ANNUAL REPORT AND
FINANCIAL STATEMENTS 2019
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Contents
Strategic Report
Overview
Purpose and vision
Performance highlights
2019 highlights
Our business today
Letter from the Chairman
Letter from the CEO
Business model
The mining lifecycle
Strategic framework
Copper contributes to a better
future both globally and locally
Key performance indicators
Risk management
Risk management framework
Principal risks
Key risks
Compliance and internal controls
Stakeholder review
Creating sustainable value for
our stakeholders
How we engage with
our stakeholders
Our people
Safety and health
Communities
Environment
Suppliers
Customers
Shareholders
Governments and regulators
Non-financial information
statement
Operating review
Mining division
Los Pelambres
Centinela
Antucoya
Zaldívar
Transport division
Growth projects and opportunities
Exploration activities
Key inputs and cost base
Operating excellence
and innovation
The copper market
Financial review
1
2
3
4
6
8
10
12
16
20
22
24
25
31
34
36
38
41
42
44
47
48
49
50
51
54
56
58
60
61
62
64
67
68
70
72
76
Corporate Governance
Applying the Code in 2019
Board leadership and
company purpose
Chairman’s introduction
Senior Independent
Director’s introduction
Group corporate
governance overview
Board activities
Stakeholder engagement
Division of responsibilities
Directors’ biographies
Board balance and skills
Roles in the boardroom
Executive Committee
members’ biographies
Introduction to the Committees
Composition, succession
and evaluation
Nomination and Governance
Committee report
Board effectiveness
Audit, risk and
internal control
Audit and Risk Committee report
Sustainability and Stakeholder
Management Committee report
Projects Committee report
Remuneration
Remuneration and Talent
Management Committee report
Committee Chair’s introduction
2020 Directors’ and
CEO Remuneration Policy
2019 Directors’ and
CEO Remuneration Report
2019 CEO Remuneration Report
Directors’ Report
Statement of Directors’
responsibilities
84
86
88
90
92
94
96
98
99
100
102
103
106
107
112
114
116
117
120
126
129
138
140
Financial Statements
Financial performance
Independent auditors’ report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated statement of
changes in equity
Consolidated balance sheet
Consolidated cash flow statement
Notes to the financial statements
Parent company
financial statements
Other Information
Alternative performance measures
Five-year summary
Production statistics
Ore reserves and mineral
resources estimates
Glossary and definitions
Shareholder information
142
149
150
150
151
152
153
202
206
209
211
212
222
225
In this Annual Report, the terms “Company”, “Group”,
“we”, “us”, “our” and “ourselves” are used to refer
to Antofagasta plc and, unless the context requires
otherwise, its subsidiaries. These terms may be used
as collective expressions where general reference is
made to the companies in the Group and/or where no
useful purpose is served by identifying any particular
company or companies.
OUR PURPOSE
DEVELOPING
MINING FOR
A BETTER FUTURE
STRATEGY
• People
• Safety and Sustainability
• Competitiveness
• Growth
• Innovation
PURPOSE
CULTURE
Shared values and
the way we work
ORGANISATION
Designed to deliver
results and growth
Our Vis i o n
OUR VISION
To be an international mining company based
in Chile, focused on copper and its by-products, known for
its operating efficiency, creation of sustainable value,
high profitability and as a preferred partner
in the global mining industry.
antofagasta.co.uk
1
Strategic Report Performance highlights
RECORD SAFETY AND
PRODUCTION PERFORMANCE
Safety
0
.
2
6
.
1
6
.
5 1
.
1
0
.
1
LTIFR1
Fatalities
2
1
15
16
0
Fatalities
1
18
0
19
0
17
1.0
LTIFR1
Copper
production2
0
.
0
7
7
3
.
5
2
7
3
.
4
0
7
4
.
9
0
2 7
.
0
3
6
Net cash
costs3
0
5
.
1
9
2
.
1
5
2
.
1
2
2
.
1
0
2
.
1
15
16
17
18
19
770.0k tonnes
15
16
17
18
19
$1.22/lb
+ See page 41 for more information
+ See pages 54-63 for more information
+ See pages 54-63 for more information
EBITDA3
7
8
5
,
2
9
3
4
,
2
8
2
2
,
2
6
2
6
,
1
0
1
9
Earnings
per share
1
.
6
7
5
.
1
5
9
.
0
5
5
.
0
1
.
2
1
Mineral
resources4
7
.
8
1
7
.
8
1
7
.
8
1
8
.
8
1
1
.
9
1
15
16
17
18
19
$2,439m
15
16
17
18
19
15
16
17
18
19
50.9 ¢/share
19.1bn tonnes
+ See page 76 for more information
+ See page 76 for more information
+ See page 212 for more information
1. The Lost Time Injury Frequency Rate is the number of accidents with lost time per million hours worked.
2. 100% of production at Los Pelambres, Centinela and Antucoya, and 50% of Zaldívar’s production.
3. Non-IFRS measure, refer to the alternative performance measures section on page 206.
4. Mineral resources (including ore reserves) held by the Group’s subsidiaries on a 100% basis and at Zaldívar on a 50% basis.
2
Antofagasta plc Annual Report 2019
2019 HIGHLIGHTS
Safety
Record safety performance with no fatal accidents and
a LTIFR of 1.0.
Copper production
Record copper production of 770,000 tonnes. An increase
of 6.2% on 2018 on higher production at Los Pelambres,
Centinela and Zaldívar.
Net cash costs
Net cash costs were $1.22/lb, 5.4% lower than in 2018 due
to higher production, tight cost control and the weaker
Chilean peso.
EBITDA
EBITDA increased by 9.5% to $2,439 million and a margin
of 49%, reflecting strong copper production and lower
cash costs.
Earnings per share
EPS from continuing operations of 50.9 cents per share,
1.2% lower than the previous year on higher EBITDA,
offset by higher depreciation and amortisation, and tax.
Dividend per share
Total dividend of 34.1 cents per share, equivalent to
a 67% pay-out ratio.
Projects
Los Pelambres Expansion project under construction.
Zaldívar Chloride Leach and Esperanza Sur pit
projects approved.
antofagasta.co.uk
3
Strategic Report
At a glance
OUR BUSINESS TODAY
Mining is our core business, representing over 96% of our revenue and
EBITDA. We operate four copper mines in Chile, two of which produce
significant volumes of by-products. We also have a portfolio of growth
opportunities located mainly in Chile.
In addition to mining, our Transport division provides rail and road
cargo services in northern Chile predominantly to mining customers,
which include some of our own operations.
Products
Revenue
EBITDA1,2
2020 forecast
Growth potential
CU
CU
AU
CU
CU
AU
CU
AG
MO
AG
MO
Antucoya
• 70% owned
• 20-year mine life
• Produces copper cathodes
Centinela
• 70% owned
• 48-year mine life
• Produces copper cathodes and copper
concentrates containing gold and silver
and a separate molybdenum concentrate
Los Pelambres
• 60% owned
• 15-year mine life
• Produces copper concentrates containing gold and
silver and a separate molybdenum concentrate
Zaldívar
• 50% owned (and operated)
• 11-year mine life
• Produces copper cathodes
Transport
• Cargo transport system in the Antofagasta
Region of Chile
• 900 km rail network
Group
9%
$432m
40%
4%
$86m
39%
$2,008m
$960m
48%
57%
$2,364m
$1,384m
5%
$113m
3%
3%
$161m
$4,965m
$81m
$2,439m
KEY
Cathodes
Concentrate
Road
Rail
1. Non-IFRS measure, refer to the alternative performance measure section on page 206.
2. Adds to more than 100% as excludes $184 million of corporate costs, exploration and evaluation, and other non-operating income and expenses. See note 2 to
the financial statements.
4
Antofagasta plc Annual Report 2019
Copper production (tonnes) and net cash costs1
2019
71,900
$2.17/lb
80-85,000
$1.90/lb
Mine life extension
• Potential to process satellite ore bodies
276,600
$1.26/lb
240-250,000
$1.50/lb
Centinela expansion
• Opening Esperanza Sur pit
• Building a second concentrator
363,400
$0.91/lb
350-360,000
$1.00/lb
Los Pelambres Incremental
Expansion
• Phase 1 will increase annual production
by 60,000 tonnes. Project construction
started in early 2019
• Phase 2 will further increase
production by 35,000 tonnes
and extend the Life-of-Mine
Mine life extension
• Assessing viability of leaching
the primary sulphide ore body
• Chloride Leach project approved.
It will increase production
by 10-15,000 tonnes
Haulage capacity increase
• Programme to increase the fleet’s
haulage capacity completes in 2020
58,100
$1.75/lb
55-60,000
$1.70/lb
6.5m tonnes
770,000
$1.22/lb
725-755,000
$1.30/lb
Products
Revenue
EBITDA1,2
Antucoya
• 70% owned
• 20-year mine life
• Produces copper cathodes
Centinela
• 70% owned
• 48-year mine life
• Produces copper cathodes and copper
concentrates containing gold and silver
and a separate molybdenum concentrate
Los Pelambres
• 60% owned
• 15-year mine life
• Produces copper concentrates containing gold and
silver and a separate molybdenum concentrate
Zaldívar
• 50% owned (and operated)
• 11-year mine life
• Produces copper cathodes
• Cargo transport system in the Antofagasta
Transport
Region of Chile
• 900 km rail network
Group
Copper production (tonnes) and net cash costs1
2019
71,900
$2.17/lb
2020 forecast
Growth potential
80-85,000
$1.90/lb
Mine life extension
• Potential to process satellite ore bodies
276,600
$1.26/lb
240-250,000
$1.50/lb
Centinela expansion
• Opening Esperanza Sur pit
• Building a second concentrator
363,400
$0.91/lb
350-360,000
$1.00/lb
58,100
$1.75/lb
55-60,000
$1.70/lb
6.5m tonnes
Los Pelambres Incremental
Expansion
• Phase 1 will increase annual production
by 60,000 tonnes. Project construction
started in early 2019
• Phase 2 will further increase
production by 35,000 tonnes
and extend the Life-of-Mine
Mine life extension
• Assessing viability of leaching
the primary sulphide ore body
• Chloride Leach project approved.
It will increase production
by 10-15,000 tonnes
Haulage capacity increase
• Programme to increase the fleet’s
haulage capacity completes in 2020
770,000
$1.22/lb
725-755,000
$1.30/lb
Antucoya
Centinela
Zaldívar
Los Pelambres
Santiago
antofagasta.co.uk
5
Strategic Report
Letter from the Chairman
ANTOFAGASTA IS PART
OF AN INDUSTRY THAT
WORKS FOR EVERYONE
“Mining is a vital part of Chile’s economy and when we are
successful the whole country benefits, through higher tax
revenues, better jobs and improved infrastructure.”
Dear shareholders,
I have written before about the cyclical nature of the copper industry
and the need for Antofagasta to deliver what we call “considered
growth”. This means focusing on those elements of our business
that are within our control, whether that is costs, the pace of new
developments, maintaining strong employee and community relations
or ensuring safe and sustainable operations.
The importance of this approach was again apparent in 2019, as
the copper price averaged $2.72/lb, 8% lower than in 2018, and once
again was affected by the uncertainty generated by the global trade
dispute. Despite this, Antofagasta delivered another record year of
production and at a lower cost than last year, reflecting the improved
grades at all our operations and the continued hard work of our
teams. As a result, Antofagasta continues to be in a strong position,
generating solid cash flows.
Growth is not just about copper production, of course. In
Antofagasta’s Transport division (FCAB) we are transforming the
business by introducing new locomotives, improving the efficiency
of the network and securing new contracts. As a result, we are
seeing growth in total transport volumes and expect to see this
translate into improved returns in due course.
A framework for long-term success
I have always believed that for the copper industry to be sustainable
in the future there is a need for long-term planning and a willingness
to invest in new projects throughout the commodity cycle. This
relies on the development of a strong corporate culture, a sense of
organisational purpose and a clear strategy, and this is encompassed
in our Purpose – Developing Mining for a Better Future.
In support of this approach, in 2019 the Board adopted a new
strategic framework designed to underpin Antofagasta’s long-term
success. The framework is built around five pillars: growth, our
people, the safety and sustainability of our operations, innovation,
and competitiveness. We have put in place a clear set of near- and
medium-term goals for the organisation based on this framework.
Green light for further growth
While production in 2019 was at record levels, a decline in ore grades
at Centinela will lead to a fall in production in 2020. The Board has
already approved the expansion of Los Pelambres, which will
reverse this decline when it reaches full production in 2022.
In addition, during 2019 the Board approved two further projects to
ensure that we continue to deliver new growth projects. The Chloride
Leach project at Zaldívar will increase recoveries and will add
6
Antofagasta plc Annual Report 2019
10-15,000 tonnes of copper per year and the new Esperanza Sur pit
at Centinela is expected to add a similar amount for its first few years
of full production from 2022 onwards. This is in addition to the
60,000 tonnes from the Los Pelambres expansion.
Looking further ahead, Antofagasta has substantial additional copper
resources that can be brought into development over time. The
construction of a second concentrator at Centinela and a further
expansion of Los Pelambres are among a number of options for
future growth projects in our portfolio.
Improving diversity in the workforce
The mining industry has often been criticised for lacking diversity in
its workforce. At Antofagasta, we continue to encourage more women
into the workforce and to ensure that they are better represented at
all levels. We now have two female Chairs of Board Committees, for
Sustainability and Stakeholder Management and Remuneration and
Talent Management, who serve on the Board alongside nine male
Directors. In addition, some of our female senior executives have been
appointed to each of the boards of our mining operating companies
and we have two women in the Senior Management team, the General
Manager of the Transport division and our Vice President of Human
Resources, who are members of our 15-member Executive Committee.
I would like to thank them and all members of the Board for their work
and support during 2019.
We are determined to further improve diversity in our business. By
doing so, we will continue to broaden the depth as well as the breadth
of skills and perspectives within our talent pool. We believe that this will
enable us to ensure that Antofagasta has the right people to help the
Company navigate the many challenges facing mining today.
Your Directors
It was with great sadness that we said goodbye to our Non-Executive
Director Gonzalo Menendez, who passed away at the end of June
following a period of illness. Gonzalo had been an important part of
Antofagasta’s development for nearly 40 years. He was responsible
for transforming the Transport division into a profitable business in
his role as General Manager in the early 1980s and later, in his role
as a Director, he played a significant role in the Group’s expansion
and eventual transformation into the mining company that it is today.
The Board will miss his wise counsel and advice.
In May we appointed Mike Anglin to the Board. Mike has over
30 years’ experience in base metals, focused on South American
and US operations and mine construction. His extensive experience
in developing and constructing large-scale mines in the Americas will,
I know, be of great benefit to Antofagasta in the coming years and
I would like to welcome him to the Board.
In March this year, we also appointed Tony Jensen to the Board.
Tony has over 35 years of mining experience in the United States and
Chile in operating, financial, business development and management
roles and will stand for election by shareholders at the 2020 Annual
General Meeting.
Tim Baker will not be standing for re-election at the 2020 Annual
General Meeting, having served for nine years on the Board. Tim has
provided invaluable service during his time with us and has served as
Chairman of the Remuneration and Talent Management Committee
and as a member of all of the other Committees.
I would also like to take this opportunity to mark the passing of
Viscount Montgomery of Alamein, David Montgomery, who was
Chairman of the Company from 1980-82. He had a great love of Latin
America and was decorated by the governments of Chile, Argentina,
Mexico and Venezuela as well as those of Spain and Brazil. He lived
in Antofagasta for a period during the 1970s and made a valuable
contribution to the Company in its early days of transformation
from a railway to a mining business.
An industry that works for everyone
During the last two decades, the quality of life and the wellbeing
of the population have improved significantly in Chile. Poverty levels
have reduced markedly and all the indicators included in the Human
Development Index of the United Nations Development Programme
have improved.
However, since October 2019 Chile, like some other countries,
has been experiencing a period of social tension with street
demonstrations and demands for social improvements which
have been followed by instances of violence by some small groups.
We condemn violence and we strongly believe that the best way
to achieve social advancement and cohesion is through dialogue.
We also believe that this should include measures that help the
country to reach higher social standards, and to grow and develop.
In order to address these issues, the government and all major
political parties have agreed to hold a referendum to determine
whether a new constitution should be adopted.
We must all work together to resolve the country’s challenges and
mining will continue to be one of the main contributors to Chile’s
economy. When the mining industry is successful, the whole country
benefits through higher tax revenues, higher levels of employment in
better jobs and improved infrastructure.
As an industry, and as a business that plans for the long term, we
value certainty and stability. We have worked hard to build strong
community relations and we benefit from the country’s educated
workforce. Ensuring that our interests are properly aligned with
those of our stakeholders is critical to the long-term sustainability
of our operations.
That is why we are focused on ensuring that when we are successful
as a company our stakeholders benefit as well. This includes our
people, local communities, suppliers, customers, shareholders and
the government and regulators. 2019 has been no exception and
we have described the specific efforts we make to support these
stakeholders throughout this Annual Report. I am particularly proud
of the work the team has done over the year to strengthen our
community relations; rolling out the successful community relations
programme we have developed at Los Pelambres, to our mines in
the north of Chile, at Centinela, Zaldívar and Antucoya.
Outlook
Despite a strong finish, the copper price was flat for most of the year,
impacted by the uncertainty around global trade. However, in the
longer term we continue to believe that the fundamentals for copper
are strong. The demand picture suggests that the world’s appetite for
copper as part of the greening of our global power and transportation
systems will continue to grow at a time when new copper supply
sources are becoming rarer.
In the short term, there is limited new supply coming on-stream in
2020. However, the outbreak of the COVID-19 virus at the beginning of
the year is having an impact on copper demand in Asia. It is not clear at
this stage how important the impact will be, but it is possible that it will
be significant. In the meantime, the Chinese government has put in
place rigorous controls to stop the spread of the virus and has
announced several stimulatory economic measures that should
reverse at least part of the negative impact on demand.
For me the commodity price volatility we have experienced over the
past few years really highlights our strengths at Antofagasta. We plan
for the long term, to deliver considered growth, manage our costs
tightly, put the safety of our people and communities at the heart
of all that we do and invest in the future. This approach will remain
core to our strategy in the years ahead.
On a final note I would like to thank our shareholders for their
support and our employees and contractors for all their work
that made 2019 another record year for Antofagasta.
Jean-Paul Luksic
Chairman
antofagasta.co.uk
7
Strategic Report Letter from the Chief Executive Officer
RECORD YEAR OF SAFETY AND
PRODUCTION PERFORMANCE
“It was a good year operationally, marked by
our best safety performance ever, a new
copper production record and an above-
target reduction in cash costs.”
Dear shareholders,
I am pleased to share with you this report on our performance in
2019. It was a good year operationally for Antofagasta, marked by
the Group’s best safety performance ever, a new copper production
record and an above-target reduction in cash costs.
On safety, I am particularly pleased to report that we suffered no
fatalities during the year, a target that is always our top priority.
We also significantly improved other safety indicators such as our
Lost Time Injury Frequency Rate (LTIFR). This progress was consistent
across almost all our operations and is not a coincidence. It reflects
the work we have been undertaking with great conviction over the
five years since we implemented our safety management system.
These results are, of course, positive in themselves. However,
we also believe that without a strong safety performance it is
very difficult to achieve a well-managed operation and deliver
good economic results and, in this sense, safety generally serves
as a leading indicator of operating discipline and performance.
We are also proud to report that in 2019 we produced a record
770,000 tonnes of copper, 6.2% higher than in 2018, which was
itself a record. This was at the top end of our revised guidance.
As well as higher ore grades, particularly at Centinela, it reflected
a very consistent operating performance at our plants, especially
Los Pelambres and Centinela where we are very pleased with the
throughput they achieved and the operating conditions that led to
this higher production.
For 2020, we anticipate that the Group’s copper production will
drop to 725-755,000 tonnes. This is based on our mine plan, and
it is primarily explained by lower grades at Centinela Concentrates.
However, in addressing this more challenging year, we will be doing
so from the platform of our performance in 2019 and the strong
underlying operating conditions it reflects.
Our net cash costs in 2019, at $1.22/lb, were 5.4% lower than in
2018. This reduction was largely thanks to our increased production
and the Cost and Competitiveness Programme we launched in 2014,
which continues to deliver important savings. Under this programme,
we have set an annual target of $100 million, having achieved
$132 million of savings and revenue enhancements in 2019.
8
Antofagasta plc Annual Report 2019
Water
For mining, water is a critical input and 2019 was yet another drought
year in north-central Chile’s Coquimbo Region, where Los Pelambres
is located. This makes our focus on water efficiency and management
ever more important. During the year, we also worked closely with
communities in the operation’s area of influence to secure water
for human consumption and livestock.
Innovation
A key part of the way we are investing in our development is to
analyse how the digital age will transform our business and how we
can make the most of the changes it entails. In this, we are guided
by our Roadmap for Innovation. One of its components is automation
and in 2019 we started to use autonomous drills at Los Pelambres
as a pilot for their gradual adoption at all our operations.
I am pleased to say that, operationally, we were able to manage the
situation without an impact on production or plant treatment capacity.
However, this issue will persist in 2020 so we will remain very vigilant
about our water balance. We will continue to look for opportunities for
efficiency gains in our water use and recycling, particularly in the
long-term context of climate change.
In addition, Los Pelambres is building a desalination plant so, as from
the end of 2021, it will be using sea water. This is just one of the
measures we are taking to adapt to climate change.
During the year, we also progressed in designing a fleet of
autonomous trucks for use at Esperanza Sur, a new pit at Centinela.
The trucks are expected to be delivered and start operation in 2021,
once the pit’s development stripping has been completed.
Remote working is another part of the Roadmap and our new
integrated operations centre for Centinela is currently in the final
stages of a feasibility study. We have decided to locate this centre
in the city of Antofagasta, some 150 kilometres from the mine,
and expect it to start operations during 2020.
Our other three operations are in northern Chile’s Atacama Desert,
where water scarcity has always been acute. Here we have taken
a lead in the use of sea water, which now accounts for some 50%
of our consumption.
As part of our work on climate change we will continue to review
its impact on our operations using scenario analysis and the TCFD
(Task Force on Climate-related Financial Disclosures) framework,
with a specific emphasis on water availability.
Labour relations
In 2019 we completed four labour negotiations and a strike at
Antucoya was the first for the Group. However, we have a very
good record of relations with our unions and these remain very
constructive, including those at Antucoya.
In our regular labour negotiations we seek to achieve an outcome
that is beneficial to both parties while preserving the long-term
viability of our operations and ensuring the sustainability of any
agreement. This approach will continue to guide our labour relations.
Projects
In 2019, we started construction of the Los Pelambres Expansion
project, which involves an expansion of the operation’s processing
capacity and the construction of the desalination plant. By the end
of the year, work on the project, which represents an investment
of $1.3 billion, was approximately 30% complete. This investment
is very important for Los Pelambres because the capacity expansion
will mitigate the increasing hardness of the ore and the desalination
plant will ensure water availability in the event of a particularly
acute shortage.
Zaldívar’s Chloride Leach project was sanctioned in 2019 and is now
beginning construction. This is a process improvement project that
will increase copper recovery by using higher levels of chloride in
the leaching solution. It represents an investment of $190 million.
In 2019, we filed the Mine Plan of Operations for Twin Metals, our
greenfield project in the United States. This is an important milestone
for Twin Metals as it is the start of the formal permitting process.
The lead times are long, but we have been able to consolidate our
mining property and have a strong and motivated team and I am
very positive about this project.
A very thorough review process will now take place over the
next five or six years, during which we will be engaging with the
corresponding government agencies, local communities and other
stakeholders. The process also involves public consultation, giving us
an opportunity to showcase our project and, of course, for scrutiny
by the government and the public.
An additional element is the digital transformation of support functions.
We are working on a portfolio of 23 projects to automate or robotise
functions in areas such as finance and human resources.
Capital expenditure
In 2020, we expect to see a higher level of capital expenditure than in
2019. This is because we will be moving into the most capital-intense
year of the Los Pelambres Expansion project as it enters its busiest
phase of construction. Our original guidance for the year was that
capital expenditure would reach $1.5 billion as compared to $1.1 billion
in 2019, but following the outbreak of COVID-19 we are reviewing this
estimate to identify possible savings or deferrals.
Events in Chile
Our operations have not been immune to the social unrest seen
in Chile since October. However, we have been able to manage
the effects in such a way that any production impact has been
minimal and our operations have performed according to plan.
The unrest was triggered principally by social demands related
to pensions, healthcare and education. Chile now has a unique
opportunity to address these issues and positively affect
people’s wellbeing.
Another key issue is the proposal to rewrite the country’s constitutional
framework. It is important that this process, if it occurs, is carried out
in an orderly fashion and results in a constitution supported by the
majority of Chileans. From this point of view, the next 18-24 months
will be important in determining whether changes are made for
the better or whether there is further uncertainty and instability.
During this process, an impact on projects that have already been
sanctioned is unlikely.
Copper market
In 2019, there continued to be a small copper supply deficit. However,
the average annual price, at $2.72/lb, represented a drop from
$2.96/lb in 2018, and there was significant volatility related to factors
that included the trade war between the United States and China.
We expect this volatility to persist in 2020, particularly following
the COVID-19 outbreak in China. However, we believe that the mid
to longer-term outlook, underpinned by an ongoing supply deficit, is
positive for copper given its critical role as an enabler of a modern
low carbon economy driven by growing electromobility and
renewable energy usage.
Iván Arriagada
Chief Executive Officer
antofagasta.co.uk
9
Strategic Report Business model
THE MINING
LIFECYCLE
Creating value
through the
mining lifecycle
Mining is a long-term
business and timescales
can run into decades.
The period from initial
exploration to the start
of production can exceed
10 years and, depending
on the nature of the
project and the market
conditions, it may take
more than five years
of operation to recoup
the initial investment.
For geological reasons,
copper deposits
frequently have higher-
grade material nearer
the surface and therefore
grade declines with
depth. This means that
unless action is taken,
such as an expansion,
copper production
declines as a mine gets
older. Also, as an open
pit gets deeper, haulage
distances and rock
hardness increase, and
this, combined with the
declining grade, leads to
higher unit costs. Large
long-life mines will have
several expansions during
their lives. The current
expansion at our 20-year-
old Los Pelambres mine
is its fourth.
Inputs
Energy
Water
Labour
Service contracts and
key supplies
Fuel and lubricants
Sulphuric acid
Our mining operations
depend on a range of key
inputs such as energy, water,
labour, sulphuric acid and
fuel. The management of
these inputs has a significant
impact on operating costs
and the sustainability of
mining operations, and
ensuring the long-term
supply of key inputs is a
vital part of the business.
+ See page 68 for
more information
Exploration
Chile
International
Evaluation
Los Pelambres
Expansion – Phase 2
Centinela Second
Concentrator
Twin Metals Minnesota
Construction
Los Pelambres
Expansion – Phase 1
Esperanza Sur pit
Zaldívar Chloride
Leach project
To ensure the long-term
sustainability of our mining
business, we must focus
on expanding our mineral
resource base.
We undertake exploration
activities in Chile and abroad,
with particular focus outside
Chile on the Americas. Our
international exploration
programmes are generally
carried out in partnership
with other companies,
in order to benefit from
their local knowledge
and experience.
Effective project evaluation
and design maximise value at
this stage of the mining cycle.
Antofagasta’s wealth of
experience in both areas
helps to make the best use
of mineral deposits. We
integrate sustainability
criteria into the design
process and project
evaluation phase, developing
innovative solutions for
challenges such as water
availability, long-term
energy supply and
community relations.
3-5 years
5 years
+ See page 67 for
more information
+ See pages 64-66 for
more information
Once a project has been
approved by the Board,
construction begins.
This stage requires
significant input of capital
and resources as well as
effective project management
and cost control to maximise
the project’s return
on investment.
We have a co-operative
approach to developing
projects. Typically, after the
feasibility stage and before
the construction phase, we
seek a development partner
to buy an interest in the
project, generating an
immediate cash return,
diversifying risk and
providing broader access
to funding while we
maintain operating
control of the project.
