 347.3 1,301.7 Profit for the financial period - - - 207.5 207.5 128.7 336.2Currency translation adjustment - - (6.0) - (6.0) 0.1 (5.9)Dividends - - - (47.3) (47.3) (17.5) (64.8) Balance at 30 June 2004 16.6 272.4 (6.0) 825.6 1,108.6 458.6 1,567.2 For the year ended 31 December 2004 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$'m Balance at 1 January 2004 16.6 272.4 - 665.4 954.4 347.3 1,301.7 Profit for the financial year - - - 579.5 579.5 377.1 956.6Currency translation adjustment - - 8.5 - 8.5 (0.4) 8.1Dividends - - - (76.9) (76.9) (119.5) (196.4) Balance at 31 December 2004 16.6 272.4 8.5 1,168.0 1,465.5 604.5 2,070.0 For the six months ended 30 June 2005 Share Share Translation Retained Net Minority Total capital premium reserves earnings equity interests US$'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 There were no items of recognised income and expense in either period other thanthe profit for the financial period. Notes to the interim financial statements 1. General information and accounting policies a) General information These June 2005 interim consolidated financial statements are for the six monthsended 30 June 2005. The information for the year ended 31 December 2004 doesnot constitute statutory accounts as defined in section 240 of the Companies Act1985. A copy of the statutory accounts for that year, which were prepared underUK Generally Accepted Accounting Principles ("UK GAAP"), has been delivered tothe Registrar of Companies. The auditors' report on these accounts wasunqualified. b) Accounting policies For accounting periods beginning on or after 1 January 2005, the Group isrequired to prepare consolidated financial statements in accordance withInternational Financial Reporting Standards ("IFRSs") in place of UK GAAP. Forthese purposes, IFRSs comprise the Standards and Interpretations issued by theInternational Accounting Standards Board ("IASB") and Interpretations issued bythe International Financial Reporting Interpretations Committee ("IFRIC") thathave been, or are expected to be, endorsed by the European Union by 31 December2005. These interim financial statements, including all comparatives, have beenprepared using the accounting policies consistent with all IFRS Standards andInterpretations published by 31 December 2004 which are mandatory for accountingperiods beginning on or after 1 January 2005. The Group has also chosen toadopt IFRS 6 "Exploration for and Evaluation of Mineral Resources" early. Theseinterim financial statements are covered by IFRS 1 "First-time adoption ofInternational Financial Reporting Standards" because they form part of theperiod included in the Group's first IFRS financial statements for the yearended 31 December 2005. The Group has applied the exemption not to comply fullywith International Accounting Standard 34 "Interim Financial Reporting". The accounting policies and methods of computation followed in these interimfinancial statements are those set out in the news release "Adoption ofInternational Financial Reporting Standards and Restatements for 2004" publishedby the Company on 13 September 2005. The news release, including fulldisclosure of these accounting policies, is available on the Company's websitewww.antofagasta.co.uk or from the Company's Registered Office. These policieshave been consistently applied to all periods presented in these interimfinancial statements. 2. Production and Sales Statistics (Neither Audited nor Reviewed) (See notes following Note 2(d).) a) Production volumes for copper and molybdenum Six months Six months Year ended ended 30.6.05 ended 30.6.04 31.12.04 000 tonnes 000 tonnes 000 tonnesCopperLos Pelambres 154.9 165.0 350.6El Tesoro 49.9 46.9 97.8Michilla 22.6 23.5 50.0Group total 227.4 235.4 498.4 MolybdenumLos Pelambres 4.7 3.7 7.9 b) Sales volumes for copper and molybdenum Six months Six months Year ended ended 30.6.05 ended 30.6.04 31.12.04 000 tonnes 000 tonnes 000 tonnes CopperLos Pelambres 150.6 139.8 352.2El Tesoro 50.6 47.1 98.3Michilla 23.1 22.9 50.2Group total 224.3 209.8 500.7 MolybdenumLos Pelambres 4.3 3.7 7.9 c) Cash