3-5 years
+ See pages 64-66 for
more information
10
Antofagasta plc Annual Report 2019
Core operations
Processing
Marketing
Mine closure
Extraction
Los Pelambres
Centinela
Antucoya
Zaldívar
During the operation
of a mine, its impact on
the environment and the
neighbouring communities
is carefully managed. At the
end of its life, a mine must be
closed, and its surroundings
restored to their original state.
A closure plan for each mine
is maintained and updated
throughout its life to ensure
compliance with the latest
regulations and provide for
a sustainable closure.
+ See page 46 for
more information
Antofagasta’s four operations
in Chile are Los Pelambres,
Centinela, Antucoya
and Zaldívar.
Antofagasta mines both
copper sulphide and copper
oxide ores, which require
different processing routes:
The world-class Los
Pelambres and Centinela
mining districts have
sustainable long-life
copper mining operations,
with large mineral resources,
and produce significant
volumes of gold, silver and
molybdenum as by-products.
All of our mines are open
pit operations.
Safety and health are
key elements of operating
efficiency and remain a top
priority for the Board and
management team.
20+ years
+ See pages 56-61 for
more information
Los Pelambres and
Centinela Concentrates
Mined sulphide ore is milled
to reduce its size before
passing to flotation cells
where it is upgraded to a
concentrate containing
25–35% copper. This
concentrate is then shipped
to a smelter operated by
a third party and converted
to copper metal.
Centinela Cathodes,
Antucoya and Zaldívar
Mined oxide ore, sometimes
combined with leachable
sulphide ore, is crushed, piled
into heaps and leached with
sulphuric acid, producing a
copper solution.
This solution is then
put through a solvent
extraction and electrowinning
(“SX-EW”) plant to produce
nearly pure copper cathodes,
which are sold to fabricators
around the world.
+ See pages 56-61 for
more information
The marketing team builds
long-term relationships with
the smelters and fabricators
who purchase our products,
with approximately 70% of
output by value going to
Asian markets.
As well as copper,
Los Pelambres and
Centinela produce
significant volumes of gold,
molybdenum and silver as
by-products. Gold and silver
are sold for industrial and
electronic applications
and for jewellery-making.
Molybdenum is used to
produce steel alloys.
Most copper and
molybdenum sales are
made under annual contracts
or longer-term framework
agreements. Sales volumes
are agreed each year,
which guarantees offtake.
+ See page 48 for
more information
Outputs
Copper
Molybdenum
Gold
Silver
Our mining operations
create significant economic
and social value for a wide
range of stakeholders. Local
communities benefit from
job creation and improved
infrastructure, while the
Chilean government and
local municipalities receive
tax payments and royalties.
There are also benefits to
society in general, with the
copper we produce being
used across many sectors,
from industrial to medical,
and increasingly in
renewable and green
technologies.
The copper and
by-products go on to
be further processed for
use in end markets, including
property, power, electronics,
transport and consumer
products.
+ See pages 18-19 for
more information
antofagasta.co.uk
11
Strategic Report Strategic framework
INTRODUCING OUR
STRATEGIC FRAMEWORK
We are committed to our Purpose of Developing Mining for a Better Future.
This is what drives and motivates us.
While our Vision has not changed, we have re-evaluated our Strategic Framework
to ensure it is aligned. At its centre is our Purpose, Developing Mining for a Better
Future, which is supported by our Strategy, Organisation and Culture through
which we seek our Vision.
In turn, our Strategy has five pillars, People, Safety and Sustainability,
Competitiveness, Growth and Innovation.
STRATEGY
• People
• Safety and Sustainability
• Competitiveness
• Growth
• Innovation
PURPOSE
CULTURE
Shared values and
the way we work
ORGANISATION
Designed to deliver
results and growth
Our Vis i o n
12
Antofagasta plc Annual Report 2019
Our Vision
To be an international mining company based
in Chile, focused on copper and its by-products,
known for its operating efficiency, creation of
sustainable value, high profitability and as a
preferred partner in the global mining industry.
Culture
Culture represents our shared values and
the way we work. It is evident not only in our
people but also in how we engage with local
communities and our suppliers, partners and
customers. We also understand the importance
of diversity and inclusion as a driver of our
competitive advantage.
Organisation
The way we manage our activities is paramount
in reaching our goals. Our structure is designed
to deliver results and growth while also having
the flexibility to adjust to challenges and
opportunities as they arise.
Strategy
Our strategy is built around five key pillars,
each of which have defined long-term objectives
with short and medium-term goals. These
pillars are: People, Safety and Sustainability,
Competitiveness, Growth and Innovation.
antofagasta.co.uk
13
Strategic Report Strategic framework continued
Culture
Shared values and
the way we work
Organisation
Designed to deliver
results and growth
Each area of the Group has an
organisational structure and Operating
Model to optimise asset performance.
This is achieved by standardising and
strengthening production processes,
improving collaboration between
key areas, defining clear roles and
responsibilities and seeking to
reduce variability and deviation
from production plans.
The way we work and manage our
risks is anchored in our shared values:
Responsibility. We are responsible
for our actions, particularly our own
safety and health and that of others.
Respect. We respect people, their opinions
matter to us and we interact with them in
an open and collaborative manner.
Commitment to sustainability.
We maximise the value of our
assets while contributing to social
development and minimising our
impact on the environment.
Excellence in our daily performance.
We strive to achieve ever better results.
We are forward-thinking and seek
to generate value in the long term.
We learn from our mistakes and have
the flexibility and confidence to
address changing challenges.
Innovation is a permanent practice
and is key to our long-term success.
14
Antofagasta plc Annual Report 2019
Strategy
How we deliver
Our strategy is structured around
five pillars, each of them with defined
short- and medium-term goals to enable
us to achieve our Purpose.
People
+ See pages 38-40 for more information
People are the core of our business. We want our employees
to feel recognised and to have the maximum opportunities for
personal and professional growth.
We seek to generate a culture of diversity and inclusion
in which our employees can achieve their full potential.
We are committed to equality and believe that we can
develop our business and make a significant contribution
to Chile’s development.
We work to improve opportunities for individuals’ internal
promotion fostered through initiatives such as technical and
managerial training programmes. Our goal is to be the best
employer in the mining industry.
To achieve this, we understand the importance of creating
an environment of trust and collaboration that looks to the
long term.
Safety and Sustainability
+ See pages 41 and 44-46 for more information
The safety and health of our employees is non-negotiable. We
are committed to achieving zero fatalities at our operations and
continuing to reduce the number and seriousness of accidents
and occupational health issues.
In line with this, we manage natural resources efficiently and
are constantly seeking ways to reduce water consumption,
source cleaner sources of energy and protect biodiversity,
while always collaborating with local communities.
We view sustainability as a source of value creation that is an
integral part of our decision-making processes. This includes
taking into account all socio-environmental factors throughout
the different stages of the development through to the closure
of a mining operation.
We are sensitive to the threats posed by climate change
and are always seeking to improve our practices accordingly.
Our aim is to maximise the utilisation of renewable energy
sources and to reduce our greenhouse gas (GHG) emissions.
Competitiveness
Our key focus as regards competitiveness is to achieve
productivity gains through cost control and streamlining
our processes.
+ See pages 70-71 for more information
Our Operating Model seeks to reduce the variability of
our production plans and includes an operating excellence
area, a discipline that focuses on productivity issues.
Our Competitiveness and Cost Programme (CCP)
has also produced significant savings.
Growth
+ See pages 64-66 for more information
We have a portfolio of growth projects that allows us to
remain competitive and develop sustainable operations in
the long term.
We continue to review our options for maximising returns
and reducing the capital cost of projects, and are enhancing
the capabilities of the project team to improve our project
execution strategy, management and control.
Our focus is on the production of copper and by-products
in the Americas (particularly Chile, Peru, Mexico, the United
States and Canada).
Innovation
+ See pages 70-71 for more information
We innovate as a means of improving social, environmental
and economic conditions while, at the same time, delivering
strong returns for our shareholders.
Innovation is key to improving productivity and efficiency
and promoting growth. We are investing in innovation and
developing opportunities, and encourage and reward
employees and contractors who send us their ideas for
improving our operations.
During the year we continued to implement our digital roadmap
to facilitate and accelerate the adoption of information and
analysis technologies, automation and robotics.
antofagasta.co.uk
15
Strategic Report Copper contributes to a better future both globally and locally
THE ROLE OF COPPER
IN A GREENER
SUSTAINABLE WORLD
Copper is essential to modern society and a greener future. It plays a vital role in
addressing some of the world’s major challenges such as the availability of affordable
and clean energy, air and noise pollution, and sustainable urban development.
Today copper is a key component of everyday life from
mobile telephones to the roofs, heating and electrical wiring
in people’s homes. It is needed for power generation and
transmission, motor vehicles, domestic appliances – such as
air conditioning and televisions – and industrial machinery.
Copper has a unique combination of properties which has
made it central to mankind’s development. It is corrosion
resistant, extremely malleable and an exceptional conductor
of heat and electricity, making it a key input for efficient
energy use and green technologies.
Since early this century, demand for industrial metal has been driven
by the urbanisation of western economies and more recently it has
been propelled by China’s growth.
Urbanisation and industrialisation in India and Southeast Asian
countries are expected to dominate copper consumption growth
beyond 2020 as the rate of Chinese demand growth begins to slow.
A growing middle class in emerging economies is also boosting sales
of copper-rich consumer goods such as electronic devices and cars.
Going forward, copper demand growth will also be fuelled by
renewable energy and electric vehicles pushed by the falling costs
of these environmentally friendly technologies and the world’s need
to find cleaner solutions for modern life.
Urbanisation
Rising urbanisation and industrialisation is a major stimulus for
sustained and strong copper demand.
The metal is a key component of the wiring, plumbing, heating and
cooling, lighting and roofing of homes, as well as the commercial
services, transport, power and telecommunications systems needed
for vibrant, modern cities.
Growing wealth will also boost copper intensity in homes and offices.
Greater spending on electrical goods will lead to higher electricity
consumption and an upgraded distribution system, all of which
consume copper.
Copper demand will also be pushed by an increasingly digital economy.
Society’s need for high-speed internet services is expected to sharply
increase demand for higher quality copper telecommunications cables
in residential and business properties.
Meanwhile, tougher housing regulations are gradually imposing
higher energy efficiency standards and lower emission rates on
new buildings to reduce negative impacts on the climate and the
environment. Copper’s superior thermal and electrical conductivity
will make it indispensable for the greener buildings of the future.
Copper stands to benefit from urbanisation and will contribute to
smarter and cleaner cities.
16
Antofagasta plc Annual Report 2019
Renewable energy
Copper is used for high-voltage power distribution conductors,
transformers and earthing in energy infrastructure as well as in
coil windings in the stator and rotor of wind generators and the
cell ribbons and cabling of solar photovoltaic systems.
Solar and wind technologies need four to six times as much copper
as conventional energy mainly owing to the need to connect larger
numbers of smaller units to the grid.
The next few decades will witness a shake-up of the energy sector.
Electrification will charge ahead, led by India, dominated by new wind
and solar projects and the globalisation of natural gas markets.
Solar photovoltaic and wind energy are now economically competitive
with traditional power sources due to falling costs. This is driving the
uptake of these green technologies over fossil fuels in advanced and
developing economies alike.
The expansion of renewable energy sources also forms part of
governments’ efforts to tackle global warming by reducing carbon
dioxide emissions, together with energy-related air pollution which
causes millions of premature deaths each year. Many countries have
established decarbonisation goals under the Paris Agreement.
This will not only benefit the environment but also copper. Growing
electrification and especially new solar and wind projects will be key
drivers behind copper demand growth.
Electromobility
Faster than expected uptake of electric vehicles is also being driven
by stricter environmental standards to restrict CO2 emissions and
combat harmful air pollution in cities. Governments are increasingly
setting tougher and tougher targets to phase out or ban the sale of
conventional cars and giving incentives to car buyers to go green.
Electric bus fleets are being pioneered in China.
Electric vehicles have made rapid gains in recent years. Their sales
have surged in China, the US and Europe and the question now is not
if but when they will outnumber conventional petrol and diesel cars.
Cheaper and better batteries have made electric vehicles more
affordable and increased the distance they can be driven before
being recharged. Running costs are already attractive in countries
with low electricity prices compared to fuel. Simpler engines mean
less maintenance.
This is good news for copper. Electric vehicles contain on average
up to almost four times the amount of copper as conventional ones
owing to their use in batteries, high-voltage wiring, windings and
rotors. Charging stations will also boost demand.
antofagasta.co.uk
17
Strategic Report Copper contributes to a better future both globally and locally continued
Copper contributes to a better future both globally and locally continued
WIDELY USED
IN A GROWING WORLD
Globally, copper is used in a wide range of sectors. Consumption in 2018 was 23.5
million tonnes and this is expected to grow by some 1.7% per year over the next 20
years and will be 33.5 million tonnes by 2040. Although most of this growth will come
from mined copper, an increasing proportion of it will be recycled material, as copper
can be recycled again and again without any degradation of its physical properties.
Total consumption 2018
23.5mt
Industrial
machinery
11%
of copper
consumption
Electrical
network
27%
of copper
consumption
Construction
28%
of copper
consumption
Consumer
and general
21%
of copper
consumption
Transport
13%
of copper
consumption
BUS STOP
18
Antofagasta plc Annual Report 2019
Source: Wood MacKenzie, Copper Outlook December 2019
DELIVERING SUSTAINABLE
ECONOMIC VALUE
More locally, we generate value for all our stakeholders. The economic value
we generate is distributed directly to them in the form of wages, purchases,
contributions, taxes and dividends. There are also indirect economic benefits
arising from the expenditure by suppliers, employees, the government and others.
Distribution of economic value generated
In 2019, we distributed $5,430 million
to our stakeholders or, in other words,
our employees, communities, suppliers,
shareholders, lenders and governments.
For Antofagasta, creating economic
value implies generating profits
responsibly and with a long-term vision,
incorporating unique and innovative
solutions in business decisions to
address challenges in the regions in
which we operate, and working to
tackle today’s global challenges.
Total economic contribution
$5,430m
Our aim is to develop mining for a
better future and we understand that
generating economic value means
more than making a profit.
Employees
$482m
Salaries, wages
and incentives
Communities
$41m
Contributions and
project funding
BUS STOP
Shareholders
$470m
Dividends
Subsidiaries´
non-controlling
interests
$450m
Dividends
Lenders
$76m
Interest payments
Suppliers
$3,493m
Payments made to suppliers
for the purchase of utilities,
goods and services
Governments
$418m
Income taxes,
royalties and other
payments to
governments
antofagasta.co.uk
19
Strategic Report Key Performance Indicators
MEASURING OUR
PERFORMANCE
We use Key Performance Indicators (KPIs) to assess
performance in terms of meeting our strategic and
operating objectives.
Performance is measured against the following financial,
operating and sustainability KPIs:
s
I
P
K
l
a
i
c
n
a
n
i
F
EBITDA1
Why it is important
This is a measure of our
underlying profitability.
Performance in 2019
EBITDA was $2,439 million, 9.5% higher
than the previous year on higher sales
volumes and lower unit costs, partially
offset by lower realised prices.
Earnings per share
Why it is important
This is a measure of the profit
attributable to shareholders.
Performance in 2019
Earnings per share from continuing
operations of 50.9 cents per share,
a 1.2% decrease on 2018, as higher
EBITDA was offset by higher tax,
and depreciation and amortisation.
Net debt1
Why it is important
This measure reflects
our financial liquidity.
Performance in 2019
Net debt remained low and decreased
by 5.5% in 2019 to $563 million.
7
8
5
,
2
9
3
4
,
2
8
2
2
,
2
6
2
6
,
1
0
1
9
1
.
6
7
5
.
1
5
9
.
0
5
1
.
2
1
5
.
0
2
7
0
,
1
4
2
0
,
1
6
9
5
3
6
5
6
5
4
15
16
17
18
19
15
16
17
18
19
15
16
17
18
19
$2,439m
50.9¢/share
$563m
+ See page 76 for more information
+ See page 80 for more information
+ See page 81 for more information
Remuneration performance criteria. See page 131 for more information
1. Non-IFRS measures, refer to the alternative performance measures section on page 206.
2. 100% of Los Pelambres, Centinela and Antucoya, and 50% of Zaldívar’s production.
3. Mineral resources (including ore reserves) relating to the Group’s subsidiaries on a 100% basis and Zaldívar on a 50% basis.
4. The Lost Time Injury Frequency Rate is the number of accidents with lost time during the year per million hours worked.
5. Mining division only.
6. Tonnes of CO2 equivalent per tonne of copper produced.
20
Antofagasta plc Annual Report 2019
s
I
P
K
g
n
i
t
a
r
e
p
O
s
I
P
K
y
t
i
l
i
b
a
n
i
a
t
s
u
S
Copper production2
Why it is important
Copper is our main product
and largest source of revenue.
Performance in 2019
We had a record year of production,
producing 770,000 tonnes. This was
a 6.2% increase on 2018, with higher
production at Los Pelambres,
Centinela and Zaldívar.
Net cash costs1
Why it is important
This is a key indicator of operating
efficiency and profitability.
Performance in 2019
Net cash costs of $1.22/lb, 5.4%
lower than in 2018 due to higher
production, tight cost control and
the weaker Chilean peso.
Mineral resources3
Why it is important
Expansion of the Group’s mineral
resources base supports its strong
organic growth pipeline.
Performance in 2019
Mineral resources at Zaldívar
increased as its primary sulphides
were included for the first time.
4
.
9
0
7
3
.
4
0
7
3
.
5
2
7
0
.
0
7
7
3
.
0
3
6
0
5
.
1
5
2
.
1
9
2
.
1
2
2
.
1
0
2
.
1
7
.
8
1
7
.
8
1
7
.
8
1
8
.
8
1
1
.
9
1
15
16
17
18
19
15
16
17
18
19
15
16
17
18
19
770.0k tonnes
$1.22/lb
19.1bn tonnes
+ See page 55 for more information
+ See page 55 for more information
+ See page 212 for more information
Safety
Why it is important
Safety is our top priority, with fatalities
and the LTIFR4 being two of the principal
measures of performance.
Performance in 2019
Record safety performance with no
fatal accidents and a LTIFR of 1.0.
Water consumption
Why it is important
Water is a precious resource and we are
focused on using the most sustainable
sources and maximising its efficient use.
Performance in 2019
Our consumption of continental water
and sea water decreased by 12% and 7%
respectively mainly due to a decrease
in material processed.
CO2 emissions intensity5
Why it is important
We recognise the risks and opportunities
arising from climate change and the need
to measure and mitigate greenhouse
gas (GHG) emissions.
Performance in 2019
CO2 emission intensity decreased by 7%
compared to 2019 mainly because of
higher copper production and energy
efficiency improvements.
0
.
2
6
.
1
6
.
5 1
.
1
0
.
1
LTIFR
Fatalities
1
18
0
19
0
17
1.0
LTIFR
2
1
15
16
0
Fatalities
5
.
6
3
9
.
6
3
6
.
2
3
2
.
9
2
4
.
0
3
2
.
8
2
9
.
8
2
5
.
6
2
7
.
4
2
6
.
0
2
Continental
water
Sea water
15
16
17
18
19
60.8m m3
7
8
.
3
7
6
.
4 3
2
.
3
3
3
.
3
0
1
.
3
15
16
17
18
19
3.10 tCO2e
per tCu produced6
+ See page 41 for more information
+ See page 44 for more information
+ See page 45 for more information
antofagasta.co.uk
21
Strategic Report
Risk management
RISK MANAGEMENT
FRAMEWORK
Effective risk management is an essential part of our culture and strategy.
Accurate and timely identification, assessment and management of key risks
give us a clear understanding of the actions required throughout the organisation
in order to achieve our objectives.
22
Antofagasta plc Annual Report 2019
Areas of focus and development during 2019Our main focus in 2019 was to increase all employees’ risk management awareness and accountability. Employees take ownership of their own risks and identify any issues of concern before a risk escalates. We have also developed risk procedures and protocols specific to different areas of the Company, to ensure all key activities are carried out within the defined levels of risk appetite. These are some of the actions that have taken place during the year:• The Board reviewed and updated the Company’s risk appetite and included two new risk areas, climate change and tailings storage. For both areas the Board defined the risk appetite as low• A risk assessment update was carried out at all of our operating companies, projects, exploration activities and support areas. Key risks that threaten the achievement of our strategic goals were managed and, when necessary, updated according to external and internal assessments of how the risk is changing and our risk appetite. The outcome was presented to the Audit and Risk Committee and the Board for their review• Critical controls and key risk indicator dashboards were updated and monitored• New action plans to maintain risk exposure within acceptable limits were prepared• Timely and comprehensive risk analysis was embedded into each relevant decision-making process• Specific procedures to support timely and in-depth risk analysis were defined for major projects and to characterise critical assets• Each operating company reviewed and updated its Business Continuity Plan, identifying and defining action plans for key risks which could interrupt operations• Members of the Executive Committee and the Risk Management team conducted performance reviews to monitor key risks and the applicability and efficacy of critical on-site controls at each operation• Best practices were shared across our operating companies• Budgeting and planning processes related to risk monitoring were included in the monthly executive review, in order to identify and manage any deviation from expected performance in a timely fashion• The importance of risk management was reinforced through regular communication and training, with over 95% of our executives and supervisors successfully completing an online risk management course Key elements of integrated risk managementWe recognise that risks are inherent to our businessOnly through adequate risk management can internal stakeholders be effectively supported in making key strategic decisions and implementing our strategyExposure to risks must be consistent with our risk appetiteThe Board defines and regularly reviews the acceptable level of exposure to key risks. Risks are aligned with risk appetite, taking into consideration the balance between threats and opportunitiesWe are all responsible for managing risksEach business activity carries out risk evaluations to ensure the sound identification, management, monitoring and reporting of risks that could impact the achievement of our goalsRisk is analysed through a consistent frameworkOur risk management methodology is applied to all our operating companies, projects, exploration activities and support areas so that we have a comprehensive view of the uncertainties that could affect achieving our strategic goalsWe are committed to continuous improvementLessons learned and best practices are incorporated into our procedures to protect and unlock value sustainably Governance
The Board determines the nature and extent of the significant risks
that we will accept in order to achieve our strategic objectives and
maintains sound risk management systems.
The Board receives detailed analysis of key matters in advance of
Board meetings. This includes reports on our operating performance,
including safety and health, financial, environmental, legal and social
matters, key developments in our exploration, project and business
development activities, information on the commodity markets,
updates on talent management and analysis of financial investments.
The provision of this information allows the early identification of
potential issues and the assessment of any necessary preventive
and mitigating actions.
The Audit and Risk Committee assists the Board by reviewing
the effectiveness of the risk management process and monitoring
key risks, preventive and mitigation procedures and action plans.
The Chairman of the Committee reports to the Board following
each Committee meeting and, if necessary, the Board discusses
the matters raised in more detail.
These processes allow the Board to monitor effectively Antofagasta’s
major risks and preventive and mitigating procedures, and to assess
whether the actual exposure is consistent with the defined risk
appetite. If a gap is identified, additional action plans are prepared.
The Risk and Compliance Management Department is responsible
for risk management systems across Antofagasta. It promotes the
Company’s risk management policy, vision and purpose to ensure
a strong risk management culture at all levels of the organisation.
The Department supports business areas in analysing their risks,
identifying existing preventive and mitigating controls and defining
further action plans. It maintains and regularly updates the Company’s
risk register.
The Department reports several times a year to the Audit and Risk
Committee on the overall risk management process, with detailed
updates on key risks, mitigation activities and actions being taken.
The General Managers of each of the operations have overall
responsibility for leading and supporting risk management. Risk
owners within each operation have direct responsibility for the risk
management processes and for regularly updating individual business
risk registers, including relevant mitigation activities. The individual
owners of the risks and controls at each business unit are identified,
to provide effective and direct management of risk. Each operation
holds its own annual risk workshop at which the business unit’s
risks and mitigation activities are reviewed in detail and updated as
necessary. Workshops are also used to assess key risks that may
affect relationships with stakeholders, limit resources, interrupt
operations and/or negatively affect potential future growth.
Mitigation techniques for significant strategic and business unit
risks are quarterly reviewed by the Risk and Compliance
Management Department.
We promote a consistent risk management process across the
Company’s different business units, ensuring risk is considered at all
levels of the organisation. Risk information flows from the business
units to the centre and from the Board back to the business units.
+ See pages 107-111 for more information
Board
of
Directors
Board
Committees
Executive
Committee
• Overall responsibility for risk management and its alignment
with Antofagasta’s strategy
• Approves the Risk Management Policy
• Defines risk appetite
• Reviews, challenges and monitors key risks
• Support the Board in monitoring key risks and
exposure relative to our risk appetite
• Make recommendations to the Board on the
risk management system
• Review the effectiveness and implementation
of the risk management system
• Assesses risks and their potential impact
on the achievement of our strategic goals
• Promotes our risk management culture
in each of the business areas
• Is the owner of key risks
First line
of defence
Second line
of defence
Third line
of defence
Each person is responsible
for identifying, preventing and
mitigating risks in their business
area and escalating concerns to
the appropriate level, if required.
The Risk and Compliance Department is
accountable for monitoring our overall
risk profile and risk management
performance, registering risks and
issuing alerts if any deviation is
detected.
The Internal Audit Department
provides assurance on the
risk management process,
including the effectiveness of
the performance of the first
and second lines of defence.
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23
Strategic Report Risk management continued
PRINCIPAL RISKS
We maintain a risk register through a robust assessment of the potential key risks that
could affect the Company’s performance. This register is used to ensure key risks are
identified in a comprehensive and systematic way and that agreed definitions of risk
are used.
Risk management
We are aware that not all risks can be completely eliminated
and exposure to some risks is necessary in pursuit of our
corporate objectives.
Mining is, by its nature, a long-term business and as part of the key
risks update and evaluation process we identify emerging risks, which
could impact on the Company’s sustainability in the long run, even if
there is limited information available at the time of the evaluation.
The main emerging risks that could impact long-term strategic
objectives are included in the key risk analysis and are reviewed
and monitored periodically. As new information based on research,
expert analysis and internal investigations becomes available, suitable
controls and action plans are defined and incorporated into the
Company’s risk matrix.
We identify, assess and manage the risks critical to the Company’s
success. Overseeing these risks benefits Antofagasta and protects
our business, people and reputation. The risk management process
provides reasonable assurance that the relevant risks are recognised
and controlled, and the Company achieves its strategic objectives and
creates value.
Because risks change and are periodically re-evaluated, the risk map
shown here represents the position at a specific point in time and the
changes since last year.
The Board carried out a robust assessment of the Company’s
principal risks during the year, which are set out below, together
with the related preventive and mitigation measures.
KEY
Low Medium High
Very
high
Risk appetite
Risk level
Risk
Risk
appetite
Risk level
2019
v. 2018
People
1. Talent management and labour relations
Safety and Sustainability
2. Safety and health
3. Environmental management
4. Climate change
5. Community relations
6. Political, legal and regulatory
7. Corruption
Competitiveness
8. Operations
9. Tailings storage
10. Strategic resources
11. Cyber security
12. Liquidity
13. Commodity prices and exchange rates
Growth
14. Growth of mineral resource base
and opportunities
15. Project execution
Innovation
16. Innovation and digitisation
Risk Heat Map
7
9
6
2
5
3
10 15
4
8
12
14
1
11
16
13
t
c
a
p
m
I
e
r
e
v
e
S
t
n
a
c
i
f
i
n
g
S
i
e
t
a
r
e
d
o
M
w
o
L
w
o
l
y
r
e
V
Very
unlikely
Unlikely
Possible
Likely
Almost
certain
Probability
24
Antofagasta plc Annual Report 2019
KEY RISKS
Risk appetite is a key element in the process of embedding the risk management
system into our organisational culture. The risk appetite statement helps to translate
our strategy into the business units’ objectives, clarifying which risk levels are, or are
not, acceptable. It promotes consistent risk decision-making, aligned to the strategic
focus and risk/reward balance approved by the Board.
The Board reviewed and updated Antofagasta’s risk appetite, for
the first time including two new risk areas, climate change and
tailings storage.
We maintain a risk register through a robust assessment of the
potential key risks that could affect the organisation’s performance.
This is used to ensure that key risks are identified in a comprehensive
and systematic way and that the agreed definitions of risk are used.
The key risks, together with related mitigation techniques, have
been presented to the Board and are in line with the organisation’s
strategic priorities of People, Safety and Sustainability, Competitiveness,
Growth and Innovation. In addition, all five of these strategic pillars
are supported by our corporate governance structures. The key risks
are outlined in the risk chart and table, and in more detail below.
People
1. Talent management and labour relations
Risk appetite
Risk level
Trend
Description
Our highly skilled workforce
and experienced management team
are critical to maintaining our current
operations, implementing development
projects and achieving long-term
growth without major disruption.
Managing talent and maintaining a
high-quality labour force in a changing
technological and cultural environment
is a key priority for us. Any failures in this
respect could have a negative impact on
the performance of the existing operations
and prospects for future growth.
Highlights
Four labour negotiations
took place in 2019. In one
case, at Antucoya, the
Company and labour
representatives could not
reach an agreement within
the prescribed negotiation
period and the workers’
union decided to execute
their legal option to initiate a
strike. The negotiation was
successfully concluded
after 18 days.
Preventive and mitigation measures
We maintain good relations with our employees and unions founded on trust, regular
dialogue and good working conditions. We are committed to safety, non-discrimination,
diversity and inclusion, and compliance with Chile’s strict labour regulations.
There are long-term labour agreements in place with all 19 unions at our operations,
helping to ensure labour stability.
We seek to identify and address labour issues that may arise throughout the
period covered by the labour agreements (usually three years) and to anticipate any
potential issues in good time. Contractors are an important part of our workforce
and under Chilean law are subject to the same duties and responsibilities as our
own employees. We treat contractors as strategic associates and build long-term,
mutually beneficial relationships.
We maintain constructive relationships with our employees and their unions
through regular communication and consultation. Union representatives are
regularly involved in discussions about the future of the workforce.
We develop the talents of our employees through training and career development,
invest in initiatives to widen the talent pool and are committed to our diversity and
inclusion policy. Through these actions we aim to increase the number of women,
people with disabilities and employees with international experience in the workplace.
Our Employee Performance Management System is designed to attract and
retain key employees by creating suitable reward and remuneration structures
and providing personal development opportunities. We have a talent management
system to identify and develop internal candidates for key management positions,
as well as identifying suitable external candidates where appropriate.
antofagasta.co.uk
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Strategic Report
Risk management continued
Safety and Sustainability
2. Safety and health
Description
Safety and health incidents could result
in harm to our employees, contractors
and local communities. Ensuring their
safety and wellbeing is our ethical
obligation and first priority and is part
of our core values. A poor safety record
or serious accidents could have a
long-term impact on Antofagasta’s
morale, reputation and production.
Risk appetite
Risk level
Trend
Preventive and mitigation measures
We seek continuous improvement of our safety and health risk management
procedures, with particular focus on the early identification of risks and the
prevention of fatalities.
The Corporate Safety and Health Department provides a common strategy for our
operations and co-ordinates all safety and health matters. We have a Significant
Incident Report system, which is an important part of the overall approach to safety.
Our goal of zero serious accidents and fatalities and minimising the number of
accidents requires all contractors to comply with our Occupational Safety and
Health Plan. This plan is monitored through monthly audits and is supported by
regular training and awareness campaigns for employees, contractors, employees’
families and local communities, particularly with regard to road safety. We require
all staff in defined safety-critical roles to satisfy at least the minimum qualifications,
to have the necessary experience for their role and to complete any required
training prior to commencing their work activities.
Critical controls and verification tools are regularly strengthened through the
verification programme and regular audits of critical controls for potentially
high-risk activities.
We continuously seek to incorporate technology and innovation to reduce workers’
exposure to safety and health risks.
Highlights
In 2019 there were no
fatal accidents. Our focus
remained on preventing
accidents to our employees
and contractors by regularly
revisiting and improving
safety and health standards.
Risks were re-evaluated,
focusing on the risk of
fatality and analysing
high potential accidents
identified during the year.
3. Environmental management
Risk appetite
Risk level
Trend
Description
An operating incident that damages
the environment could affect both our
relationship with local stakeholders and
our reputation, undermining our social
licence to operate and grow.
We operate in challenging environments,
including the largely agricultural Choapa
Valley and the Atacama Desert, where
water scarcity is a key issue.
4. Climate change
Description
The effects of climate change have had
an increasing impact on our operations.
The drought in the central area of
Chile is affecting water availability,
while higher than expected rainfall in the
northern part of the country is impacting
the infrastructure in the region and the
increasing severity of sea swells are
leading to delays in the delivery of
key supply materials.
We are committed to contributing to
the reduction of the global problem
of growing greenhouse gas emissions
and water scarcity by reducing our own
emissions. We can do this by increasing
the amount of power and water we obtain
from renewable and sustainable sources.
Preventive and mitigation measures
We have a comprehensive approach to incident prevention. Relevant risks are
assessed, monitored and controlled in order to achieve our goal of zero incidents
with significant environmental impact. We work to raise awareness among
employees and contractors, providing training to promote operating excellence.
The potential environmental impact of a project is a key consideration when
assessing its viability, and we encourage the integration of innovative technology
in the project design to mitigate such impacts.
Highlights
We had no incidents with
significant environmental
impact during 2019. We also
monitored and reinforced
our critical controls in line
with our low appetite for
environmental risk.
We prioritise the efficient use of natural renewable resources by using sea water,
favouring the use of renewable power sources, achieving higher rates of reuse and
recovery of water through thickened tailings technology and reducing greenhouse
gas emissions through energy efficiency and other measures.
We recognise that environmental sustainability is key to our licence to operate and
perform regular risk assessments to identify potential impacts and develop
preventive and mitigating strategies.
Each site maintains an updated environmental emergency preparedness plan and
a detailed closure plan with appropriate financial provisions to ensure physical and
chemical stability once operations have ceased.
Risk appetite
Risk level
Trend
Preventive and mitigation measures
We recognise that climate change is a threat to human life and the planet as we
know it today.
We measure and report our greenhouse gas emissions and have committed to
reduction targets based on realistic plans.
As regards water scarcity, we are reducing our dependence on continental water
through improved water use efficiency and the increased use of sea water as a
total proportion of our water consumption. On completion of the Los Pelambres
desalination plant the proportion of continental water used will decrease further.
We constantly seek to identify risks associated with climate change and to implement
actions to mitigate and adapt to their potential impact. For each risk evaluated as
“High” or “Extreme” we define specific action plans and strategies.
As part of our regular communication with local stakeholders we discuss the
material risks and our controls, action plans and related strategies.
Highlights
The climate change risk area
was included in the key risks
analysis for the first time in
2019, in recognition of the
increasing impact it could
have on our operations and
business sustainability.
We are committed to
contributing to the reduction
of greenhouse gas
emissions and support local
communities in preparing for
the effects of increasing
emissions.
26
Antofagasta plc Annual Report 2019
5. Community relations
Description
Failure to identify and manage local
concerns and expectations could
negatively impact Antofagasta. Relations
with local communities and stakeholders
affect our reputation and social licence to
operate and grow.
Risk appetite
Risk level
Trend
Preventive and mitigation measures
We have a dedicated team that establishes and maintains relations with local
communities. These relationships are based on trust and mutual benefit throughout
the mining lifecycle, from exploration to final remediation on closure. We seek to
identify early any potentially negative operating impacts and minimise these through
responsible behaviour. This means acting transparently and ethically, prioritising the
safety and health of our employees and contractors, avoiding environmental incidents,
promoting dialogue, complying with our commitments to stakeholders and establishing
mechanisms to prevent or address a crisis. These steps are undertaken in the early
stages of each project and continue throughout the life of each operation.
Highlights
In 2019, during a period of
nationwide social unrest, a
blockade of the access road
to Los Pelambres affected
its operations. Transparency
and open dialogue with
stakeholders led to a return
to normal operations after
a short period of disruption.
We contribute to the development of communities in the areas in which we operate,
starting with an assessment of the existing situation and their specific needs, while
looking to develop long-term, sustainable relations and evaluating the impact of our
contributions. We are also focused on developing the potential of members of local
communities through education, training and employment.
We work to communicate clearly and transparently with local communities, in line
with our Community Relations Plan. This includes a grievance management process,
local perception surveys, and local media and community engagement.
6. Political, legal and regulatory
Risk appetite
Risk level
Trend
Description
Political instability may affect our
operations, projects and exploration
activities in the countries in which we
operate. Issues regarding the granting
of permits, or amendments to permits
already granted, and changes to the legal
environment or regulations, could also
adversely affect our operations and
development projects.
Preventive and mitigation measures
Political, legal and regulatory developments affecting our operations and projects are
constantly monitored. We comply fully with the existing laws, regulations, licences,
permits and rights in each country in which we operate.
We assess political risk as part of our evaluation of potential projects, including the
nature of any foreign investment agreements.
We monitor proposed changes in government policies and regulations, particularly
in Chile, and belong to several associations that engage with governments on these
changes. This helps to improve our internal processes and better prepare to meet
any new regulatory requirements.
As we have no operations or material exposure to the UK, Brexit is not expected to
have any appreciable impact on the Company. This position is kept under review as
Brexit discussions continue.
Highlights
Following nationwide social
unrest in Chile several legal
and regulatory changes
have been proposed,
including labour, tax and
environmental reforms.
We will evaluate the impact
of these changes on
our activities and will
seek to mitigate any
negative impacts.
7. Corruption
Description
Our operations or projects around the
world could be affected by risks related
to corruption or bribery, including
operating disruptions or delays resulting
from a refusal to make “facilitation
payments”. Such risks depend on the
economic or political stability of the
country in which we are operating.
Risk appetite
Risk level
Trend
Preventive and mitigation measures
We have a “zero tolerance” regime for any activity that would result in contravening
anti-bribery and corruption legislation. A robust governance regime, including an
Ethics Committee, open channels of communication, training and multiple layers
of controls, are maintained at all of our operations and exploration activities, and
in our third-party relationships.
Our compliance model seeks to prevent any activity which may involve us directly
or indirectly in any irregular situation, to detect any potential risk in good time and
to act accordingly. There are control procedures in place that help to prevent
corruption, covering such issues as conflicts of interest, suitability of suppliers,
the receiving and giving of gifts and hospitality, and facilitation payments.
All our employees receive training on our Compliance Model, which is subject
to external certification.
Highlights
New offences were
included in the Chilean
anti-bribery law in late 2018
and early 2019. Accordingly,
our crime prevention model
was updated, and related
risks re-evaluated. The
main risk identified is the
severe transgression of
the law, which has been
evaluated as being very
unlikely, yet with a
potentially severe impact.
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Strategic Report Risk management continued
Competitiveness
8. Operations
Description
Our operations are subject to a
number of circumstances not wholly
within our control. These include
damage to or breakdown of equipment
or infrastructure, unexpected geological
variations or technical issues, extreme
weather conditions and natural disasters,
any of which could adversely affect
production and/or costs.
Risk appetite
Risk level
Trend
Preventive and mitigation measures
Key risks relating to each operation are identified as part of the regular risk
review process undertaken by the individual operations. This process also identifies
appropriate mitigation measures for such risks. Monthly reports to the Board provide
variance analysis of operating and financial performance, allowing potential issues to
be identified in good time and any necessary monitoring or control activities to be
implemented to prevent unplanned downtime.
Our focus is on maximising the availability of equipment and infrastructure and
ensuring the effective utilisation of our assets, in line with their nameplate design
and technical limits. We keep the variation of processes within defined
tolerance limits.
We have Business Continuity Plans and Disaster Recovery Plans for all key
processes within our operations in order to mitigate the consequences of a crisis or
natural disaster. We also have property damage and business interruption insurance
to provide protection from some, although not all, of the costs that may arise from
such events.
Highlights
In 2019 all operational
risks were continually and
consistently monitored at all
of our operations. Common
operating models, preventive
maintenance and cost
control supported our strong
operating performance
during the year, despite
the materialisation of social
and labour risks.
9. Tailings storage
Description
Ensuring the stability of our tailings
storage facilities (TSFs) during their
entire lifecycles is central to our
operations. A failure or collapse of any
of our TSFs could result in fatalities,
damage to the environment, regulatory
violations, reputational damage and
the disruption of the quality of life of
neighbouring communities as well
as our operations.
Risk appetite
Risk level
Trend
Preventive and mitigation measures
We manage our TSFs in a manner that allows the effectiveness of their design,
operation and closure to be monitored at the highest level of the Company.
Catastrophic failures of TSFs are unacceptable and their potential for failure will be
evaluated and addressed throughout the entire life of each facility. The facilities are
constantly monitored and all relevant information is provided to the authorities,
regulating bodies and the communities that could be affected.
We manage our TSFs based on data, modelling, and construction and operating
methods validated by highly qualified independent international experts, whose
recommendations we implement in order to strengthen the control environment.
Risk management includes timely risk identification, and control definition and
verification. Controls are based on the consequences of the potential failure of
the tailings facilities.
Highlights
The tailings storage risk
area was included as a
specific risk in the key
risks analysis in 2019
for the first time. It was
previously included as
part of Operations risks.
10. Strategic resources
Description
Disruption or restrictions to the supply
of any of our key strategic inputs such
as electricity, water, fuel, sulphuric acid
or mining equipment could negatively
impact production. In the longer term,
restrictions to the availability of key
strategic resources such as water
and electricity could also affect our
growth opportunities.
A significant portion of our input
costs are influenced by external
market factors.
11. Cyber security
Description
Breaches in, or failures of, our
information security management could
adversely impact our business activities.
Malicious interventions (hacking) of our
information or operations’ networks
could affect our reputation and/or
operational continuity.
Risk appetite
Risk level
Trend
Preventive and mitigation measures
In order to achieve security of supply, contingency plans are in place to address any
short-term disruptions to strategic resources. We negotiate early with suppliers of key
inputs to ensure supply continuity. Certain key supplies are purchased from several
sources to mitigate potential disruption arising from exposure to a single supplier.
To achieve cost competitiveness, we endeavour to buy the highest possible
proportion of our key inputs, such as fuel and tyres, on as variable a price basis as
possible, and to link costs to underlying commodity indices where this option exists.
We are committed to incorporating sustainable technological and innovative solutions,
such as using sea water and renewable power when economically viable, to mitigate
exposure to potentially scarce resources.
We maintain a rigorous, risk-based supplier management framework to ensure that
we engage solely with reputable product and service providers and keep in place
necessary controls to ensure the traceability of all supplies (including avoiding any
conduct related to modern slavery).
Highlights
In 2019 Antucoya’s
power supply contract was
renegotiated, achieving cost
reductions and supply from
renewable energy sources,
which will reduce the
Company’s greenhouse
gas emissions from 2022.
Risk appetite
Risk level
Trend
Preventive and mitigation measures
Our information security management model is designed with defensive structural
controls to prevent and mitigate the effects of computer risks. It employs a set of
rules and procedures, including a Disaster Recovery Plan, to restore critical IT
functions in the event of an attack.
Our systems are regularly audited to identify any potential threats to the operations
and additional systems have been put in place to protect our assets and data.
Highlights
In 2019, in addition
to periodic IT systems
assessments, operating
control systems hacking
tests were performed,
following which the
probability of this risk was
re-evaluated downwards.
28
Antofagasta plc Annual Report 2019
12. Liquidity
Description
Restrictions in financing sources for
future growth could prevent us from
taking advantage of growth or other
opportunities available in the market.
Risk appetite
Risk level
Trend
Preventive and mitigation measures
Security, liquidity and return represent the order of priorities for our investment
strategy. We maintain a strong and flexible balance sheet, consistently returning
capital to shareholders while leaving sufficient funds to progress our short, medium
and long-term growth plans while maintaining our financial flexibility to take
advantage of opportunities as they may arise.
We have a risk-averse investment strategy, managing our liquidity by maintaining
adequate cash reserves and financing facilities through the periodic review of
forecast and actual cash flows. We choose to hold surplus cash in demand or
term deposits or highly liquid investments.
Highlights
In 2019 we successfully
financed the Los Pelambres
Expansion project with
100% debt and refinanced
the Antucoya project
financing with a long-term
unsecured corporate loan.
13. Commodity prices and exchange rates
Risk appetite
Risk level
Trend
Description
Our results are heavily dependent
on commodity prices – principally
copper and, to a lesser extent, gold
and molybdenum. The prices of these
commodities are strongly influenced by
a variety of external factors, including
world economic growth, inventory
balances, industry demand and supply,
possible substitution, etc.
Our sales are mainly denominated in US
dollars, although some of our operating
costs are in Chilean pesos. As a result, the
strengthening of the Chilean peso may
negatively affect our financial results.
Preventive and mitigation measures
We consider exposure to commodity price fluctuations to be an integral part
of our business and our usual policy is to sell our products at prevailing market
prices. We monitor the commodity markets closely to determine the effect of price
fluctuations on earnings, capital expenditure and cash flows. Very occasionally, when
we feel it is appropriate, we use derivative instruments to manage our exposure to
commodity price fluctuations.
We run our business plans through various commodity price scenarios and develop
contingency plans as required.
As copper exports account for over 50% of Chile’s exports, there is a correlation
between the copper price and the US dollar/Chilean peso exchange rate. This
natural hedge partly mitigates our foreign exchange exposure. However, we monitor
the foreign exchange markets and the macroeconomic variables that affect them
and on occasion we implement a focused currency hedging programme to reduce
short-term exposure to fluctuations in the US dollar against the Chilean peso.
Highlights
In 2019 copper price
and exchange rates risks
remained high, unchanged
compared to 2018.
Growth
14. Growth of mineral resource base and opportunities
Risk appetite
Risk level
Trend
Description
We need to identify new mineral
resources to ensure continued future
growth, and we do this through
exploration and acquisition.
We may fail to identify attractive
acquisition opportunities or select
inappropriate targets. The long-term
commodity price forecast, and other
assumptions used when assessing
potential projects and other investment
opportunities, have a significant influence
on the forecast return of investments.
If incorrectly estimated, these could
result in poor decision-making.
As regards exploration, there is a risk
that we may not identify sufficient viable
mineral resources.
Preventive and mitigation measures
Our exploration and investment strategy prioritises exploration and investment in the
Americas. We focus on growth opportunities in stable and secure countries in order
to reduce our risk exposure.
We conduct rigorous assessment processes to evaluate and determine the risks
associated with all potential business acquisitions and strategic exploration alliances,
including conducting stress-test scenarios for sensitivity analysis. Each assessment
includes country risk analysis (including corruption) and analysis of our ability to
operate in a new jurisdiction.
At the very least, all joint ventures must operate in line with, or to the equivalent
level of, our policies and technical standards.
Our Business Development Committee reviews potential growth opportunities
and transactions, and approves or recommends them within authority levels set
by the Board.
Highlights
During 2019 our exploration
activities focused mostly on
the Americas and our risk
exposure level remained at
the same level as in 2018.
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29
Strategic Report Risk management continued
15. Project execution
Description
Failure to effectively manage our
development projects could result in
delays to the start of production and
cost overruns.
Risk appetite
Risk level
Trend
Preventive and mitigation measures
We have a project management system to apply the best practices at each phase
of a project’s development. The project management system provides a common
language and standards to support the decision-making process by balancing risk
with the benefit of growth. In addition, all geometallurgical models are reviewed by
independent experts.
During the project development lifecycle, quality checks for each of the standards
applied are carried out by a panel of experts from within the Company. This panel
reviews each completed feasibility study to assess the technical and commercial
viability of the project. It also assesses how the project can be developed safely
and considers any relevant risks or opportunities that could potentially impact
the schedule, cost or future performance of the project.
Detailed progress reports on ongoing projects are regularly reviewed and
include assessments of progress against key project milestones and
performance against budget.
Project robustness is stress-tested against a range of copper price scenarios.
Joint project/operation teams are established early in the development project
in order to ensure smooth transition of the project into operating mode once
construction is completed.
Highlights
The Los Pelambres
Expansion project started
construction at the
beginning of the year,
increasing the Company’s
exposure to project
execution risks. These
risks are being proactively
managed and frequently
evaluated by the project
team according to a
specific project risk
management procedure.
Innovation
16. Innovation and digitisation
Risk appetite
Risk level
Trend
Description
Our ability to deliver on our strategy and
performance targets may be undermined
by missed opportunities or delays in
adopting new technologies and our
ability to innovate.
Preventive and mitigation measures
We seek value-capturing innovations that realise cost savings and/or improve the
efficiency, reliability and safety of our processes while supporting our corporate
strategic pillars. We evaluate the potential of all ideas using our stage-gate approval
process and Innovation Board.
We maintain partnerships with academic institutions and companies specialising in
technology and engineering, including peers where there is no competitive barrier
to doing so, in order to maximise the potential for improvements in our processes
and systems. A dedicated team monitors, identifies and analyses external innovation
trends with potential application to our business, including in non-operational areas
such as product sales and purchasing. The team also maintains and manages a
portfolio of ongoing innovation projects.
We have a recognition and incentives programme to encourage all staff to suggest
innovations to our day-to-day operating systems. We also dedicate resources to
testing and, if successful, escalating innovations with potential positive impact on
our business and growth options.
Highlights
In 2019 we launched
our digital transformation
programme, focused on
increasing the integration
of technology into our
operating and administrative
processes.
Viability statement
To address the requirements of provision 31 of the 2018 UK Corporate
Governance Code, the Directors have assessed the prospects of the Group
over a period of five years.
Mining is a long-term business and timescales can run into decades. The
Group maintains Life-of-Mine plans covering the full remaining mine life
for each of the mining operations. More detailed medium-term planning is
performed for a five-year time horizon (as well as very detailed annual
budgets). Accordingly, a period of five years has been selected as the
appropriate period over which to assess the prospects of the Group.
When taking account of the impact of the Group’s current position on this
viability assessment, the Directors have considered in particular its financial
position, including its significant balance of cash, cash equivalents and liquid
investments and the borrowing facilities in place, including their terms and
remaining durations.
When assessing the prospects of the Group, the Directors have considered
the Group’s copper price forecasts, the Group’s expected production levels,
operating cost profile, capital expenditure and financing plans. This analysis
has focused on the existing asset base of the Group, without factoring in
potential development projects, which is considered appropriate for an
assessment of the Group’s ability to manage the impact of a depressed
economic environment. The Directors have assessed the principal risks
which could impact the prospects of the Group over this period, and consider
the most relevant to be risks to the copper price outlook. Robust down-side
sensitivity analyses have been performed, assessing the impact of:
• A significant deterioration in the copper price outlook over the five-year period
• No additional borrowing facilities being available to the Group over the
review period
• The occurrence of several of the Group’s most significant potential risks,
including operational stoppages due to labour strikes or other factors, within
a single year
The stress tests indicated results which could be managed in the normal
course of business. Based on their assessment of the Group’s prospects
and viability, the Directors confirm that they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as
they fall due over the next five years.
30
Antofagasta plc Annual Report 2019
COMPLIANCE AND
INTERNAL CONTROLS
The way in which we achieve our objectives is crucial to the long-term sustainable
development of the Company. We have zero tolerance for bribery and corruption and
we are committed to working with integrity and transparency. We comply with all
applicable anti-corruption and anti-bribery legislation and ensure the necessary
controls are in place to prevent any unethical behaviour.
Areas of focus and development during 2019
• In-depth training and briefings in ethics and compliance,
particularly in the higher-risk areas
• A Compliance Week was held for our employees in December as
a refresher programme for our Compliance Model. Examples of
ethical dilemmas were discussed, with presentations of real cases
of misconduct. The importance of taking the right actions was
emphasised and the role of the leadership team in preventing
irregular situations was reinforced
• New employees were trained in the Compliance Model as part of
their induction programme
• Controls in the Procurement Department were reinforced and the
supply chain due diligence process was strengthened, particularly
in respect of working conditions and modern slavery
• All employees updated their conflict of interest disclosures
• We improved and updated our whistleblowing channel for
employees and third parties to submit questions and complaints
• We updated our Crime Prevention Model
Code of Ethics
The Code of Ethics sets out Antofagasta’s commitment to
undertaking business in a responsible and transparent manner.
The Code requires honesty, integrity and accountability from all
employees and contractors and includes guidelines for identifying
and managing potential conflicts of interest. It is the basis for the
Compliance Model and supports the implementation of all other
related activities.
Compliance Model
Antofagasta’s Compliance Model applies to both employees and
contractors. It is clearly defined and is communicated regularly
through internal channels, as well as being available on our website.
All contracts include clauses relating to ethics, modern slavery
and crime prevention to ensure contractors’ adherence to our
Compliance Model.
We actively promote open communication with all our employees,
contractors and local communities. This helps ensure that our
corporate and value creation objectives are achieved in an ethical
and honest way.
The Compliance Model is reviewed regularly, both internally and
by third parties, and on matters relating to corruption it has been
certified under Chilean anti-corruption legislation.
Compliance model
Prevention
Detection
Action
Full management of risks
Prevention: The main focus of the Compliance Model is to prevent
any irregular situations arising. We provide a series of tools and
training opportunities to all employees and contractors to support
appropriate behaviour through:
• Internal procedures
• Anti-trust guidelines (Politically Exposed Persons,
facilitation fees, etc)
• Due diligence, review of conflicts of interest and of potential
business partners
• Inclusion of anti-corruption clauses in contracts
• Training and communication
Detection: We have several tools to detect any potentially irregular
situations, including:
• Whistleblowing channels
• Data analysis
• Regular due diligence
• Internal controls
• Internal audit
Action: If an irregular situation is detected, it is investigated
according to Antofagasta’s allegation investigation procedures.
Each operating company has an internal Ethics Committee which
reviews the conclusions of investigations and suggests action plans to
the corporate Ethics Committee. The performance of the compliance
programme is reported quarterly to the Audit and Risk Committee
and every six months to the Board. The anonymity of employees
using the whistleblowing channels is guaranteed, which safeguards
individuals and achieves greater transparency.
Our Crime Prevention Model ensures compliance with the anti-
bribery and anti-corruption laws in the United Kingdom and Chile
and is certified by an external entity.
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Strategic Report STAKEHOLDER
REVIEW
Mining is a long-term activity which has an even
longer-term impact and we seek to ensure that
our business develops on a sustainable basis.
32
Antofagasta plc Annual Report 2019
Antofagasta during 2019
Safety and health
Both our Mining and Transport divisions exceeded their safety
targets, achieving record results for the year.
We expanded our Standards to cover wider occupational health
issues as well as safety risks.
Our people
A pilot flexitime system was introduced at the Centinela mine
and will gradually be rolled out to other areas.
New work/life balance guidelines focus on facilitating a healthy
balance between employees’ working and personal lives, as well
as the integration of women and people with disabilities.
Four labour negotiations took place in 2019, one of which was
only settled after an 18-day strike, the first in our history.
Suppliers
In December we raised the Ethical Minimum Wage, which
our Mining division’s on-site contractors must pay employees,
to two-thirds above the legal minimum wage in Chile.
Our new Guidelines on Regional Procurement and Recruitment
make it easier for local companies to obtain contracts with our
mining operations.
Through the Antofagasta Mining Cluster, a public-private
alliance, we have continued to contribute to the development
of local human capital and businesses.
Communities
We have rolled out our new Social Management Model, designed
to ensure consistency in community engagement and relations.
We carried out a human rights due diligence process as a prior
step to drawing up a corporate Human Rights Policy.
The Transport division submitted an Environmental Impact
Assessment for the first stage of a project in the centre
of the city of Antofagasta to prepare its railway yard for
urban development.
Environment
In 2019, no significant environmental incidents occurred at
our operations.
We are strengthening our Climate Change Strategy, which
includes water and CO2 emissions.
Los Pelambres obtained Chile’s first certified green loan,
for the construction of its expansion project, which includes
a desalination plant.
At Los Pelambres, we are piloting a public-private initiative
to provide public access to online data about the condition of
tailings deposits.