costs per pound of copper produced Six months Six months Year ended ended 30.6.05 ended 30.6.04 31.12.04 cents cents centsCopperLos Pelambres (48.1) 18.0 7.9El Tesoro 58.9 50.5 52.4Michilla 112.2 84.7 85.6Group weighted average (including by-products) (8.7) 31.2 24.3 Group weighted average (before deducting by-products) 71.7 55.7 56.6 Cash costs at Los Pelambres comprise:On-site and shipping costs 43.9 36.4 37.2Tolling charges for concentrates 26.0 16.6 16.5Cash costs before deducting by-product credits 69.9 53.0 53.7By-product credits (principally molybdenum) (118.0) (35.0) (45.8)Cash costs (net of by-product credits) (48.1) 18.0 7.9 d) Realised prices per pound for copper and molybdenum and market prices Six months Six months Year ended ended 30.6.05 ended 30.6.04 31.12.04 cents cents centsCopperLos Pelambres 159.8 134.1 141.5El Tesoro 157.9 131.2 136.9Michilla 157.1 131.3 137.4Group weighted average 159.1 133.1 140.2 LME average 151.1 125.2 130.0 US$ US$ US$MolybdenumLos Pelambres 36.0 14.4 21.5 Market average price 33.4 11.4 16.2 Notes to the production and sales statistics (i) The production and sales figures represent the actual amounts produced and sold, not the Group's share of each mine. The Group owns 60% of Los Pelambres, 61% of El Tesoro and 74.2% of Michilla. (ii) Los Pelambres produces copper and molybdenum concentrates, and the figures for Los Pelambres are expressed in terms of payable metal contained in concentrate. Los Pelambres is also credited for the gold and silver contained in the copper concentrate sold. El Tesoro and Michilla produce cathodes with no by-products. (iii) Cash costs are a measure of the cost of operational production expressed in terms of cents per pound of payable copper produced. Cash costs are stated net of by-product credits and include tolling charges for concentrates at Los Pelambres. Cash costs exclude depreciation, financial income and expenses, exchange gains and losses and corporation tax for all three operations. By-product calculations do not take into account mark-to-market gains for molybdenum at the beginning or end of each period. (iv) Realised copper prices are determined by comparing turnover from copper sales (grossing up for tolling charges for concentrates) with sales volumes for each mine in the period. Realised molybdenum prices at Los Pelambres are calculated on a similar basis. (v) The individual figures are sometimes more specific than the rounded numbers shown; hence small differences may appear in the totals. 3. Operating profit Six months Six months Year ended ended 30.6.05 ended 30.6.04 31.12.04 US$'m US$'m US$'m Turnover 1,123.6 753.4 1,942.1Cost of (311.7) (262.2) (593.4)salesGross profit 811.9 491.2 1,348.7Adminsitrative expenses (59.3) (52.1) (118.1)Closure provision 3.9 (0.6) (1.2)Severance charges (2.5) (1.0) (3.2)Exploration costs (8.0) (2.7) (10.3)Other operating income 2.1 1.0 4.7Other operating expenses (9.1) (8.9) (17.2)Group operating profit 739.0 426.9 1,203.4Share of income from associate 0.5 - -Total profit from operations and 739.5 426.9 1,203.4associates 4. Segmental analysis a) Turnover by operation Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Los Pelambres 797.0 488.9 1,362.8El Tesoro 176.1 136.2 296.6Michilla 80.0 66.3 152.1Mining 1,053.1 691.4 1,811.5Railway and other transport services 44.7 39.9 85.7Water concession 25.8 22.1 44.9 1,123.6 753.4 1,942.1 Notes to turnover by operation (i) Turnover from Railway and other transport services is stated after eliminating inter-segmental sales to the mining division of US$4.1 million (2004 half year - US$3.3 million). (ii) Los Pelambres produces and sells copper and molybdenum concentrates. It is also credited for the gold and silver content in the copper concentrate it sells. Turnover by type of metal is analysed below, to show separately the amounts prior to deduction of tolling charges, the tolling charges involved and the net amounts included in turnover. El Tesoro and Michilla do not generate by-products from their copper cathode operations. Turnover prior to deduction of tolling