Currently, 22% of our energy consumption is supplied from
renewable sources, 65% is contracted to be renewable by
2022, and we expect that further contracts will be signed
by then, making 100% of our energy renewable.
Sustainable governance
We updated our risk matrix, specifically incorporating climate
change and tailings storage.
We published our fourth Payment to Governments Report in June.
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33
Stakeholder review
Creating sustainable value
for our stakeholders
How we engage with
our stakeholders
Our people
Safety and health
Communities
Environment
Suppliers
Customers
Shareholders
Governments and regulators
Non-financial information statement
34
36
38
41
42
44
47
48
49
50
51
Strategic Report Stakeholder review
CREATING SUSTAINABLE
VALUE FOR OUR
STAKEHOLDERS
“A commitment to sustainability is one of our six core values. As well as
seeking to maximise the value of our assets, we aim to contribute to the
social and economic development of the areas in which we operate and
to minimise our environmental impact, while always being open and
transparent with all our stakeholders.”
René Aguilar
Vice President of Corporate Affairs and Sustainability
Antofagasta is a constituent of the FTSE4Good
Index series and the STOXX Global
ESG Leaders Index
Antofagasta has been
included in the 2020 SAM
Sustainability Yearbook
Member of the International
Council on Mining and
Metals (ICMM)
Antofagasta publicly discloses its Climate
Change and Water Management through
the Carbon Disclosure Project (CDP)
Los Pelambres is a
signatory to the United
Nations Global Compact
34
Antofagasta plc Annual Report 2019
Board involvementThe Board is responsible for leading and monitoring sustainable practices. The Sustainability and Stakeholder Management Committee assists the Board in the stewardship of the Group’s sustainability programmes and makes recommendations to ensure that ethical, safety and health, environmental, social and community considerations are included in the Board’s deliberations.The Committee reviews and updates the Group’s strategy and policy framework, including safety and health, environment, climate change, human rights, communities and other stakeholder issues. It also establishes targets and monitors the Group’s performance in these areas.One way sustainability and performance goals are embedded in employees’ practices is by incorporating sustainability targets in annual performance bonus agreements. This helps mobilise and align the whole organisation behind strong sustainability practices, clearly signalling the Board’s commitment to creating value in a sustainable manner. Targets associated with safety, people, environment and social performance account for 20% of these.A year of important progress and achievementsOn various fronts we have reason to be proud of our achievements during 2019. Our safety and health performance was the best in the Group’s history and once again we had no serious environmental incidents.Beyond these and other indicators, there is, however, a broader story to tell that is crucial for the ongoing creation of value for us and all our stakeholders.As well as continuing to consolidate our Environmental Management Model, which is now in its second year, we have drawn up a specific Climate Change Strategy that includes water – a key concern in the areas where we operate – as well as GHG emissions. In line with this, we have taken important strides in modifying our electricity matrix, shifting towards renewable sources which will, we anticipate, account for all our electricity consumption at our Los Pelambres, Antucoya and Zaldívar operations by 2022.Another focus has been tailings which, following the recent accidents in Brazil, have become a matter of international concern. Partly because it is earthquake-prone, Chile has extremely strict standards and we believe we can contribute in this field, mainly through collaborative alliances at both industry and local levels. An example of this is our participation in the local Programa Tranque (Tailings Programme), a public-private alliance whose work to develop an online monitoring system is being piloted at Los Pelambres.Through the Antofagasta Mining Cluster, another public-private alliance, and our own social investment programmes, as well as the jobs we create, we continually seek to make a sustainable contribution to the development of local communities.We believe that in this way we can build the successful relationships that are key to the long-term success of the Group, the areas in which we operate and the country as a whole. Identifying our impact
We seek to develop mining for a better future, creating value for
our stakeholders in an innovative and sustainable way, with a lasting
positive impact for our host communities and Chile’s mining regions.
We believe that mining for a better future implies addressing
significant challenges and assuming leadership in devising
solutions that deliver value to our different stakeholders.
Challenges and solutions
We are seeking solutions to technical, operational and socio-
environmental challenges, harnessing our experience, the lessons
we have learned, our capacity for innovation and the diversity and
knowledge of our workforce.
Our key challenges include:
Providing a
safe workplace
This is our principal challenge because mining necessarily involves
activities that can be hazardous and have serious consequences.
As a Group, we have continued to strengthen the implementation
of our Safety and Health Strategy, manage safety and health risks
efficiently, improve incident reporting and foster visible safety
leadership at our operations.
+ See page 41 for more information
Adapting to
climate change
In 2019, we incorporated climate change as a specific risk into our
risk matrix and are working internally to address its implications,
including water scarcity, which is the single largest challenge.
We use sea water at our most northern operations and at
Los Pelambres we are building a desalination plant, which will
be operational from 2021.
+ See page 44 for more information
We have set ourselves the target of reducing our direct and
indirect annual CO2 emissions by 300,000 tonnes by 2022. The use
of renewable energy is key to us achieving this target and we have so
far signed supply contracts of this type for three of our four operations.
+ See page 45 for more information
Implementing a respectful,
diverse and inclusive work culture
In 2019, we carried out a human rights due diligence process across
all our operations as a prior step to drawing up a corporate Human
Rights Policy and associated action plan. We have also continued to
implement our Diversity and Inclusion Strategy, focusing in 2019 on
creating more flexible and inclusive working environments that foster
improvements in employees’ work/life balance.
+ See page 42 and 38 for more information
Resistance to new projects and
greater societal demands regarding
the real contribution of mining to
local development
These are undoubtedly the challenges that have gained
most prominence in recent years. Our collaborative, trackable,
comprehensive and transparent dialogue with our host communities
has been critical in moving the relationship from one of competition
to one of coexistence. This has allowed the Company and local people
to jointly prepare long-term development plans that have a positive
impact for all parties. As part of this process, we continued to
implement our Social Management Model in 2019 as a vehicle for
addressing stakeholders’ principal concerns and social demands.
In addition, we seek to align our environmental and social
commitments with the UN Sustainable Development Goals (SDGs)
and address local problems in ways that contribute in a tangible way
to achieving these goals.
These challenges are compounded by economic and operating
challenges, such as the volatility of the copper market, uncertainty
about the world economy and international trade, and the increase
in costs as the operations age and grades decline.
+ See page 42 for more information
Sustainability priorities
Our Sustainability Policy is structured around five pillars:
People, Financial Performance, Environmental Management,
Social Development, and Transparency and Corporate Governance.
The Policy provides the framework for our constant effort to develop
mining for a better future.
Our sustainability priorities are anchored in both our values and our
main risks and opportunities, and our stakeholders’ key concerns and
expectations. All of these are reviewed frequently by the Board and
its Sustainability and Stakeholder Management Committee.
Sustainable Development Goals
In 2019, we continued to map our contribution to the Sustainable
Development Goals that we have identified as relevant to the
Choapa Province where Los Pelambres is located. Through
this exercise, we seek to detect gaps and opportunities
for improvement.
Our challenge in 2020 will be to identify those SDGs which
will impact in the Province the most, and incorporate the
corresponding actions into how Los Pelambres operates.
Our aim is to contribute to the achievement of the SDGs
in the area and in the country as a whole.
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35
Strategic Report
Stakeholder review continued
HOW WE ENGAGE WITH
OUR STAKEHOLDERS
Open and transparent engagement with our stakeholders is essential for the long-term
success of our business. Engagement is based on mechanisms through which we
provide information about our activities and learn about our stakeholders’ interests
and concerns.
Communities
Suppliers
We work with some 3,850 suppliers, of
which 93% are based in Chile. Suppliers
provide a wide range of products and
services from large mining equipment
to catering and transport services.
Why we engage
Suppliers play a critical role in our ability
to operate sustainably, safely and efficiently
and therefore we seek to ensure that they
comply with our standards and guidelines on
sustainability matters. We prioritise the use
of local suppliers and pay special attention
to our largest suppliers in each category
to ensure the most cost-effective, efficient
and sustainable solutions.
How we engage
The procurement team regularly meets
with suppliers who are encouraged to raise
any issues or concerns they may have.
Tenders take place through an online
platform, designed to guarantee fair and
transparent processes, and in 2019 we
developed software to automate the issue
of invitations to tender, significantly
extending our reach and particularly
benefiting potential local suppliers.
+ See page 47 for more information
Our operations’ neighbours include a
range of communities in Chile’s Antofagasta
and Coquimbo Regions. We seek to grow
together with our communities and to
contribute to their long-term social and
economic development. Our operations
naturally affect local communities and we
strive to prevent, mitigate and compensate
for any adverse impact our activities
may have.
Why we engage
The wellbeing of local communities is
directly related to our business success
and we believe that mining activities bring
unique opportunities for national and
local development.
How we engage
Engagement is one of the four pillars
of our Social Management Model and
much of it takes place through our flagship
programmes: Somos Choapa (We are
Choapa) in the Coquimbo Region and
Diálogos para el Desarrollo (Dialogues for
Development) in the Antofagasta Region.
These programmes include mutual
collaboration on the design of initiatives to
foster local development, as well as other
channels of contact such as mine site visits.
Engagement with local communities is
regularly reported to the Sustainability
and Stakeholder Management Committee
and to the Board.
+ See page 42 for more information
36
Antofagasta plc Annual Report 2019
Our peopleThe Group has a workforce of approximately 25,100 people (direct employees and contractors’ employees), including our operations, projects, exploration programmes and corporate offices. Almost all of our workforce is based in Chile and 51% is from communities near our operations. Contractors account for approximately 74% of the workforce at our operations.Why we engageConstructive relationships anchored in mutual respect and transparency help us to retain employees and avoid labour disputes, making for higher productivity and efficiency. Contractors are essential to mining operations and operational continuity requires that they adhere to the same standards as those expected of Antofagasta’s own employees, particularly regarding safety and health.How we engage• Site visits• Quarterly on-site CEO updates• On-site reviews• Engagement surveys• Regular meetings with unions and contract managers• Meetings on safety and health and other topics• Performance evaluation+ See page 38 for more information S.172(1) Statement
Antofagasta’s purpose is to develop mining for a better future –
to achieve this and continue to deliver sustainably, we rely on the
support of a range of different stakeholders. This means always
putting the safety of our people first as we seek to deliver value
to our customers, suppliers, shareholders and the communities
in which we operate.
The Directors of Antofagasta plc have acted in accordance with
their duties to operate in the way that they consider, in good faith,
is most likely to promote the success of the Company for the
benefit of its members as a whole, particularly with regard to
the stakeholders and matters set out in section 172(1) of the
Companies Act 2006, including amongst other matters:
• The likely consequences of any decision in the long term;
• The interests of the Company’s employees;
• The need to foster the Company’s business relationships with
suppliers, customers and others;
• The impact of the Company’s operations on the community and
the environment;
• The desirability of the Company maintaining a reputation for
high standards of business conduct; and
• The need to act fairly as between members of the Company.
Section 172 considerations are embedded in decision-making at
Board level and throughout the Group. Throughout the Strategic
Report we outline the way in which we engage with our stakeholders
to create value throughout our operational activity. Within the
Corporate governance report on page 94 we discuss, in respect
of the key decisions that the Board has taken in the year, how
stakeholders were considered and how we engaged with them.
Customers
Shareholders
The majority of our sales are to industrial
customers, who refine or further process the
copper concentrate and cathodes we sell. Most
sales are made under long-term framework
agreements or annual contracts with sales
volumes agreed for the following year.
Shareholders are the companies, financial
institutions and individuals that hold a stake
in the Company. They are entitled to receive
dividends and to vote at shareholder meetings
on certain matters, including the election of
the Company’s Directors.
Why we engage
Our sales are based primarily on long-term
customer relationships and commitments.
Without these relationships, we would have
to sell a greater proportion of our cathodes
and concentrate on the spot market, with
greater uncertainty about pricing and
volume.
How we engage
• Some of our major customers are also
equity holders in our mining operations
• An annual visit to Japan by the Chairman
and several Directors in order to meet
our partners
• Regular meetings with customers around
the world
• Through our marketing office in Shanghai
+ See page 48 for more information
Why we engage
Shareholders, and particularly institutional
investors, are constantly evaluating their
holdings in the Company and whether to
buy, hold or sell shares. We provide insightful
information about the Company’s strategy,
projects and performance to assist them in
their assessment of the Company. We pay
special attention to how we communicate
with shareholders, maintaining fluent and
transparent dialogue with them in order
to ensure that they are treated well and
informed of all relevant information.
How we engage
We regularly meet with institutional investors
and brokers’ analysts at industry conferences
and roadshows, as well as in one-on-one
meetings. The Board attends the Company’s
Annual General Meeting, where its members
are available to answer questions. The
Company also provides regular production
reports, financial reports and other
ad-hoc information.
+ See page 49 for more information
Governments
and regulators
Governments and regulators, at national,
regional and local levels, draft, implement
and uphold legislation, rules and regulations,
and set the framework within which
we operate.
Why we engage
Mining is a long-term business in which
timescales can run into decades. Political
cycles are typically far shorter and material
developments and changes to policy,
legislation or regulations can have a
major impact on our business.
How we engage
We work alongside mining associations
and other industry-related bodies to
engage with governments on public policy,
legislation, regulations and procedures that
may affect our business. Our relationship
with governments and regulators takes place
strictly within their engagement mechanisms,
which in Chile are clearly defined in Law
N° 20.730 on lobbying.
+ See page 50 for more information
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Strategic Report Stakeholder review continued
OUR PEOPLE
At Antofagasta, we understand that talent is key in addressing the challenge of
developing mining for the future, and we therefore seek to foster our workforce’s
wellbeing and diversity. In 2019, this was reflected in our review of the Group’s
Leadership Model and the implementation of a new flexitime programme.
The Group’s People strategy is built around the four pillars of culture,
talent management, organisational effectiveness, and labour relations
and engagement, and is aligned with the charter of values that we
have established as central to our organisation.
38
Antofagasta plc Annual Report 2019
Our people’s wellbeingFor Antofagasta, employee wellbeing is a core aspect of our effectiveness and sustainability as an organisation and in 2019 we took important steps to improve our employees’ work/life balance.During the year a pilot flexitime system was introduced first at Centinela and then extended to our corporate headquarters in Santiago. The system allows employees to fit working hours around their individual needs, giving them more flexibility, particularly as regards shifts, and allows them to take up to a year off work for family or other reasons. It will be rolled out to the rest of the Group during 2020.In mid-2019, we created a new area to lead our Digital Transformation project. As it is rolled out in 2020, the project will significantly change the way we work, including through the generation of synergies with the new flexitime system.In 2019, we also worked with our operations and our Diversity and Inclusion Council to draw up a set of work/life balance guidelines, designed to foster both employees’ work/life balance and the integration of women and people with disabilities. As well as the flexitime system, it includes benefits that go beyond those required under Chilean law, such as longer paternity leave and facilities for employees undertaking further education.During the year, over 800 employees at our operations participated in an update of our Leadership Model, which is built around five key leadership skills. Its aim is to ensure inclusive leadership and facilitate innovation.Inclusive cultureThe Group’s Diversity and Inclusion (D&I) Strategy was launched in 2018, initially focusing on the inclusion of women, people with disabilities and employees with international experience, and in 2019 we embedded the conditions required for its full and sustainable success.A survey of executives and supervisors during the year found that 71% of them identified the D&I Strategy as a priority for the organisation.One example of initiatives to foster the inclusion of women is the Transport division’s Mujer Ferroviaria (Railway Woman) programme, which was launched in 2018 to incorporate women into maintenance roles, and now has been expanded to include other operational roles.In the Mining division, Antucoya launched Relevos (Relief Workers), a programme under which residents of the town of María Elena, which is near to Antucoya, are employed to cover breaks during shifts, such as lunch periods. This programme provides opportunities mainly for women, but also for other local residents who, for family reasons, are unable to work a full shift.Under Chile’s Workplace Inclusion Law, people with disabilities must account for at least 1% of a company’s workforce from 1 April 2020 and in 2019 our Transport division achieved this target. Despite greater challenges, our mines have also made good progress and, through Chile’s Mining Council, we are leading an initiative to define the minimum standards required to permit the employment of people with disabilities at mine sites.Diversity and inclusion targets• Double the percentage of women in the workforce by 2022, compared to the Q1 2018 baseline.• Go beyond the 1% of employees with disabilities required under Chilean legislation.Women in businessIn 2019, we sponsored the creation of a Chilean chapter of the 30% Club, a campaign launched in the UK in 2010 to foster gender balance on companies’ boards and in senior management positions. Executive CommitteeReports to the Executive CommitteeMale9 90%4279%Female110%1121%Building human capitalAt Antofagasta, we seek to develop human capital and talent, not only internally but also in our local communities.In 2019, we invested $3.3 million in employee training. This was equivalent to 44 hours of training per employee. This included training on safety and D&I topics such as inclusive leadership and unconscious bias.As part of our involvement in the Antofagasta Mining Cluster, we continued to implement the Eleva programme. This public-private initiative brings together mining companies, the Mining Competencies Council (CCM), the Fundación Chile technology transfer institute and several government agencies, in order to improve young people’s job prospects and develop human capital for the mining industry of the future.The Cluster’s activities include work experience for technical school pupils, and following a pilot programme implemented at Antucoya in 2018 this is now offered by all our mines. In 2019 a total of 58 young people completed the programme and many are now being recruited as full-time employees.+ See page 42 for more information 25,123 People
Employees
26%
Contractors
74%
Women
Unionised employees
10%
74%
1. As of 1 January 2020, this was equivalent to approximately $667.
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Labour relationsAt Antofagasta we have 19 unions; 11 in the Mining division and eight in the Transport division. Together, they represent 74% of our direct employees.We recognise employees’ rights to union membership and collective bargaining, and in Chile freedom of association is protected by law.We also have a consultation and complaints system that can be used by our employees and contractors.In 2019, three-year labour agreements were successfully negotiated in the Mining division, at Los Pelambres, Zaldívar and Antucoya. However, in the case of the Antucoya workers’ union, agreement was reached only after an 18-day strike. This was the first strike in Antofagasta’s history. It took place in a framework of respect, without violence or damage to assets, and in full compliance with the agreed provision of minimum services.In the Transport division there were no labour negotiations in 2019, but preparations were made for two important processes scheduled for 2020.Chilean legislation prohibits forced and child labour.Aligning contractorsContractors perform key tasks in our businesses and account for 74% of our total workforce. They are contractually required to meet all our labour, environmental, social and ethical standards and apply our best practices on safety and other working conditions.Contractors are required to pay employees at least an ethical minimum wage set by Antofagasta. As from 1 January 2020, this increased by 17% to Ch$500,0001 per month for the on-site contractors of our Mining division, benefiting some 3,200 families, many of whom live in the vicinity of our operations. This ethical minimum wage is currently two-thirds above Chile’s legal minimum wage.Contractors and subcontractors are also required by the Group to provide their employees with health and life insurance and, in the case of Los Pelambres and Centinela, support for their children’s education.Contractors at all our operations must also comply with the UK’s Modern Slavery Act or risk sanctions and even loss of contract.Strategic Report Stakeholder review continued
40
Antofagasta plc Annual Report 2019
Modern Slavery ActIn compliance with the UK’s Modern Slavery Act 2015, the Group has published a statement setting out the steps taken to ensure that slavery and human trafficking are not occurring in its supply chain or in any part of its business. This statement is available at www.antofagasta.co.uk.Code of EthicsThe Code of Ethics stresses the commitment of the Board, employees and contractors to conduct business in a responsible and transparent manner. It includes the values that guide the Company’s actions along with guidelines to identify and manage potential conflicts of interest and for the handling of privileged, confidential and financial information. It also sets out the role of the Ethics Committee.In addition, it provides guidelines on issues such as respect for human rights, local culture and values and the rights of neighbouring communities.TrainingWe ensure that our Crime Prevention Model and our policies and procedures are implemented and understood throughout the organisation. This is achieved through induction training for all new employees, an e-training programme implemented every two years, special training for the most exposed areas and a training plan that is updated annually.Human rightsIn 2019, we implemented a human rights due diligence process as a first step to drawing up a corporate Human Rights Policy and an associated plan of action. We respect and support human rights by:• providing high safety and health standards, fair wages and good labour relations• preventing discrimination, harassment and bullying• complying with the UK’s Modern Slavery Act• providing high-standard accommodation, services and facilities and opportunities for training and development• preventing corruption and malpractice• preventing or mitigating adverse environmental and social impacts• respecting communities’ rights, culture and heritage• engaging in dialogue throughout the mining lifecycle from exploration to closure• responding to grievances• supporting community development.Our only operation whose area of influence includes an indigenous community is Zaldívar. Relations with this community, located in Peine, 100 km from the mine, are conducted in accordance with ILO Convention 169, the guidelines of the International Council on Mining and Metals (ICMM) and our Sustainability Policy.Corporate due diligence of suppliers’ legal compliance includes key human rights issues such as general working conditions, the prevention of child labour, discrimination, harassment and other abuses. These are regularly audited by each operation as well as by the corporate centre. SAFETY AND HEALTH
For Antofagasta, the safety and health of our employees, contractors and nearby
communities is non-negotiable and takes precedence over results. In 2019 both our
Mining and Transport divisions exceeded their safety targets, achieving record results
for the year.
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Safety and occupational health strategyThe Group’s Safety and Health Risk Strategy is based on four pillars: safety risk management, health risk management, standardised reporting and continuous improvement, and leadership. In turn, it has four goals: zero fatalities, zero occupational illnesses, the development of a resilient culture, and the automation of hazardous processes.During the year we reviewed our Fatal Risk Standards, strengthening the corresponding critical controls and working with those responsible for their implementation in the field to ensure they are fully understood. We also expanded the Standards to cover occupational health as well as safety risks, incorporating silica dust, noise, acid mist, and fatigue and drowsiness, each with its corresponding control strategies.Safety risk managementIn 2019, our efforts to achieve continuous improvement in safety risk management focused on learning from high potential incidents, in other words, incidents that could have caused fatalities. Using this dynamic approach, such incidents are investigated in order to identify any risk management gaps, which are then closed in order to prevent other similar incidents occurring in the future. Emphasis is also placed on sharing the lessons learned across our different mining operations.In a bid to strengthen prevention, we plan to move towards the use of high potential incidents as a measure of our safety performance in addition to indicators such as the Total Recordable Injury Frequency Rate (TRIFR), which measures the accidents that did occur. The target for 2020 is to reduce high potential incidents by between 10% and 15%.Health risk managementGuided by our 10 Occupational Health Standards and four new Fatal Illness Risk Standards, we seek to minimise our workers’ exposure to hazardous agents and other risk factors. Medical Surveillance Programmes, which were standardised in 2018, are used to detect early symptoms that can identify an incipient illness.In 2019, we included health risks in our monthly Operational Performance Reviews, the results of which are reported to the Executive Committee, and in our six-monthly On-Site Reviews. Emphasis was placed on raising awareness of potential health risks, with senior management closely involved in this process.Performance in 2019There were no fatalities related to the Group’s activities among the employees of our Mining and Transport divisions, the employees of their contractors or related third parties such as communities. The last fatality was in October 2018.In addition, the Mining division’s Lost Time Injury Frequency Rate, at 0.8, was 32% better than the target for the year and marked a new record. The division’s Total Recordable Injury Frequency Rate (TRIFR)1, at 0.5, was also a record and among the best performances of the members of the International Council on Mining and Metals.The Transport division included its contractors in its safety indicators for the first time in 2018, posing a greater challenge for achievement of its targets. Nonetheless, its LTIFR, at 4.03, represented a drop from 6.7 in 2018 and compares with an average of over 14 for railway operations in Chile.Lost Time Injury Frequency Rate (LTIFR)2 20192018201720162015Chilean mining industry1.54 1.65 1.78 1.83 2.05 Mining division0.751.100.991.211.17Transport division4.036.667.205.7810.94Group1.011.591.531.612.00Number of fatalities 20192018201720162015Chilean mining industry1416 14 18 16 Mining division0 1 0 1 1 Transport division0 0 0 1 0 Group0 1 0 2 1 Occupational Illness Frequency Rate (OIFR)3 20192018201720162015Chilean mining industry N/A N/A N/A N/A N/A Mining division 0.080.090.000.030.09Transport division 0.470.240.00N.AN.AGroup 0.110.100.000.020.091. Number of accidents with lost time and requiring medical treatment per million hours worked.2. Number of accidents with lost time during the year per million hours worked.3. Number of occupational illnesses during the year per million hours worked.Strategic Report Stakeholder review continued
COMMUNITIES
We seek to build sustainable long-term relations with the communities near our
operations, anchored in proactive and transparent dialogue. We measure the benefits
of this engagement for both the communities and the Group.
Economic social contribution in 2019:
$40.7 million1
$39.5m
Mining division
$1.2m
Transport division
1. Includes community investment programmes (Somos Choapa, Dialogues for
Development and the Transport division’s social initiatives), social projects and
programmes established as part of our legal obligations, as well as donations,
sponsorships and contributions under the Caimanes, Salamanca and Cuncumén
agreements and by Fundación Minera Los Pelambres.
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Antofagasta plc Annual Report 2019
Social Management ModelIn 2019, we rolled out our new Social Management Model in the Mining division. It seeks to ensure that engagement principles, methodologies and practices, and the measurement of results are consistent across the Group.The model has four components, each with its own standards: Socio-Territorial Risk Management, Engagement, Initiative Management and Impact Measurement.Flagship programmesSomos ChoapaOur Somos Choapa (We are Choapa) programme is the largest public-private alliance for community development in Chile’s Coquimbo Region, where our Los Pelambres operation is located. Through it, we work with the municipal governments and communities of the Choapa Province – which stretches from the Andes to the coast – to implement projects for the area’s sustainable economic, social and environmental development. Since the programme’s launch in 2014, of the 135 initiatives that have been approved, 64 have been completed and 43 are underway, while the others are at the discussion or design stage. The projects range from job creation and economic diversification to water management and community building.Dialogues for DevelopmentAt our three mining operations in northern Chile, community engagement takes place within the framework of Diálogos para el Desarrollo (Dialogues for Development), which is based on the experience we have acquired in Choapa. In 2019, Antucoya implemented the second stage of the programme in the town of María Elena, in alliance with its municipal government. Working groups were set up to identify projects and two healthcare initiatives were approved.Centinela has also successfully strengthened its ties with the nearby town of Sierra Gorda. Key initiatives include a volunteer programme in which our employees and contractors participate.Addressing social concernsWe consider a variety of aspects of the contributions we make to our host communities including:Combating droughtIn the mainly agricultural Choapa Valley, 2019 was the driest year of a 10-year drought and local communities are concerned about the availability of water in the future. In response to these concerns, we are participating proactively in a Provincial Water Working Group, convened by the Regional Government. This multi-actor body, with representatives of the different water users and communities as well as government services, is working to identify collective solutions that can improve water availability in the valley in the short, medium and long term.Local jobsIn the Mining division we have new Guidelines on Regional Procurement and Hiring that make explicit our preference for suppliers and employees from the region where the operation is located. The guidelines also include measures to make it easier for local companies to win contracts by reducing barriers to their participation in tenders.+ See page 47 for more informationEngagement mechanismsDialogue is at the heart of our relations with neighbouring communities and, depending on the issue, can take many different forms. Key mechanisms include community meetings, round tables, community participation in environmental monitoring, and invitations to visit our operations. The results of this engagement are reported regularly to the Sustainability and Stakeholder Management Committee and, through it, to the Board.Our only operation whose area of influence includes indigenous communities is Zaldívar. Its engagement with these communities is aligned with ILO Convention 169 and the guidelines of the International Council on Mining and Metals.Culture and heritageHeritage is particularly important in the case of the Transport division, whose business and history are closely entwined with those of the city of Antofagasta. It owns some of the city’s most historic buildings and its current plans include the restoration of the emblematic Valdivia Railway Station in the city centre.In 2019, we updated our Tesoros del Choapa (Treasures of Choapa) audiovisual programme, producing a series of videos celebrating the identity and culture of the Choapa Valley, its landscapes and ways of life. Open social innovation
In 2018, the Somos Choapa programme created a special
initiative, Choapa i, to seek innovative approaches to the area’s
challenges. In alliance with local municipal governments and
the communities themselves, it invites students from one of
Chile’s main universities to propose ideas that could contribute
to local economic development and sustainability.