charges: Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Copper 530.6 413.3 1,098.4Molybdenum 341.7 117.7 374.9Gold and silver 9.5 7.1 16.8Los Pelambres 881.8 538.1 1,490.1 Tolling charges: Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Copper (71.0) (43.2) (111.4)Molybdenum (13.6) (5.8) (15.4)Gold and silver (0.2) (0.2) (0.5)Los Pelambres (84.8) (49.2) (127.3) Turnover (net of tolling charges) included in Group turnover: Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Copper 459.6 370.1 987.0Molybdenum 328.1 111.9 359.5Gold and silver 9.3 6.9 16.3Los Pelambres 797.0 488.9 1,362.8 b) Earnings before interest, tax, depreciation and amortisation (EBITDA) by operation Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Los Pelambres 655.4 374.7 1,072.0El Tesoro 110.8 82.7 179.6Michilla 18.0 19.6 53.6Exploration (8.0) (2.7) (10.3)Corporate and other items (6.7) (3.7) (10.2)Mining 769.5 470.6 1,284.7Railway and other transport 19.8 21.0 41.8servicesWater concession 17.1 14.1 30.2 806.4 505.7 1,356.7 EBITDA is calculated by adding back depreciation, amortisation and amountswritten off plant, property and equipment (see Note 4(c)) to operating profit(see Note 4(d)). c) Depreciation and amortisation by operation Six months Six months Year ended ended 30.6.05 ended 30.6.04 31.12.04 US$'m US$'m US$'m Los Pelambres 34.8 42.3 80.2El Tesoro 13.1 11.2 22.3Michilla 6.9 10.0 13.9Corporate and other items 0.2 0.2 0.4Mining 55.0 63.7 116.8Railway and other transport services 4.5 4.2 9.1Water concession 4.1 3.6 8.3 63.6 71.5 134.2Amounts written off plant, property and equipment 3.8 7.3 19.1 67.4 78.8 153.3 d) Operating profit/(loss) by operation Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Los Pelambres 620.1 330.8 988.7El Tesoro 97.6 66.6 151.4Michilla 9.6 9.5 31.6Exploration (8.0) (2.7) (10.3)Corporate and other items (6.9) (3.9) (10.7)Mining 712.4 400.3 1,150.7Railway and other transport services 14.7 16.2 30.9Water concession 11.9 10.4 21.8Group operating profit 739.0 426.9 1,203.4Share of income from associate 0.5 - -Total profit from operations and associates 739.5 426.9 1,203.4 e) Capital expenditure by operation Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Los Pelambres 35.4 14.7 47.7El Tesoro 28.7 4.2 10.0Michilla 7.1 7.2 14.8Corporate and other items 1.2 0.1 0.2Mining 72.4 26.2 72.7Railway and other transport services 7.0 4.3 7.1Water concession 1.6 0.7 1.4 81.0 31.2 81.2 Capital expenditure represents purchase of property, plant and equipment statedon an accruals basis (see Note 11) and may therefore differ from the amountincluded in the cash flow statement. 5. Derivatives and embedded derivatives 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: At 30.6.05 At 30.6.04 At 31.12.04Balance sheet US$'m US$'m US$'m Pelambres - copper concentrate 2.1 (15.3) 17.6Pelambres - molybdenum concentrate 14.9 3.1 32.9Tesoro - copper cathodes (0.4) - 0.8Michilla - copper cathodes (0.4) 0.1 0.4 16.2 (12.1) 51.7 Income statement Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Mark-to-market effect on (35.5) (8.8) 11.3turnover Copper concentrate sales at Los Pelambres totalling 112,900 tonnes at 30 June2005 remained open as to price, with an average mark-to-market price of 152.9cents per pound. Molybdenum concentrate sales at Los Pelambres totalling 1,700 tonnes at 30 June2005 remained open as to price, with an average mark-to-market price of US$37.4per pound. Derivative financial instruments The Group uses derivative financial instruments to reduce exposure to foreignexchange, interest rate and commodity price movements. The Group does not usesuch derivative instruments for trading purposes. The Group has not adopted thehedge accounting provisions of IAS 39 "Financial Instruments: Recognition andMeasurement". Accordingly, derivatives are measured at each balance sheet dateat fair value. Gains and losses arising from changes in fair value are includedin the income statement for the period, within operating profit for commodityderivatives and within net finance costs for exchange and interest derivatives. The mark-to-market adjustments at the end of each period and the effect onoperating profit and net finance costs in the income statement for each periodare as follows: At 30.6.05 At 30.6.04 At 31.12.04Balance sheet US$'m US$'m US$'mCurrent assets - derivative financial instruments 0.9 - 0.2Current liabilities - derivative financial instruments (6.2) (6.3) (2.3) (5.3) (6.3) (2.1) At 30.6.05 At 30.6.04 At 31.12.04Balance sheet - net position US$'m US$'m US$'m Commodity (3.8) - 0.2Interest (1.5) (6.3) (2.2)Exchange - - (0.1) (5.3) (6.3) (2.1) Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04Income statement US$'m US$'m US$'m Mark-to-market effect on other operating expenses (4.0) 3.8 4.0Mark-to-market effect on net finance costs 0.8 3.5 7.5 (3.2) 7.3 11.5 The Group had min/max instruments at 30 June 2005 for 78,150 tonnes of copperproduction, with a weighted average floor of 117.7 cents per pound and aweighted average cap of 151.7 cents per pound. These instruments had a weightedaverage duration of 4.4 months and covered a period of 1.5 years. The Group had interest rate collars at 30 June 2005 with a notional principalamount of US$111.5 million, with a weighted average floor of 5.01% and aweighted average cap of 5.99%. These instruments had a weighted averageduration of 1.1 years. The Group had outstanding forward exchange contracts at 30 June 2005 to buy USdollars and sell pesos with a net value of US$3 million. The duration of theseinstruments was 1.5 months. 6. Net finance costs Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Interest 15.4 9.8 19.2receivableInterest payable (12.2) (14.9) (34.0)Foreign exchange (3.1) (9.4) 3.3Mark-to-market effect of derivatives 0.8 3.5 7.5Preference dividends (0.1) (0.1) (0.2)Discount charge relating to provisions (0.8) (0.4) (0.7)Net finance cost - (11.5) (4.9) In 2004, interest receivable and similar income includes realised gains ofUS$7.5 million relating to gains under currency swaps. 7. Taxation The tax charge for the period is comprised as follows: Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Current tax charge (118.3) (75.7) (183.1)Deferred tax charge (13.7) (3.5) (58.8) (132.0) (79.2) (241.9) 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 andthe other countries in which it operates and deferred tax is provided onundistributed earnings to the extent that remittance is probable in theforeseeable future. The effective tax rate for the six months ended 30 June 2005 was 17.9%, comparedwith the Chilean statutory tax rate of 17%. This was principally due to theprovision of additional deferred tax of US$8.7 million in the period forwithholding taxes. The effective tax rate for the six months ended 30 June 2004was 19.1% and for the year ended 31 December 2004 was 20.2%. In the 2004financial year, US$36 million was provided for such withholding taxes accountingfor the higher effective tax rate that year. 8. Earnings per share Earnings per share is calculated on profit after tax and minority interestgiving net earnings of US$367.5 million (2004 half year - US$207.5 million) andbased on 197,171,339 ordinary shares in issue throughout both periods. There was no potential dilution of ordinary shares in either 2004 or the sixmonths ended 30 June 2005. 9. Dividends 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 23September 2005. The Board has declared an interim dividend of 16 cents per ordinary share (2004half year - 15 cents) for payment on 13 October 2005 to shareholders on theregister at the close of business on 23 September 2005. Dividends are declaredand paid gross. The exchange rate to be applied for the conversion of dividendswill be £1 = US$1.8412 (2004 half year - £1=US$1.8151), giving thoseshareholders who will be paid in sterling an interim dividend of 8.69 pence perordinary share (2004 half year - 8.2640 pence). In 2004, the Group proposed an ordinary dividend of 39 cents per share and aspecial dividend per share of 40 cents per share, giving a total dividend forthe year of 79 cents per ordinary share. 