In the latest cycle of the programme, three projects have been
selected to add value to agricultural products, to transport
seafood produced along the coast and to reuse greywater.
Building the region’s future
In 2019, Fundación Minera Los Pelambres awarded 175
scholarships to higher education students from Choapa. One of
those students is Valeria Mekes: “I’m the first in my family to go to
university and I hope I won’t be the last,” says the future lawyer.
Railway yard urban development
Our Transport division owns 48 hectares of land in an area
that is now the centre of the city of Antofagasta. For the past
130 years the railway’s maintenance workshops have been
located there, and until 1998 it was used to stockpile products
such as copper and lead concentrate. Now, however, the
Transport division is planning to vacate the site and release
it for urban development.
The Company conducted a rigorous community participation
process, involving assemblies and working groups as well as
door-to-door visits, before submitting its Environmental Impact
Assessment during the year. The first stage of the Reconversion
Plan will involve rehabilitating the land by removing heavy metals
and other industrial waste from the soil.
Antofagasta Mining Cluster
The Antofagasta Mining Cluster is a vehicle for fostering
the development of northern Chile’s Antofagasta Region,
where three of our mining operations and our Transport
division are located. We were the first mining company to
join this public-private alliance, which brings together mining
companies, government agencies and educational institutions.
We are particularly committed to two of the initiative’s strategic
pillars: the creation of regional human capital and the
development of innovative suppliers.
In 2019, we committed $1.2 million to educational and training
initiatives in the Region, benefiting over 600 people, from
students at technical schools and universities to neighbours of
our operations. For example, we are implementing 14 different
programmes within the Region’s two main universities, to support
the teaching they provide and increase graduates’ employability.
Through the Eleva programme, we provide work experience
for pupils from technical secondary schools. Similarly, when
we award apprenticeships and internships to support the
writing of undergraduate theses, we give priority to students
from the Region.
In the case of promoting innovation, we are implementing
InnovaMinerals, an open collaboration platform through which
we invite companies and entrepreneurs to propose innovative
solutions to challenges faced by the mining industry.
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Human rightsIn 2019, we carried out a human rights due diligence process as a prior step to drawing up a corporate Human Rights Policy and associated plan of action. Numerous interviews have been carried out with both internal and external stakeholders, including neighbouring communities. The Policy is expected to be approved by the Board during 2020.Complaint mechanismsIn the case of complaints or suggestions, a community’s first point of contact is with our local communities teams. Depending on the nature and seriousness of a complaint, the team will report it to Public Affairs which will, if necessary, escalate the matter. Community members can also use our online Tu Voz (Your Voice) service, and such complaints are referred to the Company’s Ethics Committee.Impact measurementOne of the four key components of our Social Management Model is impact measurement, which we do by calculating a project’s social return on investment (SROI). In 2019, we measured the impact of three social programmes implemented by Fundación Minera Los Pelambres: Confluye, an initiative to increase water availability for small farmers; Cosecha, a programme to help rural entrepreneurs add value to their products and services; and an educational programme that includes scholarships and skill-development projects. The scholarship programme had the highest SROI and Cosecha the lowest.Strategic Report Stakeholder review continued
ENVIRONMENT
On environmental matters, we seek to go beyond compliance with our legal
obligations, particularly in the case of shared resources such as water.
Chile’s first certified green loan
In April 2019, Los Pelambres obtained debt financing of $1.3
billion from a group of international banks for its expansion
project. As well as being the largest such deal in our history,
this marked another milestone in that an $875 million tranche
was certified as a “green loan” by Standard and Poor’s (S&P),
making Los Pelambres the first company in Chile and the first
mining company in the world to obtain such certification.
Out of the loan, some $500 million will be used to finance
construction of the project’s desalination plant and associated
pipeline, which S&P certified as a green project on the
grounds of its contribution to reducing freshwater
consumption in a water-stressed area.
Environmental incidents
In 2019, our operations suffered no significant environmental
incidents. Similarly, no procedures were initiated by the
authorities that could result in sanctions.
1. Difference between our calculated figure according to ICMM and the 100% of sea water effectively used in Antucoya.
44
Antofagasta plc Annual Report 2019
Environmental managementIn 2019, our Mining and Transport divisions further embedded the Environmental Management Model we introduced in 2017. It comprises four areas: leadership, incident reporting, operating risk management and regulatory risk management. Following important improvements on incident reporting in 2018, particular attention has been paid to management of the resulting information at Group level in order to put it to optimum use.Environmental performance is reported monthly to the Executive Committee and half-yearly to the Sustainability and Stakeholder Management Committee. It is also one of the Group’s annual performance bonus targets.In 2019, three internal environmental audits took place, two performed by the Environmental Management team and one by Internal Audit. All of them were concluded successfully without any significant negative findings.Environmental complianceIn Chile, large-scale projects are subject to strict environmental and social impact assessments by the Environmental Evaluation Service (SEA) to obtain a Resolution of Environmental Approval (RCA) to proceed with the project. These RCAs include legally binding commitments on matters such as the prevention and mitigation of the impact of the project on the environment and any necessary compensation measures required. Compliance with commitments is enforced by the Superintendency for the Environment (SMA) and failure to comply with the commitments can result in fines or even the revocation of the RCA.Antofagasta has a total of 75 RCAs, entailing some 10,556 commitments on matters that include water use, air quality and protection of biodiversity. In 2019, our operations focused on raising the standards of the evidence they use to demonstrate compliance.Water managementAll four of our mines are in water-stressed areas and care for this resource is therefore a crucial part of our approach to adapting to climate change. Our Environmental Management Model includes a specific water management standard.In 2019, we continued to apply the Water Stewardship Framework of the International Council on Mining and Metals and report our direct water extraction in accordance with the ICMM’s Minimum Disclosure Standard. In addition, we report our water risk exposure in accordance with the requirements of the Water Programme of the Carbon Disclosure Project (CDP).During the year, we drew up a corporate Water Management Standard, which is expected to be internally validated during 2020. This will be an integral part of our new Climate Change Strategy.+ See page 45 for more informationIn 2019, sea water accounted for 46% of our Mining division’s water consumption. At Antucoya, it accounts for about 97%1 of total water consumption and some 86% at Centinela. Centinela also uses pioneering thickened tailings technology to reduce its overall water consumption.+ See page 46 for more informationLos Pelambres mainly uses continental water. However, the expansion project includes a desalination plant on which construction began in 2019. The plant is scheduled to start operation by the end of 2021 and will produce 400 l/s of industrial water for the expansion and will act as back-up for Los Pelambres in dry conditions.The Choapa Valley is a water-stressed area, with agriculture as the prime user, and has suffered a drought for the last 10 years, of which 2019 was the worst. Among other actions, Los Pelambres is actively participating in a Provincial Water Working Group established by the Regional Government to identify and implement solutions that can improve the area’s water security in the short, medium and long term. This includes working with the local farming community to help them manage their water needs.+ See page 42 for more informationWater consumption by source in 2019 (millions of m3)Source 2019201820172016Surface water13.9 16.518.214.2Underground water18.3 19.417.213.5Third-party suppliers0.4 0.91.21.2Sea water28.2 30.429.226.5Total60.8 67.265.855.4 Water recovery at Centinela
An increase in water recovery from thickened tailings and pulp
concentrate at Centinela has reduced the volume of sea water
pumped up to the operation. This in turn reduced electricity
consumption in the pumping process, which in 2019 meant
the avoidance of 15,090 tCO2e of emissions.
CO2 emissions (tonnes of CO2 equivalent)1
Los Pelambres
Centinela
Zaldívar
Antucoya
Transport division
Corporate offices
Total
Scope 1 Direct emissions
Scope 2 Indirect emissions
Total emissions
2019
251,580
448,890
140,623
152,231
96,854
106
1,090,285
2018
262,355
453,898
141,475
168,490
99,400
1
1,125,619
2019
2018
2019
2018
544,900
539,300
192,862
114,337
1,118
825
1,393,341
523,942
563,101
180,109
123,353
1,224
1,189
1,392,919
796,480
988,190
333,485
266,568
97,972
931
2,483,626
786,297
1,016,999
321,584
291,843
100,624
1,191
2,518,538
1. Further information on our CO2 emissions can be found on the Carbon Disclosure Project website www.cdp.net.
2. Tonnes of CO2 equivalent per tonne of copper produced.
CO2 emissions intensity
tCO2e/tCu 2
2019
2.19
3.57
2.87
3.71
N/A
–
3.10
2018
2.20
4.10
3.40
4.04
N/A
–
3.33
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Energy managementEnergy represents some 20% of the Mining division’s total operating costs. Out of this, approximately 13% corresponds to electricity, purchased mainly from generators in Chile’s national electricity system (SEN), and 7% to fuel.Our Energy Management Strategy has four pillars: supply security, price, source and energy efficiency. We have applied this strategy in the renegotiation of supply contracts to decarbonise our electricity matrix, taking advantage of the price of renewable energy which, in Chile, is cheaper than more polluting technologies.In February 2019, Antucoya signed a contract under which its annual consumption will be 100% renewable from the beginning of 2022. Following a tender in 2018, Zaldívar will become 100% renewable from July 2020. Combined with the recent renegotiation of one of the supply contracts at Los Pelambres, approximately 65% of our Mining division’s consumption will be supplied under contracts for renewable energy from 2022, and we expect that further contracts will be signed by then, making 100% of our energy renewable.In 2019, we modified our approach to energy efficiency, moving from a focus on individual energy-saving projects to a more structural concept under which energy efficiency is an integral part of each task we carry out. In line with this, energy efficiency is one of the Group’s annual performance targets.Carbon footprintIn 2017, we embarked on a series of projects to reduce our direct and indirect annual CO2 emissions (or Scope 1 and Scope 2 emissions) by 300,000 tonnes between 2018 and 2022. In 2019, we reduced our CO2 emissions by 34,912 tCO2e compared to 2018. These reductions include those from our own direct (Scope 1) emissions, achieved through various energy saving projects, and reductions in indirect (Scope 2) emissions.Our reduction of Scope 2 emissions in recent years came largely from the integration of Chile’s formerly separate electricity systems – the Northern Interconnected System (SING) and the Central Interconnected System (SIC) – in 2017 to form a single national system (SEN). This integration allowed lower-carbon energy from central and southern Chile to be brought to northern Chile, where the Centinela, Antucoya and Zaldívar mines are located and thus significantly reduced their emissions.Water withdrawals from each source are measured in terms of both the rate of flow and volume in order to predict the source’s behaviour and provide the authorities with compliance reports. In 2019, our operations consumed a total of 60.8 million cubic metres of water, down from 67.2 million cubic metres in 2018 mainly because of lower throughput in 2019 and improved water efficiency.The main loss of water is through evaporation and no water is discharged into continental water bodies. All our operations are working to increase their water reuse rate, which currently varies between 79% and 97%, depending on the operation.Climate changeAt Antofagasta we understand that climate change poses risks for our operations, including water scarcity, sudden intense rainfall (as occurred in the Antofagasta Region in February 2019) and tidal surges. The sudden rainfall impacted both our mining operations and the Transport division’s railway, and the tidal surges disrupted the loading of concentrate shipments.In response, we have incorporated climate change as a specific risk, as distinct from environmental management, into our risk matrix and are drafting a comprehensive Climate Change Strategy. This will be completed during 2020 and will include our targets and metrics for water and CO2 emissions. Using this strategy, we will strengthen co-ordination within the Group in order to take advantage of all available synergies.Strategic Report
Stakeholder review continued
Twin Metals environmental review
In December, Twin Metals Minnesota (TMM), our copper,
nickel, cobalt and PGM project in the United States, began its
formal environmental review process by submitting its Mine
Plan of Operations to the US Bureau of Land Management,
and the Scoping Environmental Assessment Worksheet data
to the Minnesota Department of Natural Resources.
This underground project is designed to minimise its potential
impact on water, wetlands, noise, dust, light and visual pollution.
The operation would have an overall footprint some 80-85%
smaller than a similar-sized traditional open pit mine with
conventional tailings. At TMM, 50% of tailings would be used
as backfill in the underground mine while the rest would be
dewatered and compressed, using the dry stacking method.
Construction of the mine would take two to three years and
it would process 20,000 tonnes of ore per day.
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Antofagasta plc Annual Report 2019
Mining wasteOur mining operations have three main tailings storage facilities (TSFs). The two at Los Pelambres are conventional tailings dams, El Mauro and Los Quillayes. The latter, the operation’s original TSF, is no longer in regular use and has limited remaining capacity, so now only serves as back-up for El Mauro.Our third main TSF is a thickened tailings deposit at Centinela. By reducing the contained water in the tailings, this technology improves water recovery, increases the deposit’s stability, requires less surface than traditional TSFs, and reduces its environmental impact. In addition, at Zaldívar we have a very small TSF for the tailings from the flotation of some of its sulphides.All our TSFs are built using the downstream construction method. El Mauro, our largest TSF, is designed to withstand severe earthquakes and extreme weather. Early warning and evacuation procedures are in place and its physical and chemical monitoring system provides real-time information.All of our TSFs are visited twice a year by a panel of independent international experts, who review their performance and make suggestions for improvements, and whose findings are presented to the Board.In 2019, we participated in the public consultation on new standards proposed under the Global Tailings Review. This was established by the ICMM, the United Nations Environment Programme (UNEP) and the Principles for Responsible Investment (PRI) in the wake of the Brumadinho and Mariana TSFs’ failures in Brazil and the concerns expressed by the Church of England Pensions Board and the Council on Ethics of the Swedish National Pension Funds.As part of the process of drawing up the new standards, a group of experts visited Chile where, among other activities, they met representatives of the community closest to El Mauro.Transparent information is also a key aspect of the Programa Tranque (Tailings Programme), a public-private and community initiative in which we are participating. Its aim is to establish an online monitoring system for TSFs and it is being piloted at El Mauro. The data produced are currently being reviewed by the authorities prior to deciding the best way of making it easily accessible to communities.BiodiversityOur Biodiversity Standard is aligned with ICMM’s position statement on Mining and Protected Areas and has three goals: to prevent and minimise our impact on biodiversity, to appropriately restore or compensate for any impact, and to generate additional benefits for the areas where we operate.The Choapa Valley, where Los Pelambres is located, is particularly rich in biodiversity. In this area, we manage four nature sanctuaries, including an important wetland. Together with areas of reforestation and other initiatives, these sanctuaries total 27,000 hectares, equivalent to seven times the area used for the operation. We are currently working on the development of a possible integrated management model to standardise the nature sanctuaries’ administration.In the Antofagasta Region, Zaldívar is collaborating with a University of Chile research centre on the Desierto Verde (Green Desert) project. It is studying species of trees able to withstand arid and saline conditions in order to prevent erosion and absorb CO2. Other initiatives include Centinela’s participation in a foundation for the conservation of the gaviotín chico, a species of tern that is in danger of extinction.Air qualityWe have no smelters, with their potential for air emissions. Dust (PM10) is the main emission from our mines and we implement robust dust-suppression programmes and monitor PM10 emissions closely with, in some cases, community participation. At Los Pelambres, representatives of the nearby town of Cuncumén participate in the monitoring of a total of 36 indicators related to air quality.Mine closureAntofagasta has no mines close to closure but, as required under Chilean law, all our operations have closure plans approved by Chile’s National Geology and Mining Service (SERNAGEOMIN). These plans are updated every five years and in 2020 we will be working to align all our closure plans with the ICMM’s Integrated Mine Closure – Good Practice Guide.Task Force on Climate-related Financial DisclosuresAt Antofagasta, we are addressing climate change and its associated risks from many different angles, and as a means of responding to the interest of investors and analysts on the subject we have decided to adopt the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).Responsible productionAntofagasta is participating in the Copper Mark initiative of the International Copper Association (ICA), of which it is a member. This proposed voluntary assurance system, based on the United Nations Sustainable Development Goals (SDGs), will allow investors and consumers to make informed decisions about responsibly-produced copper through verification of the copper producers’ environmental, social and governance (ESG) standards. This mark will also comply with the responsible sourcing requirements announced by the London Metal Exchange (LME). SUPPLIERS
As part of our bid to contribute to the development of the areas where we operate, we
place particular emphasis on giving local companies opportunities to work with us.
3,843
Suppliers
Based
in Chile
93%
Total payments
to suppliers
$3,493m
Of purchases
made in Chile
91%
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Responsible supplyAs a Group, we have 3,843 suppliers of goods and services, including Chilean and international companies. They are managed by a central team that applies common procedures across our different operations and ensures compliance with our standards and practices.Contracts with suppliers include clauses requiring compliance with Chilean Law N° 20.393 on bribery and asset laundering and the UK’s Bribery Act and Modern Slavery Act. Our Suppliers’ Code of Conduct covers matters such as ethical principles and sustainability, and forms part of our contracts with suppliers.Tenders take place through an online platform designed to guarantee fair and transparent processes, with objective and auditable award procedures. This platform includes a channel for reporting complaints.In 2019, we introduced a new clause into our contracts with suppliers, specifying their obligation to pay subcontractors, a situation over which we previously had no legal control. Under the new clause, we can discount any outstanding payments from a supplier’s performance bond and, ultimately, terminate the contract.As from 1 January 2020, we also raised the Ethical Minimum Wage which our Mining division’s on-site contractors must pay their employees. Contractors must also provide complimentary health insurance for employees and their dependents.+ See page 38 for more informationEmphasis on local suppliersDuring the year we reviewed our policy on local suppliers, with a view to increasing their access to opportunities to supply the Group. We also launched our new Guidelines on Regional Procurement and Recruitment under which, subject to availability, our mining operations must give preference to local suppliers, which are now defined more widely than before.The new guidelines include measures to reduce administrative and financial barriers to local companies’ participation in tenders. In addition, we have reduced the payment period for SMEs from 30 days to 15 days.During the year, we developed Robotic Process Automation (RPA) solutions to automate repeated tasks, which allows our procurement team to focus on added value tasks such as a provider’s evaluation and selection, or negotiation. Thanks to this, our teams can dedicate more attention to local providers, and therefore improve their relationship with us.Supplier developmentOne of our undertakings as active members of the Antofagasta Mining Cluster, a public-private alliance to promote the Antofagasta Region’s economic and social progress, is to foster the development of innovative local suppliers. A key initiative in this field is InnovaMinerals, an open collaboration platform through which we invite companies and entrepreneurs to propose innovative solutions to challenges faced by the mining industry.+ See page 42 for more informationIn 2019, we launched 11 challenges in the Antofagasta Region. The process involved workshops attended by over 300 people, as a result of which 18 solutions were pitched and a contract was signed for the development of one of them.In addition, our new Guidelines on Regional Procurement and Recruitment anticipate the creation of an incubator for local suppliers, with a view to their participation not only in our tenders, but in those of other mining companies. Initial conversations about its implementation are taking place with the Antofagasta-based Integrated Centre for Pilot Testing of Mining Technologies (CIPTEMIN), a public-private alliance that includes universities from around the country.Our work with communities also involves the development of businesses to supply our local operations. In 2019, Antucoya and Centinela launched programmes that contributed to the development of 45 businesses in the local towns of María Elena and Sierra Gorda.Local alliancesWe use alliances as a vehicle for establishing ties with potential local suppliers. For example, Los Pelambres has a collaboration agreement with the Association of Traders and Companies of Salamanca (ACESA) to foster opportunities for businesses in this nearby town. One result of this was that 11 companies joined together to bid for and win a contract to rent 30 pick-up trucks to the Los Pelambres Expansion project. This project has also undertaken to hire 30% of its workforce locally.Energy efficiency in suppliersIn line with our approach to climate change, we consider energy efficiency when selecting suppliers. In the case of energy-intensive goods and services, this is a parameter in the tender and we have also established energy efficiency KPIs for rented equipment.Strategic Report Stakeholder review continued
CUSTOMERS
Our business model is underpinned by relationships with local, regional, national and
international stakeholders. Successful management of these relationships contributes
to our long-term success.
Revenue by location of
customer and product
Europe
22%
North
America
2%
Copper 82%
Molybdenum 5%
Gold 8%
Transport 4%
Silver 1%
South
America
6%
48
Antofagasta plc Annual Report 2019
Rest
of Asia
Pacific
39%
Japan
31%
CustomersMost copper and molybdenum sales are made under annual contracts or longer-term framework agreements, with sales volumes agreed for the coming year. Gold and silver is contained in the copper concentrates and is therefore part of copper concentrates sales.Most sales are to industrial customers who further process the copper into more added value products; smelters, in the case of copper concentrate production; and copper fabricators and trading companies in the case of cathode production. We build long-term relationships with these key smelters and fabricators while ensuring customer diversification. We also maintain relationships with trading companies that participate in shorter-term sales agreements, or in the spot market.About 70% of our mining sales are under contracts of a year or longer and metals sales pricing is generally based on prevailing market prices.Structure of sales contractsTypically, our sales contracts set out the annual volumes to be supplied and the main terms for the sale of each payable metal, with the pricing of the contained copper in line with LME prices.In the case of concentrates, a deduction is made from LME prices to reflect TC/RCs, the smelting and refining costs to process the concentrate into refined copper. These TC/RCs are typically determined annually in line with market developments and the parties’ assessments of the copper concentrate market at the time of the negotiation of the terms.In the case of copper cathode transactions, a premium, or in some cases a discount, on the LME price is negotiated to reflect differences in quality, logistics and financing compared with the metal exchange’s standard copper contract specifications.Similarly, our molybdenum contracts are made under medium and long-term framework agreements, with pricing usually based on Platts’ average prices for Technical Molybdenum Oxide with a deduction to reflect the cost of converting molybdenum sulphide concentrate into molybdenum oxide.Across the industry, neither copper producers nor consumers tend to make annual commitments for 100% of their respective sales or purchases, and normally retain a portion to be sold or purchased on the spot market during the year.In line with industry practice, our sales agreements generally provide for provisional pricing at the time of shipment, with final pricing based on the average market price in the month in which settlement takes place.For copper concentrates, the final price remains open until settlement occurs, on average four months from the shipment month.Settlement for the gold and silver contained in the copper concentrates occurs approximately one month after shipment. Copper cathode sales remain open for an average of one month from the month of shipment. Settlement for copper in concentrate sales is later than for copper cathode sales, as copper in concentrate requires more processing to produce refined copper for sale. Molybdenum sales generally remain open for two or three months after the month of shipment.
SHAREHOLDERS
The shares of Antofagasta plc are listed on the main market of the London Stock
Exchange. As explained in the Directors’ Report on page 138, the controlling
shareholders of the Company hold approximately 65% of the Company’s ordinary
shares. The majority of the Company’s remaining ordinary shares are held by
institutional investors, mainly based in the UK and North America.
2019 Shareholder engagement calendar
Q1
• CEO presented at an industry conference for institutional
investors in the US
• One-on-one and small group meetings with some 160
investors, of which senior management participated in
over 65%
• Presentation of full-year 2018 results by the CEO and CFO
• London and Paris roadshow – 4 days
• US East Coast and Canada roadshow – 3 days
• Investor relations team attended two investor conferences
in the UK and one in Chile
Q2 • CEO and CFO presented to institutional investors in Chile
• CEO presented at an industry conference for institutional
investors in Spain
• One-on-one and small group meetings with some 200
investors, of which senior management participated in
over 50%
• Annual General Meeting in London
• Buy-side analysts and institutional investors visited
Los Pelambres
• Investor relations team attended four investor conferences,
two in the UK and two in the US
• Madrid roadshow – 1 day
• Corporate Governance roadshow with our Senior
Independent Director – 2 days
Q3
• Presentation of half-year 2019 results by the CEO and CFO
• One-on-one and small group meetings with some 120
investors, of which senior management participated in
over 40%
• London, Paris and Frankfurt roadshow – 4 days
• US East Coast and Canada roadshow – 3 days
• CFO and Vice President of Finance attended one industry
conference in the UK
• Investor relations team attended three investor conferences
in the UK
Q4 • Asia Pacific and Australia roadshow – 5 days
• One-on-one and small group meetings with some
80 investors
• Governance roadshow in London with Remuneration and
Talent Management Committee Chair – 3 days
• Investor relations team attended three investor conferences
in the UK
antofagasta.co.uk
49
We maintain an active dialogue with institutional shareholders and sell-side analysts, as well as with potential shareholders. This communication is managed by the investor relations team in London and includes a formal programme of presentations and roadshows to update institutional shareholders and analysts on developments at Antofagasta.Throughout 2019, we held regular meetings with institutional investors and sell-side analysts, including international investor roadshows, and presentations at industry conferences and to banks’ equity sales forces. These were attended by the CEO and various members of the management team, including the CFO and the Vice President of Finance.We publish quarterly production figures as well as half-year and full-year financial results. Copies of these production reports, financial results, presentations and press releases are available on our website. We also publish a separate Sustainability Report on our social and environmental performance during the year. The latest report is available on our website in both Spanish and English.What investors focused on most in 2019• Our ability to achieve our full-year production and cost guidance• Free cash flow generation and capital allocation• Our capital expenditure programme and the potential of longer-term growth projects• Progress on the Los Pelambres Expansion project• Supply and demand factors in the world copper market• Potential impact on our operations of the social unrest in ChileStrategic Report Stakeholder review continued
GOVERNMENTS
AND REGULATORS
Mining is a long-term business in which timescales can run into decades.
Political cycles are typically far shorter and material developments and changes
to policy, legislation or regulations can have a major impact on our business.
50
Antofagasta plc Annual Report 2019
Governments and regulators engagementOur operations, projects and exploration are mainly located in Chile, where we interact with both the central government and the governments of the Antofagasta and Coquimbo Regions, as well as with the municipalities of the communes that are part of our areas of direct influence.The relationship with governments and regulators is subject to their strict engagement mechanisms, which are clearly defined under the Chilean Lobby Law No. 20.730. This Law seeks to regulate the activity of lobbying, and other efforts that represent particular interests, in order to strengthen transparency and honesty. It applies to the officials of central and local administrations who regulate activities such as the issue, modification and repeal of administrative acts and laws, and decisions of the authorities and officials.Payments to governmentsAntofagasta makes payments to governments relating to activities involving the exploration, discovery, development and extraction of minerals, and our Transport division.These payments are primarily taxes paid to the Chilean government and mineral licence fees, which in 2019 totalled $418 million of which 99.8% was paid in Chile.Chilean law allows political donations to be made subject to certain requirements, but Antofagasta made no political donations in 2019. However, we often contribute towards the financing of projects benefiting local communities in alliance with local municipalities and the government. These contributions are regulated by specific laws and are reviewed by the Chilean Internal Revenue Service (SII).Public-private alliancesSince mining is a long-term business, we seek to contribute to Chile’s development and prosperity, which is why we engage with the local government in public-private alliances. Some examples are our active participation in a workshop organised by the Mining and Women Ministries to encourage female participation in the mining industry, or our commitment to the Mining Cluster in northern Chile, which is a public-private alliance to promote local employment, technology and skills development.Another example of a public-private alliance in which we actively participate is the Provincial Water Working Group. This is organised by the Coquimbo Region government to identify and implement collective solutions that can contribute to the area’s water security in the short, medium and long term. Non-financial information statement
The table below sets out where stakeholders can find information in the Strategic Report on non-financial matters, as required under the
Non-Financial Reporting Directive requirements. As described in this report, the effective application of these Policies and Standards underpins
the Group´s management of the risks in relation to these matters.