10. Intangible asset - concession rightConcession right Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Balance at the beginning of the period 93.2 90.6 90.6Amortisation (1.6) (1.4) (3.3)Foreign currency exchange difference (3.5) (6.1) 5.9Balance at the end of the period 88.1 83.1 93.2 The intangible asset 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.The intangible asset is being amortised on a straight-line basis over the lifeof the concession. 11. Property, plant and equipment Mining Railway and Water Six months Six months Year ended other Concession ended 30.6.05 ended 30.6.04 31.12.04 transport US$'m US$'m US$'m US$'m US$'m US$'m Balance at the beginning of the period 1,627.2 99.7 69.2 1,796.1 1,860.0 1,860.0Additions 72.4 7.0 1.6 81.0 31.2 81.2Acquisition - - - - - 0.2Transfers and reclassifications (0.8) - - (0.8) (0.4) 0.3Disposals and amounts written off property, plant and equipment (2.5) (0.6) (1.1) (4.2) (7.3) (19.1)Depreciation (55.0) (4.5) (2.5) (62.0) (70.1) (130.9)Foreign currency exchange difference - (0.6) (2.4) (3.0) (6.3) 4.4Balance at the end of the period 1,641.3 101.0 64.8 1,807.1 1,807.1 1,796.1 12. Investment property Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Balance at the beginning of the period 3.2 3.0 3.0Foreign currency exchange difference (0.1) (0.2) 0.2Balance at the end of the period 3.1 2.8 3.2 Investment property represents the Group's forestry properties, which are heldfor long-term potential and accordingly classified as investment property heldat cost. 13. Investment in associate Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Balance at the beginning of the period 2.9 - -Acquisition - - 2.9Share of profit before tax 0.6 - -Share of tax (0.1) - -Dividends received (1.0) - -Foreign currency exchange difference - - -Balance at the end of the period 2.4 - 2.9 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. The investment was acquired on 16December 2004 and did not have any material effect on the Group's earnings oroperating cash flows in that year. 14. 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 theGroup did not differ materially from cost at any period end. 15. Borrowings At 30.6.05 At 30.6.04 At 31.12.04 US$'m US$'m US$'m Los Pelambres Corporate (419.8) (552.8) (457.9) loans Other loans (16.7) (21.5) (19.1)El Tesoro Corporate (73.7) (138.4) (99.7) loans Subordinated debt - (9.7) - Finance (0.3) (13.2) (12.2) leasesMichilla Finance (3.2) (1.6) (2.1) leasesRailway and other transportservices Loans (7.4) (8.2) (7.9)Other Preference shares (3.6) (3.7) (3.9)Total (524.7) (749.1) (602.8) Loans at 30 June 2005 are shown net of deferred financing costs of US$2.2million (30 June 2004 - US$2.5 million; 31 December 2004 - US$2.4 million). Theamount in relation to Los Pelambres was US$1.9 million (30 June 2004 - nil; 31December 2004 - US$2.1 million). The amount in relation to El Tesoro was US$0.3million (30 June 2004 - U$2.5 million; 31 December 2004 - US$0.3 million) Maturity of borrowings At 30.6.05 At 30.6.04 At 31.12.04 US$'m US$'m US$'mShort-term (103.3) (125.5) (104.7)borrowingsMedium and long-term borrowings (421.4) (623.6) (498.1) (524.7) (749.1) (602.8) 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 Note5. 16. Post-employment benefit obligation Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Balance at the beginning of the period (16.2) (13.0) (13.0)Charge to operating profit in the period (2.5) (1.0) (3.2)Release of discount to net interest in period (0.4) (0.2) (0.1)Reclassification 1.0 (0.3) (0.5)Utilised in period 0.4 0.6 0.7Foreign currency exchange difference 0.9 1.1 (0.1)Balance at the end of the period (16.8) (12.8) (16.2) The post employment benefit obligation relates to the provision for severanceindemnities which are payable when an employment contract comes to an end, inaccordance with normal employment practice in Chile and other countries in whichthe Group operates. The severance indemnity obligation is treated as anunfunded defined benefit plan, and the calculation is based on valuationsperformed by an independent actuary. 17. Long-term provisions Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Balance at the beginning of the period (13.2) (11.6) (11.6)Charge to operating profit in the period 3.9 0.6 1.2Release of discount to net interest in period (0.5) (0.2) (0.6)Utilised in period (0.4) (0.5) (2.2)Balance at the end of the period (10.2) (11.7) (13.2) Analysed as follows:Decommissioning and restoration (10.0) (11.6) (13.0)Termination of water concession (0.2) (0.1) (0.2)Balance at the end of the period (10.2) (11.7) (13.2) 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. 18. Deferred tax assets and liabilities Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Net position at the beginning of the period (194.5) (135.7) (135.7)Charge to tax on profit in period (13.7) (3.5) (58.8)Net position at the end of the period (208.2) (139.2) (194.5) Analysed between:Deferred tax assets 2.5 1.5 1.6Deferred tax liabilities (210.7) (140.7) (196.1)Net position (208.2) (139.2) (194.5) 19. Reconciliation of profit before tax to net cash inflow from operatingactivities Six months Six months Year ended ended ended 31.12.04 30.6.05 30.6.04 US$'m US$'m US$'m Profit before tax 739.5 415.4 1,198.5Depreciation and amortisation 63.6 71.5 134.2Amounts written off property, plant and equipment 3.8 7.3 19.1Net finance costs - 11.5 4.9Share of profit of associ ate (0.5) - -Increase in inventories (17.6) (20.1) (9.5)Decrease/(increase) in debtors 4.0 20.7 (140.7)(Decrease)/increase in creditors and provisions (25.7) 11.0 47.0Cash flow from operations 767.1 517.3 1,253.5 20. Analysis of changes in net borrowings At 1.1.05 Cash Flows Other Exchange At 30.06.05 US$'m US$'m US$'m US$'m US$'mCash and cash equivalents 881.4 186.0 - (2.8) 1,064.6 Bank borrowings due within one year (102.1) 51.1 (50.9) 0.1 (101.8)Bank borrowings due after one year (482.5) 16.0 50.7 - (415.8)Finance leases due within one year (2.6) 2.3 (1.3) 0.1 (1.5)Finance leases due after one year (11.7) 10.4 (0.7) - (2.0)Preference shares (3.9) - - 0.3 (3.6)Total borrowings (602.8) 79.8 (2.2) 0.5 (524.7) Net borrowings 278.6 265.8 (2.2) (2.3) 539.9 Net cash/(borrowings) Net cash and net borrowings at the end of each period is as follows: At 30.6.05 At 30.6.04 At 31.12.04 US$'m US$'m US$'mCash and cash equivalents 1,064.6 491.3 881.4Total borrowings (524.7) (749.1) (602.8) 539.9 (257.8) 278.6 21. Reconciliation between UK GAAP and IFRS The Group published financial information in accordance with IFRS for 2004, asrequired by IFRS 1, on 13 September 2005. The news release, together with thefull statement "Adoption of International Financial Reporting Standards andRestatements for 2004" is available on the Company's website and from theCompany's registered office, 5 Princes Gate London SW7 1QJ (telephone: +44 207808 0988). The statement includes explanations of the significant UK GAAP toIFRS differences and reconciliations for: a. net earnings (profit after tax and minority interests) for the six months ended 30 June 2004 and the year ended 31 December 2004; b. net equity (excluding minority interests) at 1 January 2004 (the date of transition), 30 June 2004 and 31 December 2004. The statement also includes detailed IFRS accounting policies adopted by theCompany in preparing its consolidated financial statements. A summary of thedetailed information is provided in the statements is set out below. Reconciliation of net earnings under UK GAAP to net earnings after IFRS Half year Full year 30.06.04 31.12.04 US$'m US$'m UK GAAP - Net earnings 222.3 558.3 Mark-to-market of provisionally priced sales (11.7) 12.0Mark-to-market of financial derivatives 4.3 6.2Reclassification of preference dividends to finance costs (0.1) (0.2)Post-employment benefits - measurement of severance indemnities 0.6 -Change in functional currency of subsidiary (1.0) 1.1Exchange differences on intra-group items (7.7) 0.5Recognition of deferred tax on temporary differences 0.8 1.6 Total adjustments (14.8) 21.2 IFRS - Net earnings 207.5 579.5 Net earnings are stated after tax and minority interests. Reconciliation of shareholders' funds under UK GAAP to net equity under IFRS 01.01.04 30.06.04 31.12.04 US$'m US$'m US$'m UK GAAP - shareholders' funds 905.9 1,079.5 