Reporting requirement
Relevant Policies and Standards
Content
Sustainability
Value Chart
Sustainability Policy
ICMM Guidelines
Safety and health
Environmental
matters
Safety and Occupational Health Strategy
Special Corporate Safety and Health Regulation
for Contractors and Subcontractors (RECCS)
Fatal Risk Standard (ERFT)
Occupational Health Standard (ESO)
Environmental Management Model
Integral closure of mining operations standard
Climate change standard
Water management standard
Biodiversity standard
Our people
People Strategy
Diversity and Inclusion Strategy
Social matters
Social Management Model
Engagement Standard
Management of initiatives standard
Suppliers
Code of Ethics
Purchase and contracts guideline
Direct award procedure
Material management policy
Human Rights
Code of Ethics
Anti-corruption
and anti-bribery
Code of Ethics
Compliance Model
Anti-Corruption Model
Antitrust Protocol
Description of principal risks and impact on business activity
Letter from the Chairman
Letter from the CEO
Value creation
How we engage with our stakeholders
Sustainability and Stakeholder Management Committee
Safety and Occupational Health Strategy
Safety risk management
Health risk management
Performance
Environmental management
Environmental compliance
Water management
Mining waste
Responsible production
Climate change
Carbon footprint
Energy management
Biodiversity
Air quality
Mine closure
TCFD
Inclusive culture
Building human capital
Labour relations
Aligning contractors
Employee wellbeing
Social Management Model
Flagship programmes
Engagement mechanisms
Open social innovation
Culture and heritage
Local jobs
Addressing social concerns
Impact measurement
Responsible supply
Local suppliers
Supplier development
Local alliances
Energy efficiency in suppliers
Respectful, diverse and inclusive work culture
Human Rights
Modern Slavery Act
Business integrity and compliance
Code of Ethics
Management of Compliance Risks
Risk Management Framework
Principal Risks
Key Risks
Description of the business model
The Mining Lifecycle
Non-financial Key Performance Indicators
2019 highlights
Total economic contribution
Key Performance Indicators
Page
06
08
34
36
112
41
44
38
42
47
40
31
22
24
25
10
03
19
20
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51
Strategic Report OPERATING
REVIEW
The Group seeks to set realistic but demanding
operating targets each year and achieves them
year after year.
52
Antofagasta plc Annual Report 2019
Operating review
Mining division
Los Pelambres
Centinela
Antucoya
Zaldívar
54
56
58
60
61
62
Transport division
64
Growth projects and opportunities
67
Exploration activities
Key inputs and cost base
68
Operating excellence and innovation 70
72
The copper market
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Strategic Report Operating review continued
MINING DIVISION
Antofagasta owns and operates four mines.
Los Pelambres is located in the Coquimbo Region
of central Chile and Centinela, Antucoya and Zaldívar
are located in the Antofagasta Region of northern Chile.
“We have had good production performance
this year, particularly at Los Pelambres,
Centinela and Zaldívar. As expected,
ore grades were higher at all of our
operations and we achieved a year
of record copper production.
“The safety performance of our workers
and contractors at our mines was also
particularly pleasing and was the result
of our strong safety culture and discipline
in how we operate. I look forward to
continuing this positive momentum
and further improving our operating
performance in 2020.”
Hernán Menares
Vice President of Operations
54
Antofagasta plc Annual Report 2019
Los Pelambres p56
Centinela p58
Antucoya p60
Zaldívar p61
Peru
Pacific Ocean
Bolivia
ESPERANZA
PORT
MEJILLONES
ANTUCOYA
CENTINELA
Antofagasta
Region
ANTOFAGASTA
ZALDÍVAR
Antofagasta
Region
Coquimbo
Region
Argentina
SANTIAGO
Chile
LA SERENA
Coquimbo
Region
ILLAPEL
LOS PELAMBRES
LOS VILOS
PUNTA
CHUNGO
PORT
Los Pelambres
Centinela
Antucoya
Zaldívar
Capital city
Cities and town centres
Ports
770,000
Tonnes of copper
produced in 2019
282,300
Ounces of gold produced
in 2019
11,600
$1.22/lb
Tonnes of molybdenum produced
in 2019
Net cash costs1
in 2019
1. Non-IFRS measure, refer to the alternative performance measures section on page 206
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Strategic Report Operating review continued
Mining division
LOS PELAMBRES
Los Pelambres is a sulphide deposit in Chile’s Coquimbo Region,
240 km north of Santiago. It produces copper concentrate
(containing gold and silver) and molybdenum concentrate
through a milling and flotation process.
2020
20 years of operations
15 years Life-of-Mine
60%
owned
2019 Production
Copper (tonnes)
363,400 +1.6%
Molybdenum (tonnes)
11,200 (15.8%)
Gold (ounces)
59,700 (5.5%)
2000
Start of operations
2035
Projected mine life
2019 Financials
EBITDA
$1,384m (3.0%)
Net cash costs
$0.91/lb (unchanged)
2020 Forecast
Copper (tonnes)
350–360,000
Molybdenum (tonnes)
10–11,000
Gold (ounces)
50–60,000
Net cash costs
$1.00/lb
8
.
7
5
3
4
.
3
6
3
8
.
3
4
3
3
.
3
1
2
.
1
1
5
.
0
1
2
.
3
4 6
.
5
5
7
.
9
5
17
18
19
17
18
19
17
18
19
Copper production
(‘000 tonnes)
363,400
tonnes
Molybdenum production
(‘000 tonnes)
11,200
tonnes
Gold production
(‘000 ounces)
59,700
ounces
56
Antofagasta plc Annual Report 2019
2019 Performance
Operating performance
Los Pelambres had a strong 2019, meeting its production and
outperforming its cost guidance for the full year despite disruptions
to its mine supplies during the quarter. This again confirms its
position as a stable and reliable world-class operation.
EBITDA at Los Pelambres was $1,384 million, compared with
$1,428 million in 2018, reflecting slightly lower sales volumes and
lower realised prices, partially offset by lower operating costs.
Production
Copper production for the year increased by 1.6% to 363,400 tonnes
due to higher copper grades.
Molybdenum production in 2019 was 11,200 tonnes, 15.8% lower than
in 2018 due to lower grades.
Gold production was 59,700 ounces, 5.5% lower than the
previous year.
CAPEX
Phase 1 of the Los Pelambres Expansion project started in early 2019.
The capital cost of the project is $1.3 billion, which includes an
additional SAG mill, ball mill and the corresponding flotation circuit
with six additional cells and a 400 l/s desalination plant and water
pipeline. Throughput at the plant will increase from the current
capacity of 175,000 tonnes of ore per day to an average of
190,000 tonnes of ore per day and copper production will
increase by 60,000 tonnes.
At the end of 2019, the Los Pelambres Expansion project
(engineering, procurement and construction) was 31% complete.
Capital expenditure during 2019 was $494 million, including
$129 million on mine development and $235 million on development.
+ See pages 64-66 for more information
Cash costs
Cash costs before by-product credits at $1.40/lb were 7.9% or 12c/lb
lower than in 2018, reflecting strong cost performance during the
year and the weaker Chilean peso.
Net cash costs for the full year were $0.91/lb, the same as in 2018,
despite lower by-product credits.
Outlook for 2020
The forecast production for 2020 is 350–360,000 tonnes of copper,
10–11,000 tonnes of molybdenum and 50–60,000 ounces of gold.
Cash costs before by-product credits are forecast to be approximately
$1.45/lb and net cash costs of $1.00/lb.
Los Pelambres
Autonomous Drilling
Systems (ADS)
During 2019, we developed the
ADS project to start operating the
first autonomous mining equipment
in Los Pelambres. The implementation
is expected to decrease the operational
risks and improve both operating and
maintenance results using a more
precise control system.
The first two retrofitted drills, equipped
with ADS kits, were commissioned at
the end of 2019 and are now in operation.
Their performance is being evaluated
and additional rigs are expected to be
converted once the assessment period
is successfully concluded.
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Strategic Report Operating review continued
Mining division
CENTINELA
Centinela mines sulphide and oxide deposits 1,350 km north of Santiago in the
Antofagasta Region, one of Chile’s most important mining areas.
Centinela produces copper concentrate (containing gold and silver) through
a milling and flotation process, and molybdenum concentrate. It also produces
copper cathodes, using the solvent extraction and electrowinning (SX-EW) process.
2020
19 years of
operations
48 years Life-of-Mine
70%
owned
2019 Production
Copper (tonnes)
276,600 +11.5%
Molybdenum (tonnes)
400 +33.3%
Gold (ounces)
222,600 +51.5%
2001
Start of operations
2019 Financials
EBITDA
$960m 48.8%
Net cash costs
$1.26/lb (16.6%)
5
.
5
9
1
9
.
3
6
1
5
.
5
5
1
17
18
19
Copper concentrate
(‘000 tonnes)
195,500
tonnes
5
.
2
9
1
.
1
8
5
.
4
6
17
18
19
Copper cathodes
(‘000 tonnes)
81,100
tonnes
58
Antofagasta plc Annual Report 2019
2068
Projected mine life
2020 Forecast
Copper (tonnes)
240–250,000
Gold (ounces)
130–140,000
Molybdenum (tonnes)
2.5–3,000
Net cash costs
$1.50/lb
6
.
2
2
2
0
.
7
5
1
9
.
6
4
1
17
18
19
Gold
(‘000 ounces)
222,600
ounces
2019 Performance
Operating performance
Centinela had a year of record copper production during
2019 as the sulphide ore grade increased by 21.1%.
EBITDA at Centinela was $960 million, compared with
$645 million in 2018, on higher copper and gold sales
volumes and lower unit costs.
Production
Copper production for the full year was 276,600 tonnes,
11.5% higher than in 2018 primarily as a result of higher
grades at Centinela Concentrates, partially offset by
lower grades at Centinela Cathodes.
Production of copper in concentrates for the full year
was 25.7% higher than in 2018 at 195,500 tonnes due
to higher grades and recoveries.
Cathode production in 2019 was 81,100 tonnes, 12.3%
lower than 2018 due to lower oxide grades, partially
compensated for by higher throughput.
Gold production was 222,600 ounces, 51.5% higher
than in 2018 as a result of expected higher grades
and recoveries.
Cash costs
Cash costs before by-product credits for the full year
were $1.83/lb, 3.2% lower than in 2018, mainly as
a result of higher production and the weaker local
currency, partially offset by higher input prices.
Net cash costs were $1.26/lb, 16.6% lower than the
previous year, reflecting the lower cash costs before
by-product credits and $0.19/lb higher by-product
credits as gold production increased by over 50%.
CAPEX
Capital expenditure was $458 million, including
$213 million on mine development.
+ See pages 64-66 for more information
Outlook for 2020
Production for 2020 is forecast at 240–250,000 tonnes
of copper, 130–140,000 ounces of gold and 2,500–3,000
tonnes of molybdenum.
Cash costs before by-products are forecast to be
approximately $2.00/lb and net cash costs $1.50/lb.
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Strategic Report Operating review continued
Mining division
ANTUCOYA
Antucoya is approximately 1,400 km north of Santiago and 125 km north-east of
the city of Antofagasta. Antucoya mines and leaches oxide ore to produce copper
cathodes using the solvent extraction and electrowinning (SX-EW) process.
2020
4 years of
operations
20 years Life-of-Mine
2016
Start of operations
2019 Financials
EBITDA
$86m (39.1%)
Cash costs
$2.17/lb +9.0%
2040
Projected mine life
2020 Forecast
Copper (tonnes)
80–85,000
Cash costs
$1.90/lb
2019 Performance
Operating performance
Antucoya had a challenging 2019 due
to lower than expected plant availability.
Several measures have been implemented in
the plant and the spent ore stacking process
to improve continuity of the operation.
EBITDA was $86 million compared
with $142 million in 2018, reflecting lower
realised prices and higher operating costs.
Production
Antucoya produced 71,900 tonnes of copper,
similar to last year’s production as lower
throughput was offset by higher grades
and recoveries.
Cash costs
Cash costs for 2019 were $2.17/lb, 9.0%
higher than in 2018, mainly because of
higher input prices, particularly acid and
higher costs in the spent ore reclaiming
and stacking process.
CAPEX
Capital expenditure was $50 million,
including $5 million on mine development.
Outlook for 2020
Production is forecast to be 80–85,000
tonnes of copper and cash costs are
expected to be approximately $1.90/lb.
70%
owned
2019 Production
Copper (tonnes)
71,900 (0.4%)
5
.
0
8
2
.
2
7
9
.
1
7
17
18
19
Copper production
(‘000 tonnes)
71,900
tonnes
60
Antofagasta plc Annual Report 2019
Mining division
ZALDIVAR
Zaldívar is an open-pit, heap-leach copper mine which produces copper cathodes
using the solvent extraction and electrowinning (SX-EW) process. It is located at an
elevation of 3,000 metres above sea level, approximately 1,400 km north of Santiago
and 175 km south-east of the city of Antofagasta.
25 years of operations
11 years Life-of-Mine
2020
50%
owned
2019 Production (50%)
Copper (tonnes)
58,100 +22.8%
1995
Start of operations
2019 Financials
EBITDA
$113m +28.8%
Cash costs
$1.75/lb (9.8%)
2031
Projected mine life
2020 Forecast
Copper (tonnes)
55–60,000
Cash costs
$1.70/lb
1
.
8
5
7
.
1
5
3
.
7
4
17
18
19
Copper production
(‘000 tonnes)
58,100
tonnes
2019 Performance
Operating performance
Mining entered a high-grade zone of the
deposit, improving production and unit costs.
Outlook for 2020
Attributable copper production is forecast
to be 55–60,000 tonnes at a cash cost of
approximately $1.70/lb.
Attributable EBITDA was $113 million
compared with $87 million in 2018.
Production
Copper production was 58,100 tonnes,
22.8% higher than 2018, mainly due to
higher grades, which increased from 0.82%
to 1.04%, and higher plant throughput.
Cash costs
Cash costs were $1.75/lb, 9.8% lower than
the previous year, mainly because of the
higher production and the weaker Chilean
peso, partially offset by higher input prices.
CAPEX
Attributable capital expenditure for 2019
was $45 million, including approximately
$18 million of mine development.
Other matters
An Environmental Impact Assessment (EIA)
has been submitted for an extension of the
mine life to 2031. A decision is expected in
late 2020 or early 2021. This EIA includes
the extension of the water permit for
extraction rights from 2025 to 2031
and remediation.
Zaldívar’s final pit phase, which represents
approximately 18% of current ore reserves,
impacts a portion of Minera Escondida’s
mine property, as well as infrastructure
owned by third parties (road, railway,
powerline and pipelines). Mining of the
final pit phase is subject to agreements
or easements to access these areas
and relocate this infrastructure.
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Strategic Report Operating review continued
TRANSPORT DIVISION
Our Transport division is known as Ferrocarril de Antofagasta a Bolivia
(FCAB) and provides rail and truck services to the mining industry in
the Antofagasta Region, including our own mining operations.
2019 Tonnage transported
(´000 tonnes)
6,533 +7.7%
7
6
2
,
6
5
6
0
,
6
3
3
5
,
6
17
18
19
Transported in 2019
(´000 tonnes)
6.5 million
tonnes
2019 Financials
Revenue
$161m (7.1%)
EBITDA
$81m (9.1%)
2019 Performance
Our Transport division continued to improve
its operations through the implementation of
its Management Model, which is based on
five key pillars: operating continuity, growth,
urban development, transformation and
community affairs.
As production from existing customers has
fallen it has become more important that the
division expands its customer base, and two
new contracts started during the year, which
helped increase transport volumes by 7.7%
to 6.5 million tonnes.
Transport volumes growth in 2019 was
mainly driven by higher sulphuric acid
volumes transported to mining customers.
During 2019, 12 new locomotives were
commissioned, replacing older equipment
and increasing the fleet’s haulage capacity
and efficiency. This new fleet will also be
more fuel efficient than the fleet it replaces.
Operating performance
The division’s EBITDA was $80.8 million in
2019, which was 9% lower than the previous
year, mainly due to a lower sales mix margin,
the impact of adverse weather and the
effects of the civil unrest in the
Antofagasta Region.
Costs and operating efficiency
Management is focused on optimising the
division’s business processes to ensure its
long-term competitiveness. The Group´s
Cost and Competitiveness Programme (CCP)
has been applied at the division to improve
its cost structure and operating standards
and has achieved benefits of some $3 million.
The main areas of improvement were lower
material and contract costs, and improved
operating and maintenance management.
During the year, with more new
locomotives, reliability and availability
improved significantly. In addition, the old
fleet is also performing better following
some engine upgrades and the launch
of the Sigma project which standardises
and automates maintenance controls and
has led to improved availability.
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Antofagasta plc Annual Report 2019
Sustainability
The maturity of the safety processes
applied at the division continued to
show improvement with no fatalities or
accidents with serious consequences to
people reported in 2019. The Lost Time
Injury Frequency Rate (LTIFR) fell 40%
to 4.0 compared with 6.7 in 2018.
During the year, we successfully
implemented the Environmental Management
Model and launched the Occupational Health
Standards for our contractors.
Also, in line with our Diversity and Inclusion
Policy, the employment of women and
people with disabilities increased to 11%
and 1% of the total workforce respectively.
Outlook
Over the coming years the Company will
transport an increasing quantity of bulk
materials and is currently working on
a project to further increase transport
volumes, particularly of copper concentrates.
In the shorter term, some of the division’s
facilities, trains and trucks are vulnerable
to disruptions arising from unrest in the
country, which could have a negative
impact on the division’s operations.
Sustainability practices are improving with
the focus on consolidating various safety,
environmental management and community
affairs programmes.
The division is also advancing its plans to
convert land it has in the centre of the city of
Antofagasta from industrial to urban use. We
have been consulting with communities and
neighbours, and in September submitted the
project’s Environmental Impact Assessment.
Tocopilla
María Elena
Calama
Sierra Gorda
Antofagasta
Region
Mejillones
Antofagasta
Taltal
Customer map
Road route
Rail route
FCAB customers
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Strategic Report Operating review continued
GROWTH PROJECTS
AND OPPORTUNITIES
Our approach to considered growth means that we focus on everything from
controlling capital costs and optimising production at our existing operations to
the development of new mining operations. We achieve this through careful project
management and constant monitoring of the efficiency of our mines, plants and
transport infrastructure.
Construction of Phase 1 of the Los
Pelambres Expansion project started
at the beginning of the year and the
Esperanza Sur project and the Zaldívar
Chloride Leach project were approved
by the Board during the year. Also,
in December Twin Metals Minnesota
presented its Mine Plan of Operations
to the US authorities, the first stage
of the required permitting process.
Where possible, debottlenecking and
incremental plant expansions are used to
increase throughput and improve overall
efficiencies, as these projects often have
lower capital expenditure requirements
and generate higher returns than
greenfield projects.
We continue to review our options for
maximising returns and reducing the
capital cost of projects, and are enhancing
the capabilities of the project team to
improve our project execution strategy,
management and control.
Los Pelambres Expansion
This expansion project is divided into two phases.
Phase 1
This phase is designed to optimise throughput within the limits of
the existing operating, environmental and water extraction permits.
Construction started in early 2019 and by the end of the year the
project progress to completion was 31%.
Throughput at the plant will increase from the current capacity
of 175,000 tonnes of ore per day to an average of 190,000 tonnes
of ore per day and first production is expected by the end of 2021.
The plant expansion includes an additional SAG mill, ball mill and
the corresponding flotation circuit with six additional cells.
Annual copper production will be increased by an average of 60,000
tonnes per year over 15 years, starting at approximately 40,000
tonnes per year for the first four to five years and 70,000 tonnes
for the rest of the period as the hardness of the ore increases and
the benefit of higher milling capacity is fully realised.
The capital cost of the project is $1.3 billion, which includes $500
million for a 400-litres per second desalination plant and water
pipeline. The desalination plant will supply water for the expansion
and will act as a back-up for the existing operation in dry conditions
such as those the region has been experiencing recently. Desalinated
water will be pumped from the coast to the Mauro tailings storage
facility, where it will connect with the existing recycling circuit
returning water to the Los Pelambres concentrator plant.
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Antofagasta plc Annual Report 2019
Phase 2
In the second phase of expansion, throughput will increase to
205,000 tonnes of ore per day increasing copper production by
35,000 tonnes per year. As part of this development the Group
will submit a new EIA to increase the capacity of the Mauro tailings
storage facility and the mine waste dumps, as well as extend certain
operating permits. The granting of these permits will extend the
mine’s life by 15 years beyond the current 15 years, accessing
a larger portion of Los Pelambres’s 6 billion tonne mineral
resources base.
Work began on the environmental baseline study for the new EIA in
2017, along with the early stages of community engagement activities.
Critical studies on tailings and waste storage capacity have been
undertaken and are now progressing towards the feasibility
study stage.
Capital expenditure for this phase was estimated in the pre-feasibility
study in 2014 at approximately $500 million, the majority of the
expenditure being spent on mining equipment and increasing
the capacity of the concentrator and the Mauro tailings facilities.
The conveyors from the primary crusher in the pit to the
concentrator plant will also have to be repowered to support
the additional throughput.
Phase 1
+60,000 tonnes
annual copper production
Phase 2
+15 years
Life-of-Mine extension
+35,000 tonnes
annual copper production
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Centinela Second Concentrator
We are currently evaluating the construction of a second
concentrator and tailings deposit some 7 km from the existing
concentrator in two phases. Phase 1 would have an ore throughput
capacity of approximately 90,000 tonnes per day, producing copper,
gold and molybdenum as by-products, with an annual production of
approximately 180,000 tonnes of copper equivalent. Once Phase 1
has been completed and is operating successfully, a further
expansion is possible and would involve increasing the capacity
of the concentrator to 150,000 tonnes of ore per day with annual
production increasing to 250,000 tonnes of copper equivalent,
maximising the potential of Centinela’s large resource base.
Ore for the second concentrator would be sourced initially from the
Esperanza Sur deposit and later from Encuentro Sulphides. The latter
lies under the Encuentro Oxides reserves, which are expected to be
depleted by 2026.
The EIA for both phases of the project was approved in 2016 and the
completion of the feasibility study and review for Phase 1 is expected
to be completed during 2020. The capital cost estimated in the 2015
pre-feasibility study for Phase 1 was $2.7 billion, which included
capitalised stripping, mining equipment, a concentrator plant, a
new tailings deposit, water pipeline and other infrastructure, plus
the owner’s and other costs. The optimised feasibility study will
update these estimates as well as including an evaluation of the
potential disposal of Centinela’s existing water infrastructure and
the evaluation of a new milling and crushing strategy using high
pressure rolls rather than the more traditional SAG mills. In addition,
a third party may be invited to provide water to the site and build the
new pipeline.
Esperanza Sur pit
The Board has approved a project to open the Esperanza Sur pit at
Centinela. Esperanza Sur is 4 km south of the Esperanza pit and is
close to Centinela’s concentrator plant. The deposit contains 1.4 billion
tonnes of reserves with a grade of 0.4% copper, 0.13 g/t of gold and
0.012% of molybdenum.
Stripping is expected to start in 2020 and to be completed by the
end of 2021 at a capital cost of $175 million. The stripping will be
capitalised and will be carried out by a contractor. The Company is
currently evaluating whether to use autonomous mining equipment
once the stripping is completed.
Opening the Esperanza Sur pit will improve Centinela’s flexibility to
supply its concentrator and the higher grade material, over the initial
years, will increase production by some 10–15,000 tonnes of copper
per year, compared to how much would be produced if material was
solely supplied from the Esperanza pit. This greater flexibility will
allow Centinela to smooth and optimise its year-on-year production
profile, which has in the past been variable.
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Antofagasta plc Annual Report 2019
Zaldívar Chloride Leach
The Board approved the Zaldívar Chloride Leach project during the
second half of 2019.
The project is expected to increase copper recoveries by
approximately 10 percentage points with further upside in recoveries
possible, depending on the type of ore being processed. This will
increase production at Zaldívar by approximately 10–15,000 tonnes
per annum of copper over the remaining life of the mine. Work will
begin early in 2020 and the first full year of production is expected
to be 2022.
The project requires an upgrade of the Solvent Extraction (SX) plant
and the construction of additional washing ponds at an estimated
capital cost of $190 million.
As the Group equity accounts its interest in Zaldívar, capital
expenditure at the operation is not included in Group total capital
expenditure amounts.
Twin Metals Minnesota
In December 2019, Twin Metals Minnesota presented its Mine Plan
of Operations (MPO), a prerequisite for permitting applications, to
the US Bureau of Land Management and a Scoping Environmental
Assessment Worksheet Data Submittal was also issued to the
Minnesota Department of Natural Resources. These submissions
start a multi-year scoping and environmental review process that
will thoroughly evaluate the proposed project. The review process
will include additional baseline data collection, impact analyses, and
multiple opportunities for public input, and is expected to take some
five years.
Twin Metals Minnesota is a wholly owned copper, nickel and platinum
group metals (PGM) underground mining project, which holds the
Maturi, Maturi Southwest, Birch Lake and Spruce Road copper-nickel
PGM deposits in north-eastern Minnesota, US. In 2018 an update of
the pre-feasibility study was completed on an 18,000 tonnes of ore
per day project producing an average of 42,000 tonnes of copper
per year plus nickel and PGM as by-products, the equivalent of
some 65,000 tonnes of copper per year.
Reko Diq project
In July 2019 the World Bank’s International Center for
Settlement of Investment Disputes (“ICSID”) awarded
$5.84 billion in damages (compensation and accumulated
interest as at the date of the award) to Tethyan Copper
Company Pty Limited (“Tethyan”), a joint venture held equally
by the Company and Barrick Gold Corporation, in relation to
arbitration claims filed against the Islamic Republic of Pakistan
(“Pakistan”) following the unlawful denial of a mining lease for
the Reko Diq project in Pakistan in 2011.
On 8 November 2019, Pakistan applied to ICSID to annul the
award and on 13 March 2020, ICSID appointed a committee
to consider this application which is expected to reach a
conclusion in the next one to two years. TCC is currently
stayed from taking action to collect the award. Whether
this stay remains in place will be an issue litigated before
the ICSID appointed committee.
The proceeds of the award will only be recognised in
Antofagasta’s financial statements once they are received.
EXPLORATION ACTIVITIES
We seek to expand our mineral resource base to ensure our long-term future,
undertaking exploration activities in Chile and abroad, focused on the Americas.
Also, as part of the long-term development of the Centinela Mining
District, we continued geological evaluation and drilling at several
projects in the area to identify new high-quality projects, particularly
leachable oxides.
International
International exploration efforts remain concentrated on the key
copper belts of North and South America, with a strong focus on
Peru and western North America. South American activities were led
from the Group’s office in Santiago and North American efforts from
the office in Toronto.
Exploration in Chile and internationally remains a key contributor to
the sustainable long-term growth of our copper business. We have an
active programme of early and intermediate-stage projects managed
by our exploration teams in Santiago and Toronto. Exploration is
managed using these in-house teams and includes a well-balanced
portfolio of exploration properties in Chile and Peru. The teams
manage their own programmes in Chile and look for opportunities
with third parties in the Americas outside of Chile, with the aim
of building a portfolio of long-term copper projects.
Exploration and evaluation expenditure, which includes expenditure
on pre-feasibility studies, increased by 14% in 2019 to $111 million
compared with 2018, as expenditure at Twin Metals was increased
and exploration activities in Chile progressed.
Chile
Our exploration programmes in the copper belts of northern and
central Chile continue, particularly in areas with high prospectivity
for porphyry copper, as well as manto and IOCG (Iron Ore Copper
Gold)-type deposits. During 2019 the early stage programmes drilled
more than 100,000 metres, 10% more than in 2018, with most of the
drilling on two properties.
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Strategic Report Operating review continued
KEY INPUTS AND COST BASE
Our mining operations depend on many inputs, ranging from energy and water to
labour and fuel, the most important of which are reviewed below.
As concentrate producers, Los Pelambres and Centinela require
reagents and grinding media. As cathode producers using the SX-EW
process, Centinela, Antucoya and Zaldívar require sulphuric acid.
The availability, cost and reliability of these inputs are central to
our cost management strategy, which focuses on cost control
and security of supply.
Energy
Our operations are on the country’s main grid, the National Electrical
System (SEN), which was created in 2017 when two regional grids
were linked together, and provides users with access to a wide
range of power generation sources.
The northern sector of the SEN supplies Centinela, Antucoya and
Zaldívar, and the central sector supplies Los Pelambres.
Power in the northern sector is from coal-fired stations and,
increasingly, renewable sources such as wind and solar, and in
the central sector power is primarily from hydroelectric plants.