1,322.7 Mark-to-market of provisionally priced sales 13.7 2.0 25.7Mark-to-market of financial derivatives (7.4) (3.1) (1.2)Reversal of proposed ordinary dividends 47.3 29.6 126.2Reclassification of preference shares to borrowings (3.5) (3.7) (3.9)Post-employment benefits - measurement of severance indemnities (1.5) (0.9) (1.5)Change in functional currency of subsidiary - 4.5 (4.0)Currency treatment of non US dollar fair value adjustments (0.4) (0.4) (0.4)Recognition of deferred tax on temporary differences 0.3 1.1 1.9 Total adjustments 48.5 29.1 142.8 IFRS - net equity 954.4 1,108.6 1,465.5 Net equity is stated excluding minority interests. 22. Other disclosures Contingent assets and liabilities There were no material contingent assets or liabilities in the period. Changes in estimates During the six months ended 30 June 2005, the Group conducted a formal review ofits mine closure plans and accordingly reassessed the decommissioning andrestoration provisions for each mine. As a result of the review, the provision at Los Pelambres was reduced by US$5.0million, principally as a result of the extension of the mine life following theapproval of the Environmental Impact Assessment in 2004 which increased themine's reserves. Of this amount, US$0.8 million related to decommissioningcosts and this amount has been credited against property, plant and equipment.The balance of US$4.2 million related to restoration costs and has been creditedagainst operating profit. There were no material changes to the provisions atEl Tesoro or Michilla. Related Party Transactions The ultimate parent company of the Group is Metalinvest Establishment, a companycontrolled by the estate of Mr. A A Luksic and his family interests. TheCompany's subsidiaries, in the ordinary course of business, enter into varioussale, purchase and transactions with companies also controlled by the estate ofMr. A A Luksic and his family interests, including Quinenco S.A., a Chileanindustrial and financial conglomerate the shares of which are traded on theSantiago and New York Stock Exchanges. These transactions are under termsthat are no more favourable than those arranged with third parties. Thesetransactions, in total, are not considered to be 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$1.0 million, as disclosed in the Consolidated Cash Flow Statementon page 13. 23. Currency translation Assets and liabilities denominated in foreign currencies are translated intodollars and sterling at the period end rates of exchange. Results denominated inforeign currencies have been translated into dollars at the average rate foreach period. Period end rates Average rates 30.06.05 US$ 1.7905 = £1; US$1 = Ch$579 US$1.8737 = £1; US$1 = Ch$580 30.06.04 US$1.8185 = £1; US$1 = Ch$636 US$1.8222 = £1; US$1 = Ch$608 31.12.04 US$1.9257 = £1; US$1 = Ch$557 US$1.8457 = £1; US$1 = Ch$607 24. Distribution These results will be sent by first class post to all shareholders on 13September 2005. Copies of this report will be available for members of thepublic who are not shareholders at the Company's registered office, 5 PrincesGate, 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 2005 which comprises the consolidated profit andloss account, the consolidated balance sheet, the consolidated cash flowstatement, the consolidated statement of changes in equity and related Notes 1to 24, with the exception of Note 2. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the 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 which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in Note 1, the next annual financial statements of the Group willbe prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the European Union. Accordingly, the InterimReport has been prepared in accordance with the recognition and measurementcriteria of IFRS and the disclosure requirements of the Listing Rules. 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 2005. Deloitte & Touche LLPChartered AccountantsLondon 12 September 2005 This information is provided by RNS The company news service from the London Stock Exchange