Each of our operations sources power under medium and long-term
contracts, called Power Purchase Agreements (PPAs). Currently
most of our power is sourced from thermal stations and prices
are indexed to the coal price. However, this situation is changing.
In recent years renewable technologies have significantly reduced in
cost and, with the nationwide access provided by the SEN, many new
renewable power plants are being built. At the end of 2019, 47% of
the SEN’s installed capacity was from renewable sources and will
increase over the coming years. We are benefiting from these
changes and have contracted 65% of our power from renewable
sources from 2022 onwards and expect that this will increase to
100% as we continue to transition our power contracts to renewables.
In 2019, Los Pelambres renegotiated one of its PPAs, increasing its
use of renewable power, and by 2022 it expects to be supplied
entirely from renewable sources.
During the year Antucoya also renegotiated its supply contract and
will be 100% renewable from 2022. Zaldívar has already entered
into a 100% renewable contract, which will start in July 2020.
Sourcing our energy from renewable sources not only reduces our
carbon footprint, but also reduces our power costs and, as electricity
makes up 13% of our operating costs, this will have a meaningful
impact on our costs.
In addition to reducing the cost of our electricity, we are also improving
our energy consumption efficiency. We have an Energy Management
System based on international standard ISO 50.001 to manage
energy efficiency from the design stage to the construction of mining
and infrastructure projects, and in its use at our mining operations.
During 2019, we implemented improvements that reduced our
energy consumption by approximately 180 GWh and more than
4 million litres of diesel, equivalent to emissions of 80,000 tonnes
of CO2, a significant step towards achieving our target of reducing
emissions by 300,000 tonnes by 2022.
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Antofagasta plc Annual Report 2019
Water
Water is a strategic input for all mining operations. At Los Pelambres
and Zaldívar water is supplied from continental sources while
Centinela and Antucoya use sea water.
In 2019, sea water accounted for 46% of total Group water use and
our efficiency metric (ICMM defined for reuse and recycling) ranges
from 79–97%, depending on the characteristics of each operation.
Los Pelambres recycles approximately 85% of its water and the
Los Pelambres Expansion project includes a desalination plant
and pipeline to supply 400 l/s of sea water to the operation.
Centinela is a pioneer in efficient water management, becoming the
world’s first large-scale mining company to operate using raw sea
water and thickened tailings, which allow more water to be recycled.
Antucoya also uses only raw sea water, as will the Centinela second
concentrator project when it is built.
Zaldívar has submitted an Environmental Impact Assessment for an
extension of its mine life to 2031 and this includes an application to
extend the mine’s water extraction rights from 2025, when they
currently expire.
We report our water consumption according to the ICMM´s Minimum
Disclosure Standard and the Carbon Disclosure Project´s (CDP)
water programme methodologies.
The corporate procurement department works closely with each
of the operations to achieve synergies and savings, and improves
contractor output and productivity.
Labour
We employ approximately 25,000 employees and contractors, and
accessing a diverse and talented workforce is key to our success.
Union labour agreements are in place at all of our mining operations
and generally last for a period of three years.
We continue to foster good working relationships with our employees
and unions. During 2019 labour negotiations were successfully
concluded with the supervisors’ unions at Los Pelambres, Zaldívar
and Antucoya, and with the workers’ union at Antucoya after an
18-day strike.
Contractors account for approximately 74% of our workforce and
are responsible for labour negotiations with their own employees.
We maintain strong relations with all contractors to ensure operating
continuity and require all contractors to adhere to the same key
standards as we have for our own employees, particularly in the
areas of safety and health.
Service contracts and key supplies
Corporate agreements for key supplies such as mining equipment,
tyres, critical spares and reagents continue to deliver savings,
while assuring operating continuity. Our operations have contracts in
place for all critical services such as camp administration, employee
transport and maintenance. A core team of experts defines product
and service categories, and procurement policies and procedures
are standardised across our sites.
Synergies and economies of scale are the main targets for all goods
and services, where standardisation is possible and, when necessary,
customised contracts are negotiated for specific operating or
project requirements.
Depending on the strategic position of the supplier, we use a range
of approaches, from pure price competition with e-auctions to
long-term Group-wide agreements with mechanisms and
incentives for bilateral benefits.
Major contracts for goods and services have price adjustment
mechanisms in place that reflect the price influence of the associated
key commodities such as oil, steel and ammonia, as well as foreign
exchange rate variations.
In total we have some 3,850 suppliers of goods and services of
which 93% are based in Chile.
Fuel and lubricants
Fuel and lubricants represent approximately 7% of operating costs
and are used mainly by trucks for ore and waste haulage. Improving
fuel efficiency is a priority, with the amount of fuel consumed per
tonne of material mined being a key measure. Variations in the oil
price affect not only the fuel price but also the spot price of energy,
shipping rates for supplies and products, and the cost of items such
as tyres and conveyor belts, which contain oil-based products.
The oil price declined by approximately 7.5% during 2019.
Contracts are negotiated centrally by the Corporate Procurement
Department to maximise leverage and benefits.
Sulphuric acid
Sulphuric acid is one of the main inputs for the leaching process for
cathode producers and accounts for approximately 5% of the Group’s
operating costs. Centinela, Antucoya and Zaldívar use approximately
1.5 million tonnes of sulphuric acid per year which is mainly
contracted under one-year contracts to secure supply and prices.
During the first half of the year, scheduled smelter upgrades in
Chile combined with the maintenance of the Ilo smelter in Peru
led to a significant deficit of acid in the region. This pushed up the
contracted acid price to around $130 per tonne. From July onwards,
the situation began to normalise and prices ended the year at around
$70 per tonne, similar to the levels agreed for 2020.
Exchange rate
Approximately 35–40% of our operating costs are in Chilean pesos.
The exchange rate with the US dollar is correlated to the copper price
as copper exports generate some 50% of Chile´s foreign exchange
earnings, which provides a natural hedge for the Company. During
2019, the Chilean peso weakened by 7% from Ch$695/$1 at the
beginning of the year to Ch$745/$1 at the end.
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Strategic Report Operating review continued
OPERATING EXCELLENCE
AND INNOVATION
Excellence, forward thinking and innovation are three of our core values and
are central to how we achieve our production targets at competitive costs in
a safe environment. We do this through three initiatives, which have different
timescales and overlap to a degree. These are the promotion of operating
excellence, the implementation of our Cost and Competitiveness Programme
and the development of innovative solutions and ideas.
Cost and Competitiveness Programme
The Cost and Competitiveness Programme (CCP) was introduced
in 2014 to reduce our costs base and improve our competitiveness
within the industry. Five years later, the CCP’s scope has evolved
to reflect the greater maturity level that has been achieved over
this period.
During 2019, we have achieved savings of $132 million, equivalent
to $7c/lb for the year.
The target for 2020 is a further $100 million of savings, mainly as
a result of productivity improvements achieved through applying
our operating excellence methodology.
The programme focuses on five areas to deliver sustainable cost
reductions and productivity increases:
Streamlining goods and services procurement:
• Improving the efficiency and quality of purchase contracts while
reducing costs
• Centralising procurement to create synergies for the
operating companies
Operating efficiency and asset reliability:
• Maximising plant and equipment availability and minimising
variability through continuous improvement
• Ensuring the reliability and performance of assets through planned,
proactive and predictive maintenance
Energy efficiency:
• Optimising energy efficiency and lowering energy contract prices
Corporate and organisational effectiveness:
• Restructuring the Group’s organisational framework to increase
efficiency and reduce costs
Working capital, capital expenditure and services efficiency:
• Optimising inventory levels, capital expenditure and services costs
21%
through productivity
improvements
$132m
of savings achieved in 2019
79%
through more efficient
contract and input
negotiations, consumption
rates and better use of
maintenance resources
Operating excellence
We have Operating Excellence departments centrally and at each
operation to drive continuous improvement. They apply the “full
potential” methodology to challenge existing operating practices,
identify opportunities and create value.
The departments have standardised and strengthened production
processes at the operations, improving collaboration between key
areas, and defining clear roles and responsibilities. The operating
areas themselves originate and lead any initiatives and are supported
by the Operating Excellence departments. This structure and
methodology has helped reduce the variability and deviation
of actual results compared to planned production and also
optimise asset performance.
During the year more than 60 initiatives were implemented
at our operations and were a key contributor to the Cost and
Competitiveness Programme savings.
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Antofagasta plc Annual Report 2019
Innovation
Innovation is critical to our strategy of creating long-term value and
is a key enabler for safer and sustainable mining development, and
our long-term competitiveness and growth. Our innovation strategy
is characterised by a focused, collaborative and multi-dimensional
approach focused on value creation. We seek to promote a culture
that fosters innovation, develops skills and enables transformation.
Strategic objectives
Our innovation model considers developing or adopting new solutions
to improve or transform our current operational practices to solve
our main strategic challenges and build our future.
Our strategic objectives are to develop or implement effective
solutions to the main operational challenges that limit our operations’
ability to reach their full potential (Operational Innovation). We are
also implementing our digital roadmap to significantly improve our
operations’ safety and productivity, and investigating the use of
new technologies to address our main strategic challenges
(Transformational Innovation).
At the heart of our innovation strategy is, first, to fully understand our
challenges and then rethink how we sustainably resolve them.
Operational Innovation
We are sharing our main operational challenges through an open
platform, called Innovaminerals, to capture ideas from inside and
outside the Group to resolve our challenges. Since 2016, over 540
ideas have been uploaded onto the platform, 53 of which have been
presented to the Innovation Board and 35 have been approved for
further evaluation.
We also have a system called PITCH through which suppliers can
submit proposals to solve the challenges we have presented. Since
2018 we have considered over 300 proposals of which 15 were
adopted by our operations or are being co-developed with us.
We are currently co-developing 24 projects, five of which moved
into implementation during 2019. These included, better planning
tools for scheduling mine development sequencing and slope stability
at Centinela, improving fuel management at Los Pelambres and using
drones to detect uncrushable material in stockpiles.
Our portfolio of projects includes both technical and non-technical
initiatives across the entire value chain and also the reinforcement
of critical safety controls and environmental protection.
Transformational Innovation
Current transformational strategic initiatives include reducing the
volume and improving the monitoring of tailings, transporting large
volumes of material over long distances and developing a primary
sulphide leach process. On the primary leach process in particular
we are generating encouraging results and will be continuing our
large-scale pilot programme during 2020.
Additionally, we continue with the implementation of our digital
roadmap programmes. These include:
• The evaluation of the construction of a remote operating centre for
Centinela in the city of Antofagasta
• Evaluating the use of autonomous trucks at Centinela’s new
Esperanza Sur pit
• Commissioning the first retrofitted autonomous production drill rigs
at Los Pelambres
• Using remote operated auxiliary equipment on the leach dumps
at Antucoya and the tailings at Centinela to improve safety
and accessibility
• Developing advanced data analytics to better understand and
predict the performance of our operations
• Launching a digital transformation programme in 2019 to simplify
and streamline corporate support functions, such as accounting,
procurement, and maintenance
• Installing robotic arms to fully automate the replacement of SAG
mill liners at Los Pelambres
Critical to our success in value creation from the implementation of
this roadmap is properly managing change for each of these projects
to assure effective adoption. It is important to capture all the existing
knowledge and best practices and develop the right skills and talents.
To do this we are going to open our own Digital Academy in 2020 to
reinforce the generation of adaptive and technical capabilities around
digital tools, digital enablers and different work methodologies.
Case study at Los Pelambres: Increased utilisation
of mobile equipment
By improving operating practices, better sequencing co-
ordination and improved planning, utilisation of the haulage
fleet was improved by 15% over a two-year period, while
drilling equipment utilisation increased by 10% during 2019.
Case study at Centinela: Improving the operation
of tailings thickeners
During 2019 we analysed the correlation between the
different variables that affect the tailings thickeners’
performance and then mapped the interdependence
of the most relevant variables.
In 2020 we will use this information to create a digital model
of the tailings thickeners using Machine Learning, which will
allow us to predict instability under a matrix of scenarios and
to provide recommendations on how to maintain a stable and
efficient operation.
Digital Transformation Programme
During 2019, a special team was assembled to implement a
Digital Transformation Programme to capture opportunities
for value creation by integrating new technologies into
our business.
The Programme is expected to be implemented first in the
areas of our support functions, such as accounting, human
resources, procurement and maintenance.
Among the main technological enablers being considered are
the automation of repetitive processes, the implementation of
advanced analytics and the use of blockchain technology.
The first applications of digital technology under this
programme are expected in 2020.
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Strategic Report Operating review continued
THE COPPER MARKET:
SUPPLYING METALS FOR
A BETTER FUTURE
As the world develops and becomes ever more environmentally aware, the demand
for copper increases. We are responding by supplying the copper needed for a more
sustainable world.
Copper consumption by region in 2018
51%
8%
15%
10%
16%
China
Other Asia
North America
Europe
Rest of world
Source: Wood Mackenzie,
Copper Outlook December 2019
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Antofagasta plc Annual Report 2019
Refined copperThe year started positively on strong fundamentals and with the threat of production disruptions pushing the copper price up from $2.70/lb at the beginning of the year to over $2.90/lb by April. However, sentiment deteriorated as the US-China trade negotiations continued and the threat of production disruptions receded leading to the price slipping to the $2.60–2.70/lb range. Trading continued in this range until towards the end of the year when increasing optimism that Phase 1 of the trade agreement would be signed improved sentiment and the copper price rose to end the year at $2.79/lb.Although copper demand for the year was lower than had originally been expected so was production performance, leaving the market in balance. Visible exchange stocks were down 50,000 tonnes on the year and stocks in Chinese bonded warehouses were estimated to have decreased by 155,000 tonnes. However, total refined production is estimated to have marginally increased by 90,000 tonnes, representing less than 0.5% of the global refined supply with the extra refined production coming from scrap (secondary production).Our average realised price in 2019 was $2.75/lb, 2.3% lower than in 2018.Market outlookThe outbreak of COVID-19 is impacting global GDP growth and the outlook for the year. This, together with the resulting uncertainty, depressed copper demand expectations and copper prices fell to a low of $2.50/lb in January before recovering slightly. It is not clear how long copper will trade at these levels. This will depend on how quickly the spread of COVID-19 is controlled and how quickly the Chinese and other major economies return to normal.Globally, demand growth over the coming years is largely driven by the rate of urbanisation, the adoption of electric vehicles and the use of power from renewable sources. These dominant trends are impacting demand growth at different rates in different countries, but the strongest growth is expected to be in China and southeast Asia.+ See pages 16-18 for more informationOn the supply side growth is expected to be limited in 2020. No major greenfield projects are planned to come on-stream during the year and it is estimated that the general industry decline in the copper grade will result in some 200–300,000 tonnes less copper being produced during the year from existing operations.Further out, some new production is expected to come into production in 2021 and 2022 while the impact of grade decline will continue. antofagasta.co.uk
73
Copper concentrateSome 70% of our copper production is in the form of copper concentrates, so the dynamics of the concentrate market are important and affect the level of treatment and refining charges (“TC/RCs”) we pay. These charges account for some 10% of our costs before by-product credits.Most of the new copper production in the world is in the form of concentrates and these volumes have been largely absorbed by new smelter capacity in China. The copper concentrate market was in deficit during 2019 and spot TC/RCs were significantly lower than the annual contract TC/RCs negotiated towards the end of 2018. Spot TC/RCs fell sharply during the year, reaching a low of about $40 per dry tonne of concentrate and 4c/lb of refined copper in August.Industry TC/RCs for 2020 were set in the fourth quarter of 2019 at $62 per dry tonne of concentrate and 6.2c/lb of refined copper, a reduction of 23% on 2019’s annual terms.Further increases in smelter capacity, in a period when the growth in concentrate production is expected to be limited, will keep the copper concentrate market in deficit and TC/RCs low, although the impact of the COVID-19 virus might change this.GoldThe gold price during 2019 increased by about 9.8%, peaking during the fourth quarter of the year at an average of $1,482/oz. The trade tension between China and the US helped support the price of gold during the year and in early 2020 the price strengthened further following the outbreak of the coronavirus.Gold averaged $1,393/oz in 2019 compared with $1,270/oz in 2018 and closed the year at $1,523/oz. If global economic uncertainty continues in 2020 the gold price is expected to remain strong.MolybdenumThe molybdenum price performed strongly for the first nine months of 2019 averaging $11.9/lb. It then weakened to $8.9/lb in November and closed the year at $9.2/lb. Molybdenum is mainly used in making specialist steel alloys and demand is linked to steel production, and particularly its use in the oil and gas industry. Production is mainly as a by-product of copper mining operations.The price averaged $11.4/lb for the year compared with $11.9/lb in 2018. The consensus price for 2020 at the beginning of the year was about $10.0/lb. Strategic Report FINANCIAL
REVIEW
The Group maintains a strong financial position,
to underpin its returns to shareholders and its
investment in its future growth.
74
Antofagasta plc Annual Report 2019
antofagasta.co.uk
75
Strategic Report Financial review
STRONGER EBITDA AND
CASH FLOWS
“Our higher copper and gold sales together with improved
unit costs EBITDA increased by 9.5% to $2,439 million and
our operating cash flow by 37%.”
Alfredo Atucha
Chief Financial Officer
Financial review for the year ended 31 December 2019
Revenue
EBITDA (including results from associates and joint ventures)
Total operating costs
Operating profit from subsidiaries
Net share of results from associates and joint ventures
Total profit from operations, associates and joint ventures
Net finance expense
Profit before tax
Income tax expense
Profit from continuing operations
Discontinued operations
Profit for the year
Attributable to:
Non-controlling interests
Profit for the financial year attributable to the owners of the parent
Basic earnings per share
From continuing operations
From discontinued operations
Total continuing and discontinued operations
76
Antofagasta plc Annual Report 2019
Year ended
31.12.2019
Total
$m
4,964.5
2,438.9
(3,588.7)
1,375.8
24.4
1,400.2
(51.0)
1,349.2
(506.1)
843.1
–
843.1
Year ended
31.12.2018
Total
$m
4,733.1
2,228.3
(3,388.1)
1,345.0
22.2
1,367.2
(114.5)
1,252.7
(423.7)
829.0
51.3
880.3
341.7
501.4
336.6
543.7
US cents
US cents
50.9
–
50.9
51.5
3.6
55.1
Net earnings
The $42.3 million decrease in the profit for the financial year
attributable to the owners of the parent from $543.7 million in 2018
to $501.4 million in the current year was mainly due to the impact
of the profit from discontinued operations in 2018. Excluding this
one-off gain, the profit from continuing operations attributable to
the owners of the parent in 2018 was $507.8 million, and so the
decrease in 2019 was $6.4 million or 1.3%. The full reconciliation
between 2018 and 2019 is as follows:
231.4 (200.6)
543.7
400
Y
F
–
8
1
0
2
e
u
n
e
v
e
R
2.2
V
J
d
n
a
s
e
t
a
i
c
o
s
s
A
s
t
s
o
c
g
n
i
t
a
r
e
p
O
63.5
(82.4)
(51.3)
(5.1)
501.4
s
m
e
t
i
e
c
n
a
n
F
i
x
a
T
s
n
o
i
t
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t
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s
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s
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e
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e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
-
n
o
N
Y
F
–
9
1
0
2
Revenue
The $231.4 million increase in revenue from $4,733.1 million in 2018
to $4,964.5 million in the current year reflected the following factors:
276.5 (100.7)
(7.6)
159.7
(93.4)
9.2
(12.3) 4,964.5
4,733.1
4,500
Y
F
–
8
1
0
2
e
c
i
r
p
r
e
p
p
o
C
l
s
e
m
u
o
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e
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l
d
o
G
s
C
R
/
C
T
m
u
n
e
d
b
y
o
M
l
r
e
v
l
i
S
t
r
o
p
s
n
a
r
T
Y
F
–
9
1
0
2
Revenue from the Mining division
Revenue from the Mining division increased by $243.7 million, or
5.3%, to $4,804.0 million, compared with $4,560.3 million in 2018.
The increase reflected a $168.2 million improvement in copper sales
and a $75.5 million increase in by-product revenues.
Revenue from copper sales
Revenue from copper concentrate and copper cathode sales
increased by $168.2 million, or 3.9%, to $4,083.4 million, compared
with $3,915.2 million in 2018. The increase reflected the impact of
$276.5 million of higher sales volumes, partly offset by $100.7 million
of lower realised prices and $7.6 million of higher treatment and
refining charges.
(i) Copper volumes
Copper sales volumes reflected within revenue increased by 6.6%
from 671,100 tonnes in 2018 to 715,500 tonnes in 2019, increasing
revenue by $276.5 million. This increase was due to higher copper
sales volumes at Centinela (46,900 tonne increase) as a result of
its increased production volumes and decrease in finished goods
inventories, and at Antucoya (300 tonne increase), partly offset
by lower sales volumes at Los Pelambres (2,800 tonne decrease).
(ii) Realised copper price
The average realised price decreased by 2.1% to $2.75/lb in 2019
(2018 – $2.81/lb), resulting in a $100.7 million decrease in revenue.
While the LME average market price decreased by 8.1% to $2.72/lb
(2018 – $2.96/lb), this was offset by a positive provisional pricing
adjustment of $27.3 million. The provisional pricing adjustment
mainly reflected the increase in the period-end mark-to-market
copper price to $2.81/lb at 31 December 2019, compared with
$2.71/lb at 31 December 2018.
Realised copper prices are determined by comparing revenue (gross
of treatment and refining charges for concentrate sales) with sales
volumes in the period. Realised copper prices differ from market
prices mainly because, in line with industry practice, concentrate and
cathode sales agreements generally provide for provisional pricing at
the time of shipment with final pricing based on the average market
price in future periods (normally around one month after delivery to
the customer in the case of cathode sales and normally four months
after delivery to the customer in the case of concentrate sales).
Further details of provisional pricing adjustments are given in Note 6
to the financial statements.
(iii) Treatment and refining charges
Treatment and refining charges (TC/RCs) for copper concentrate
increased by $7.6 million to $252.1 million in 2019 from $244.5 million
in 2018, mainly due to the increase in the concentrate sales volumes
at Centinela, partly offset by lower average TC/RC rates. Treatment
and refining charges are deducted from concentrate sales when
reporting revenue and hence the increase in these charges has
had a negative impact on revenue.
Revenue from molybdenum, gold and other
by-product sales
Revenue from by-product sales at Los Pelambres and Centinela
relate mainly to molybdenum and gold and, to a lesser extent, silver.
Revenue from by-products increased by $75.5 million or 27.7% to
$720.6 million in 2019, compared with $645.1 million in 2018. This
increase was mainly due to higher gold revenue partly offset by
lower molybdenum sales.
Revenue from gold sales (net of treatment and refining charges)
was $407.7 million (2018 – $248.0 million), an increase of $159.7
million which mainly reflected an increase in volumes as well as a
higher realised price. Gold sales volumes increased by 45.8% from
198,100 ounces in 2018 to 288,800 ounces in 2019, mainly due to
higher grades and recoveries at Centinela. The realised gold price
was $1,416.0/oz in 2019 compared with $1,256.3/oz in 2018,
reflecting the average market price for 2019 of $1,393.5/oz
(2018 – $1,269.6/oz), adjusted for a positive provisional pricing
adjustment of $7.4 million.
Revenue from molybdenum sales (net of roasting charges) was
$254.6 million (2018 – $348.0 million), a decrease of $93.4 million.
The decrease was due to the lower realised price of $10.8/lb
(2018 – $12.4/lb) and decreased sales volumes of 12,100 tonnes
(2018 – 14,000 tonnes).
Revenue from silver sales increased by $9.2 million to $58.3 million
(2018 – $49.1 million). The increase was due to higher sales volumes
of 3.6 million ounces (2018 – 3.3 million ounces) as well as an
increase in the realised silver price to $16.4/oz (2018 – $15.3/oz).
antofagasta.co.uk
77
Strategic Report
Financial review continued
Revenue from the Transport division
Revenue from the Transport division (FCAB) decreased by
$12.3 million or 7.1% to $160.5 million, mainly due to lower revenue
from the sales volumes of industrial water ($4.8 million impact),
lower tonnages transported, relating to some Bolivian customers,
and the impact of the weaker Chilean peso, partly offset by slightly
higher tonnages transported, relating to Chilean customers.
Operating costs
The $200.6 million increase in total operating costs from
$3,388.1 million in 2018 to $3,588.7 million in the current year
reflected the following factors:
153.2
3,588.7
25.2
2.8
3,388.1
13.5
9.4
(3.5)
3,300
Y
F
–
8
1
0
2
s
t
s
o
c
e
t
i
s
-
n
o
e
n
M
i
s
t
s
o
c
e
n
m
i
r
e
h
t
O
n
o
i
t
a
u
a
v
e
l
d
n
a
n
o
i
t
a
r
o
p
x
E
l
e
t
a
r
o
p
r
o
C
t
r
o
p
s
n
a
r
T
Y
F
–
9
1
0
2
n
o
i
t
a
s
i
t
r
o
m
a
d
n
a
n
o
i
t
a
i
c
e
r
p
e
D
Operating costs (excluding depreciation, amortisation
and loss on disposals) at the Mining division
Operating costs (excluding depreciation, loss on disposals and
impairments) at the Mining division increased by $50.9 million to
$2,556.0 million in 2019, an increase of 2.0%. Of this increase,
$25.2 million is attributable to higher mine-site operating costs.
This increase in mine-site costs reflected the higher production
volumes and activity levels in the year, higher key input prices and
higher administrative and commercial costs, partly offset by cost
savings from the Group’s Cost and Competitiveness Programme,
the adoption of the new IFRS 16 Leases accounting standard and
the weaker Chilean peso. However, on a unit cost basis, weighted
average cash costs excluding by-product credits (which are
reported as part of revenue) and treatment and refining charges
for concentrates (which are deducted from revenue) decreased
from $1.55/lb in 2018 to $1.49/lb in 2019.
The Cost and Competitiveness Programme has been implemented to
reduce the Group’s cost base and improve its competitiveness within
the industry. During 2019 the programme achieved benefits of $132
million, of which $104 million reflected cost savings and $28 million
reflected the value of productivity improvements. Of the $104 million
of cost savings, $82 million related to Los Pelambres, Centinela and
Antucoya, and therefore impacted the Group’s operating costs, and
$22 million related to Zaldívar (on a 100% basis) and therefore
impacted the share of results from associates and joint ventures.
Other Mining division costs increased by $2.8 million. Exploration
and evaluation costs increased by $13.5 million to $111.1 million
(2018 – $97.6 million), with the most significant factor being the
increased drilling work at Los Pelambres, Centinela and Antucoya
in relation to the reserve and resource estimates. Corporate costs
increased by $9.4 million.
78
Antofagasta plc Annual Report 2019
Operating costs (excluding depreciation, amortisation
and loss on disposals) at the Transport division
Operating costs (excluding depreciation, amortisation and loss
on disposals) at the Transport division decreased by $3.5 million to
$105.7 million, mainly due to lower fuel consumption and a slightly
lower diesel price, and the impact of the weaker Chilean peso.
Depreciation, amortisation and disposals
The depreciation and amortisation charge increased by $153.8 million
from $760.5 million in 2018 to $914.3 million. This mainly reflected
increased depreciation of lease assets as a result of the implementation
of IFRS 16 Leases, higher amortisation of IFRIC 20 stripping costs,
decreased deferral of depreciation in inventories and increased
depreciation of the Centinela concentrator plant due to the increased
production volumes. The loss on disposal of property, plant and
equipment was $12.7 million, a decrease of $0.6 million
(2018 – $13.3 million).
Operating profit from subsidiaries
As a result of the above factors, operating profit from subsidiaries
increased in 2019 by 2.3% to $1,375.8 million (2018 – $1,345.0 million).
Share of results from associates and joint ventures
The Group’s share of results from associates and joint ventures
was a profit of $24.4 million in 2019, compared with $22.2 million in
2018, with the increase mainly reflecting higher profits from Zaldívar.
In August 2018 the Group disposed of its interest in El Arrayan for
cash consideration of $28.0 million, resulting in a profit on disposal
of $5.8 million, which is included within the total $22.2 million share
of results from associates and joint ventures for the prior year.
EBITDA
EBITDA (earnings before interest, tax, depreciation and amortisation)
increased by $210.6 million or 9.5% to $2,438.9 million (2018 –
$2,228.3 million). EBITDA includes the Group’s proportional share
of EBITDA from associates and joint ventures.
EBITDA from the Group’s Mining division increased by 10.2% from
$2,139.4 million in 2018 to $2,358.1 million this year. This reflected
the higher revenue explained above, partly offset by slightly higher
mine-site costs and increased exploration and evaluation expenditure.
EBITDA at the Transport division decreased by $8.1 million to
$80.8 million in 2019, reflecting the decreased revenue explained
above, partly offset by the lower operating costs.
Commodity price and exchange rate sensitivities
The following sensitivities show the estimated approximate impact
on EBITDA for 2019 of a 10% movement in the average copper,
molybdenum and gold prices and a 10% movement in the average
US dollar/Chilean peso exchange rate.
The impact of the movement in the average commodity prices
reflects the estimated impact on the relevant revenues during
2019, and the impact of the movement in the average exchange rate
reflects the estimated impact on Chilean peso denominated operating
costs during the year. These estimates do not reflect any impact in
respect of provisional pricing or hedging instruments, any potential
inter-relationship between commodity price and exchange rate
movements, or any impact from the retranslation or changes in
valuations of assets or liabilities held on the balance sheet at
the year-end.
Copper price
Molybdenum price
Gold price
US dollar/Chilean peso exchange rate
Net finance expense
Net finance expense decreased by $63.5 million to $51.0 million, compared with $114.5 million in 2018.
Investment income
Interest expense
Other finance items
Net finance expense
Average market
commodity
price/average
exchange rate
during the year
ended 31.12.19
$2.72/lb
$11.4/lb
$1,393/oz
703
Impact of a 10%
movement in
the commodity
price/exchange
rate on EBITDA
for the year
ended 31.12.19
$m
460
30
40
125
Year ended
31.12.19
Year ended
31.12.18
$m
47.1
(111.1)
13.0
(51.0)
$m
30.1
(113.5)
(31.1)
(114.5)
Interest income increased from $30.1 million in 2018 to $47.1 million in 2019, mainly due to the increase in average interest rates as well as
a higher average cash balance.
Interest expense decreased slightly from $113.5 million in 2018 to $111.1 million in 2019. This reflected a lower average borrowing balance due
to loan repayments, which was largely offset by the increase in the average LIBOR rate and the adoption of the new accounting standard IFRS
16 Leases which resulted in an additional $10 million of interest expenses in the year, as explained in Note 1 to the financial statements.
Other finance items were a net gain of $13.0 million (2018 – net expense of $31.1 million). This reflected an expense of $22.7 million for
the unwinding of the discounting of provisions (2018 – $12.7 million) and a gain of $35.8 million in respect of foreign exchange due to the
weakening of the Chilean peso (2018 – expense of $18.3 million).
Profit before tax
As a result of the factors set out above, profit before tax increased by 7.7% to $1,349.2 million (2018 – $1,252.7 million).
Income tax expense
The tax charge for 2019 was $506.1 million (2018 – $423.7 million) and the effective tax rate was 37.5% (2018 – 33.8%).
Profit before tax
Tax at the Chilean corporate tax (first category tax) rate of 27.0%
Mining tax (royalty)
Deduction of mining tax (royalty) as an allowable expense in determination
of first category tax
Items not deductible from first category tax
Adjustment in respect of prior years
Withholding taxes
Tax effect of share of results of associates and joint ventures
Unrecognised tax losses
Net other items
Tax expense and effective tax rate for the year
Year ended
31.12.2019
Year ended
31.12.2018
$m
%
$m
%
1,349.2
(364.3)
(66.6)
19.1
(11.9)
4.3
(59.3)
4.7
(33.0)
0.9
(506.1)
1,252.7
(338.2)
(82.5)
21.1
(10.8)
2.6
(4.5)
3.0
(13.8)
(0.6)
(423.7)
27.0
4.9
(1.4)
0.9
(0.3)
4.4
(0.4)
2.5
(0.1)
37.5
27.0
6.5
(1.7)
0.9
(0.2)
0.4
(0.2)
1.1
–
33.8
The effective tax rate varied from the statutory rate principally due to the mining tax (royalty) (net impact of $47.5 million/3.5% including
the deduction of the mining tax (royalty) as an allowable expense in the determination of first category tax), the withholding tax relating to
the remittance of profits from Chile (impact of $59.3 million/4.4%), unrecognised tax losses (impact of $33.0 million/2.5%) and items not
deductible for Chilean corporate tax purposes, principally the funding of expenses outside of Chile (impact of $11.9 million/0.9%), partly
offset by adjustments in respect of prior years (impact of $4.3 million/0.3%) and the impact of the recognition of the Group’s share of
profit from associates and joint ventures, which are included in the Group’s profit before tax net of their respective tax charges (impact
of $4.7 million/0.4%).
Profit from discontinued operations
In 2019 there were no discontinued operations in the Group. On 11 September 2018 the Group completed the disposal of Centinela Transmisión
SA, which holds the electricity transmission line supplying Centinela and other external parties, for a cash consideration of $117.0 million. The
profit on disposal was $49.2 million, which along with the $2.1 million profit from Centinela Transmisión for the period prior to the disposal,
resulted in a total profit from discontinued operations of $51.3 million in 2018.
Non-controlling interests
Profit for 2019 attributable to non-controlling interests was $341.7 million, compared with $336.6 million in 2018, an increase of $5.1 million.
antofagasta.co.uk
79
Strategic Report
Financial review continued
Earnings per share
Earnings per share from continuing operations
Earnings per share from discontinued operations
Earnings per share from continuing and discontinued operations
Earnings per share calculations are based on 985,856,695 ordinary shares.
Year ended
31.12.19
$ cents
Year ended
31.12.18
$ cents
50.9
–
50.9
51.5
3.6
55.1
As a result of the factors set out above, profit attributable to equity shareholders of the Company was $501.4 million compared with $543.7 million
in 2018, and total earnings per share from continuing and discontinued operations was 50.9 cents per share (2018 – 55.1 cents per share).
Earnings per share from continuing operations was 50.9 cents per share (2018 – 51.5 cents per share).
Dividends
Dividends per share declared in relation to the period are as follows:
Ordinary dividends:
Interim
Final
Total dividends to ordinary shareholders
Year ended
31.12.19
$ cents
Year ended
31.12.18
$ cents
10.7
23.4
34.1
6.8
37.0
43.8
The Board determines the appropriate dividend each year based on consideration of the Group’s cash balance, the level of free cash flow and
underlying earnings generated during the year and significant known or expected funding commitments. It is expected that the total annual
dividend for each year would represent a payout ratio based on underlying net earnings for that year of at least 35%.
The Board has declared a final dividend for 2019 of 23.4 cents per ordinary share, which amounts to $230.7 million and will be paid on
22 May 2020 to shareholders on the share register at the close of business on 24 April 2020.
The Board declared an interim dividend for the first half of 2019 of 10.7 cents per ordinary share, which amounted to $105.5 million.
This gives total dividends proposed in relation to 2019 (including the interim dividend) of 34.1 cents per share or $336.2 million in total
(2018 – 43.8 cents per ordinary share or $431.8 million in total) equivalent to a payout ratio of 67.0%.
Capital expenditure
Capital expenditure increased by $205.9 million from $872.9 million in 2018 to $1,078.8 million, mainly due to expenditure on the Los Pelambres
Expansion project.
NB: capital expenditure figures quoted in this report are on a cash flow basis, unless stated otherwise.
Derivative financial instruments
The Group periodically uses derivative financial instruments to reduce its exposure to commodity price, foreign exchange and interest rate
movements. The Group does not use such derivative instruments for speculative trading purposes. At 31 December 2019 the derivative financial
instruments in place had a negative fair value of $7.3 million (2018 – positive $0.8 million).
Cash flows
The key features of the cash flow statement are summarised in the following table.
Cash flows from continuing operations
Income tax paid
Net interest paid
Capital contributions and loans to associates
Disposal of subsidiary and associate
Purchases of property, plant and equipment
Dividends paid to equity holders of the Company
Dividends paid to non-controlling interests
Dividends from associates and joint ventures
Other items
Changes in net debt relating to cash flows
Other non-cash movements
Effects of changes in foreign exchange rates
Movement in net debt in the period
Net debt at the beginning of the year
Net debt at the end of the year
80
Antofagasta plc Annual Report 2019
Year ended
31.12.19
Year ended
31.12.18
$m
$m
2,570.7
(403.6)
(35.3)
(1.8)
–
(1,078.8)
(470.3)
(400.0)
58.0
1.8
240.7
(214.3)
6.5
32.9
(596.3)
(563.4)
1,877.0
(498.0)
(41.8)
(8.1)
145.2
(872.9)
(466.9)
(120.0)
16.6
(0.2)
30.9
(154.3)
(16.5)
(139.9)
(456.4)
(596.3)
Cash flows from continuing operations were $2,570.7 million in 2019 compared with $1,877.0 million in 2018. This reflected EBITDA from
subsidiaries for the year of $2,302.8 million (2018 – $2,118.9 million) adjusted for the positive impact of a net working capital decrease of
$291.9 million (2018 – working capital increase of $240.3 million) and a non-cash decrease in provisions of $24.0 million (2018 – decrease of
$1.6 million). The working capital decrease was mainly due to the $275 million refund of the one-off short-term VAT payment which had been
made in December 2018 and was refunded to the Group as expected in January 2019.
The net cash outflow in respect of tax in 2019 was $403.6 million (2018 – $498.0 million). This amount differs from the current tax charge
in the consolidated income statement of $354.4 million (2018 – $404.5 million) mainly because cash tax payments for corporate tax and
the mining tax partly include the settlement of outstanding balances in respect of the previous year’s tax charge of $29.5 million (2018 –
$147.2 million), payments on account for the current year based on the prior year’s profit levels of $456.4 million, as well as the recovery
of $82.3 million in 2019 relating to prior years.
In 2018 the cash inflow from the disposal of a subsidiary and an associate of $145.2 million related to proceeds from the disposal of Centinela
Transmisión ($117.2 million) and El Arrayan ($28.0 million).
Contributions and loans to associates and joint ventures of $1.8 million relate to Tethyan Copper Company.
Capital expenditure in 2019 was $1,078.8 million compared with $872.9 million in 2018. This included expenditure of $493.8 million at
Los Pelambres (2018 – $255.5 million), $457.6 million at Centinela (2018 – $502.4 million), $49.9 million at Antucoya (2018 – $42.8 million),
$15.9 million at the corporate centre (2018 – $4.5 million) and $61.6 million at the Transport division (2018 – $67.7 million).
Dividends paid to equity holders of the Company were $470.5 million, of which $364.8 million related to the payment of the final element of
the previous year’s dividend and $105.7 million to the interim dividend declared in respect of the current year. Dividends paid by subsidiaries
to non-controlling shareholders were $400.0 million (2018 – $120.0 million). Dividends received from associates and joint ventures of
$58.0 million (2018 – $16.6 million) were mainly related to a $50.0 million dividend received from Zaldívar.
Financial position
Cash, cash equivalents and liquid investments
Total borrowings
Net debt at the end of the period
At 31.12.19
At 31.12.18
$m
$m
2,193.4
(2,756.8)
(563.4)
1,897.6
(2,493.9)
(596.3)
At 31 December 2019 the Group had combined cash, cash
equivalents and liquid investments of $2,193.4 million (31 December
2018 – $1,897.6 million). Excluding the non-controlling interest share
in each partly-owned operation, the Group’s attributable share of
cash, cash equivalents and liquid investments was $1,849.6 million
(31 December 2018 – $1,615.2 million).
Total Group borrowings at 31 December 2019 were $2,756.8 million,
an increase of $262.9 million on the prior year (31 December 2018
– $2,493.9 million). The increase reflected $469.0 million of additional
borrowings at Los Pelambres in respect of the Expansion project,
$131.7 million of lease liabilities recognised upon the implementation
of IFRS 16 Leases at 1 January 2019 (as explained in Note 1 to the
financial statements), further leases of $45.3 million recognised
during 2019 and non-cash net increases of $37.7 million (principally
accrued interest), partly offset by net repayments of loans and
finance leases of $408.5 million and decreases due to the effects of
changes in foreign exchange rates of $12.3 million. The repayments
of borrowings and finance leases of $408.5 million reflected
repayments at Los Pelambres of $138.2 million, Centinela of
$196.0 million, Antucoya of $39.8 million, the corporate centre
of $3.5 million and the Transport division of $31.0 million.
Excluding the non-controlling interest share in each partly-owned
operation, the Group’s attributable share of the borrowings was
$2,041.3 million (31 December 2018 – $1,890.5 million).
This resulted in net debt at 31 December 2019 of $563.4 million
(31 December 2018 – $596.3 million). Excluding the non-controlling
interest share in each partly-owned operation, the Group’s
attributable net debt was $191.7 million (31 December 2018 –
$275.3 million).
Cautionary statement about forward-looking statements
This Annual Report contains certain forward-looking statements. All
statements other than historical facts are forward-looking statements.
Examples of forward-looking statements include those regarding the
Group’s strategy, plans, objectives or future operating or financial
performance, reserve and resource estimates, commodity demand
and trends in commodity prices, growth opportunities, and any
assumptions underlying or relating to any of the foregoing. Words
such as “intend”, “aim”, “project”, “anticipate”, “estimate”, “plan”,
“believe”, “expect”, “may”, “should”, “will”, “continue” and similar
expressions identify forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties, assumptions and other factors that are beyond the
Group’s control. Given these risks, uncertainties and assumptions,
actual results could differ materially from any future results expressed
or implied by these forward-looking statements, which apply only as
at the date of this report. Important factors that could cause actual
results to differ from those in the forward-looking statements include:
global economic conditions, demand, supply and prices for copper
and other long-term commodity price assumptions (as they materially
affect the timing and feasibility of future projects and developments),
trends in the copper mining industry and conditions of the international
copper markets, the effect of currency exchange rates on commodity
prices and operating costs, the availability and costs associated
with mining inputs and labour, operating or technical difficulties in
connection with mining or development activities, employee relations,
litigation, and actions and activities of governmental authorities,
including changes in laws, regulations or taxation. Except as required
by applicable law, rule or regulation, the Group does not undertake
any obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Past performance cannot be relied on as a guide to future performance.
The Strategic Report has been approved by the Board and signed
on its behalf by:
Jean-Paul Luksic
Chairman
16 March 2020
Ollie Oliveira
Senior Independent Director
antofagasta.co.uk
81
Strategic Report
CORPORATE GOVERNANCE
The Board of Antofagasta plc is responsible for the long-term, sustainable
success of the Group, generating value for shareholders and contributing to
wider society.
The Board has established strong and effective governance structures that
clearly define roles and responsibilities and promote constructive challenge.
These structures reflect the Board’s commitment to international best practice
and continuing success as an international mining company based in Chile.
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Antofagasta plc Annual Report 2019
Governance
Applying the Code in 2019
Board leadership and
company purpose
Chairman’s introduction
Senior Independent
Director’s introduction
Group corporate
governance overview
Board activities
Stakeholder engagement
Division of responsibilities
Directors’ biographies
Board balance and skills
Roles in the boardroom
Executive Committee
members’ biographies
Introduction to the Committees
Composition, succession
and evaluation
Nomination and
Governance Committee report
Board effectiveness
84
Audit, risk and internal control
Audit and Risk
Committee report
Sustainability and
Stakeholder Management
Committee report
Projects Committee report
Remuneration
Remuneration and Talent
Management Committee report
Committee Chair’s introduction
2020 Directors’ and
CEO Remuneration Policy
2019 Directors’ and
CEO Remuneration Report
2019 CEO Remuneration Report
Directors’ Report
Statement of Directors’
responsibilities
107
112
114
116
117
120
126
129
138
140
86
88
90
92
94
96
98
99
100
102
103
106
antofagasta.co.uk
83
Corporate Governance
Applying the Code in 2019
APPLYING THE PRINCIPLES
“We apply the
principles of the
Code to our specific
circumstances as
an international
mining company
based in Chile.”
Jean-Paul Luksic
Chairman
that Mr Luksic continues to demonstrate objective judgement and
provides constructive challenge and believes that his continued
appointment is appropriate without fixing a limit on his continuing
length of service. The Company’s major shareholders were invited by
the Senior Independent Director to discuss this subject during 2018
and 2019 and expressed their unanimous support for Mr Luksic’s
ongoing service as Chairman of the Board.
As Chairman and Chair of the Board’s Nomination and Governance
Committee, Mr Luksic fully supports wider succession and diversity
planning and has overseen the design and implementation of
succession plans to facilitate increased diversity and continual
refreshment of the Board. Further details are set out in the
Nomination and Governance Committee report on pages 103 to 105.
The UK Corporate Governance Code is available on the Financial
Reporting Council website at www.frc.org.uk.
UK Corporate Governance Code
compliance statement
The UK Corporate Governance Code issued by the Financial
Reporting Council in July 2018 sets out the governance principles and
provisions that applied to the Company during the 2019 financial year.
The Code is not a rigid set of rules. It consists of principles
and provisions. The Listing Rules require companies to apply the
principles and report to shareholders on how they have done so.
The Corporate Governance Report that follows has been prepared
for this purpose and demonstrates how these principles have been
considered and applied to the Company’s specific circumstances.
The Company complied with all of the principles and detailed
provisions of the Code in 2019 with the exception of Code Provision
19. This Code Provision, which recommends that the Chairman
should not remain in post beyond nine years from the date of his
first appointment to the board, was introduced for the first time
for accounting periods beginning on or after 1 January 2019. The
Company’s Chairman, Jean-Paul Luksic, was appointed to the Board
in 1990. He served as Chief Executive Officer of the Group’s Mining
division from 1998 until 2004 and was appointed Executive Chairman
in 2004. In 2014, he stepped back from executive responsibilities to
become Non-Executive Chairman. Mr Luksic’s vast Chilean, mining
and business experience and unparalleled knowledge of the Group’s
businesses have been, and continue to be, a cornerstone of the
Company’s continuing growth and success. The Board considers
84
Antofagasta plc Annual Report 2019
How the Code principles were applied in 2019
Board leadership and company purpose
The role of the Board
• The Company is headed by an effective Board,
Commitment
• All Directors have confirmed they are able to
allocate sufficient time to meet the expectations
of their role.
which is collectively responsible for the Company’s
long-term sustainable success, generating value
for shareholders and contributing to wider
society as shown throughout this Corporate
Governance Report.
• The Board has adopted and actively promotes
the Group’s purpose statement, vision and values.
It has adopted behavioural guidelines, which are
consistent with the Company’s values and support
its long-term sustainable success. This is explained
further in the Chairman’s introduction – page 86.
• An overview of how the Board ensures that its
obligations to shareholders are met is described
throughout this Corporate Governance Report.
• The Board considers the matters set out in
section 172 of the Companies Act 2006 in Board
discussions and decision-making. Examples can be
found on page 94.
• The Board has established a framework of prudent
and effective controls, enabling risk to be
appropriately assessed and managed – pages 110-111.
• The Company’s governance framework contributes
to the delivery of the Group’s strategy – pages 90
and 93.
• There are well-established and effective workforce
engagement channels throughout the Group’s
businesses – page 95.
Dialogue with shareholders
• The Senior Independent Director and Chair of the
Remuneration and Talent Management Committee
met with shareholders during the year – pages 88
and 119.
• The Chairman and Directors met with shareholders
at the AGM.
Constructive use of general meetings
• The Company held an accessible AGM in central
London with voting on a poll, separate resolutions
and proxy voting (for, against or withheld).
• The majority of the Directors attended the meeting.
• Committee Chairs were available to
answer questions.
Division of responsibilities
• The Board is structured to ensure that there is
limited scope for an individual or small group
of individuals to dominate its decision-making,
as demonstrated throughout this Corporate
Governance Report.
• The CEO is not a Director of the Company and
therefore not a member of the Board – page 99.
• There is a clear division of responsibilities between
the leadership of the Board and the executive
leadership of the Company’s businesses.
• The division of responsibilities between
the Chairman, the CEO and the Senior Independent
Director are recorded in writing and are available on
the Company’s website at www.antofagasta.co.uk.
• The roles of the Board and the Board Committees
are recorded in the Schedule of Matters Reserved
for the Board and the Terms of Reference for each
of the Board’s Committees, which are available on
the Company’s website at www.antofagasta.co.uk.
The Chairman
• The Chairman is responsible for the leadership
of the Board and for its overall effectiveness in
directing the Company. His responsibilities are
set out on page 99.
• He is responsible for setting the Board’s agenda,
facilitating effective contribution of Non-Executive
Directors and ensuring that the Directors receive
accurate, timely and clear information – page 91.
Non-Executive Directors
• The Non-Executive Directors constructively
challenge management and each other, and
help develop proposals on strategy – page 99.
• Additional external appointments are not
undertaken without the prior approval of the Board.
• Time commitment is considered as part of the
Board effectiveness review and when electing
and re-electing Directors.
• A review of the Directors’ external directorships is
carried out annually – page 139.
Information and support
• The Board is provided with information in a form
and of a quality appropriate to discharge its duties
– page 91.
• The Board has access to independent professional
advice and to the advice and services of the
Company Secretary – page 99.
• The Board is regularly updated on the Group’s
performance between scheduled Board meetings
– page 91.
Composition, succession and evaluation
Composition of the Board and Committees
• The Board has 11 Directors, comprising
a Non-Executive Chairman and ten other
Non-Executive Directors, seven of whom
are independent.
• All members of the Audit and Risk and
Remuneration and Talent Management
Committees are independent and three of the
four Nomination and Governance Committee
members are independent.
• The Board and its Committees comprise Directors
with the requisite combination of skills, experience
and knowledge to fulfil their roles – pages 96 and 98.
• There is a diverse pipeline for succession,
consideration is given to the length of service of
the Board as a whole and membership is regularly
refreshed – page 104.
• The Roles in the boardroom diagram shows the
core responsibilities and participation in Board
discussions and deliberations of each Director,
the CEO and the Company Secretary – page 99.
Appointments to the Board and
succession planning
• There is a formal, rigorous and transparent
procedure for the identification and appointment
of new Directors led by the Nomination and
Governance Committee – page 104.
• An external search consultancy was engaged
during the year for the appointment of Michael
Anglin to the Board as a Non-Executive Director
– page 104.
• An effective succession plan has been developed
for Board and senior management appointments
– page 104.
Development
• New Directors receive a thorough induction on
joining the Board – page 105.
• Directors are regularly updated with information
and training and, as a minimum, receive an annual
briefing on legal, regulatory, market and other
developments that are relevant to directors of
UK-listed companies – page 98.
Evaluation
• An externally facilitated Board and Committee
effectiveness review was conducted during
the year – for full details see page 106.
• Following the review, the Board has agreed an
action plan to close any gaps that have been
identified – see page 106.
Re-election
• All Directors stand for annual re-election.
Tim Baker will not be standing for re-election
in 2020 – page 96.
Audit, risk and internal control
Financial and business reporting
• The Board considers that the Annual Report taken
as a whole is fair, balanced and understandable
– page 140.
• Auditors’ report – pages 142-148.
• Review of auditor’s independence and objectivity
– page 109.
• Robust assessment of principal risks and the
Group’s risk appetite – pages 24-30.
• Effectiveness of risk management and internal
control framework – pages 22-23 and 110-111.
• Going concern statement – page 139.
• Viability statement – page 30.
Audit Committee and auditors
• Three out of the four Audit and Risk Committee
members are considered to have recent and
relevant financial experience – pages 98 and 107
• Significant issues considered by the Committee
relating to the financial statements – page 108.
• Whistleblowing policy – page 111.
• Internal audit function – page 110.
Remuneration
The level and structure of remuneration
• The Company has no executive directors but
voluntarily discloses the CEO’s remuneration,
which includes transparent, stretching and
rigorously applied performance-related elements
designed to promote the Company’s long-term
sustainable success – pages 126-137.
• The Directors’ and CEO’s Remuneration Policy is
aligned to the Company’s purpose and values, and
is clearly linked to the successful delivery of the
Company’s long-term strategy – pages 117-125.
• The Board has a Remuneration and Talent
Management Committee and all members of this
Committee are independent. The Chair, Francisca
Castro, served as a member of the Committee for
more than 12 months before being appointed as
Chair of the Committee.
Procedure
• The Directors’ Remuneration Policy was last
approved by shareholders at the 2017 AGM.
• The 2020 Directors’ and CEO’s Remuneration
Policy was reviewed in 2019 in consultation with
shareholders and will be put to shareholders for
approval at the 2020 AGM – pages 120-125.
• The Board has a formal and transparent procedure
for developing remuneration policies – pages 116-125.
• No Director is involved in setting his or her own
remuneration and the CEO is not involved in
fixing his own remuneration.
antofagasta.co.uk
85
Corporate Governance Chairman’s introduction
A BETTER FUTURE BUILT ON
STRONG AND EFFECTIVE
GOVERNANCE
“We apply international corporate governance best
practice to enable us to operate successfully in
Chile, where our corporate headquarters, senior
management team and all of our operating assets
are located.”
Jean-Paul Luksic
Chairman
Gonzalo Menéndez
It was with deep sadness and regret that we reported the passing of
Non-Executive Director Gonzalo Menéndez in June 2019 following
a period of illness. Mr Menéndez had been a Director of Antofagasta
plc since 1985. His involvement with the Group dated back to the
beginning of the 1980s, when he was appointed General Manager of
the Group’s railway business. From that time, Mr Menéndez played
a key role in the growth and development of the Group, most
recently through his contribution to the stewardship and oversight
of the Group as Non-Executive Director. We will greatly miss his
honest, forthright and wise counsel.
Introduction
As highlighted in my introductory letter in 2018, we closely monitored
the UK corporate governance reforms that were finalised during
2018. We are now delighted to report on how we have applied
the new version of the Code that was published in July 2018.
The focus of our reporting is to outline how we have applied the
principles of the Code in a way that can be meaningfully evaluated by
our stakeholders. This reflects not only the emphasis of the new Code
and its broader view of governance, but is also intended to allow
everyone concerned to understand the particular circumstances of
our Group and how this has influenced how we best apply the Code.
The Board’s ability to continue to deliver long-term sustainable
success relies on a detailed understanding and reflection of the
views of our workforce and stakeholders in Chile, where our
corporate headquarters, senior management team and all of our
operating companies are located. I invite everyone to keep this in
mind when reading this Corporate Governance Report, particularly
where comparisons are made between the workforce engagement
mechanisms and remuneration arrangements that we believe are
appropriate for our circumstances in Chile and those mechanisms
and arrangements that other companies may consider appropriate
for their own circumstances.
The Board has been pursuing and overseeing a number of important
developments during the year, which are highlighted throughout this
Corporate Governance Report, a selection of which I would like to
highlight in this letter.
Our purpose, strategy, culture and vision
The Board fully embraces the important role that it has in setting the
tone for the Group’s culture and embedding it throughout the Group.
Following the adoption of our purpose statement in 2018 – Developing
Mining for a Better Future – we oversaw updates to the Group’s
strategic framework during 2019, described in detail on pages 92-93,
which defines our strategy, culture and vision and is explicitly
aligned with our purpose of Developing Mining for a Better Future.
The Board also reviewed amendments to several of the Group’s
most important policies during the year. This process has been
complemented by the launch of behavioural guidelines for employees
which set out, in concrete terms, the specific workplace behaviours
we consider to be in line with each of our core values and truly
reflective of our unique culture.
Stakeholder considerations and workforce engagement
Mining is a long-term business and our relationships with our
workforce, local communities, suppliers, governments, customers
and shareholders are central to our long-term success. The Group’s
governance structures include a network of arrangements to ensure
that the views and interests of stakeholders are represented in the
boardroom and considered as part of deliberations. Some examples
of Board decisions that were made during the year and how the
interests of our stakeholders were taken into account are on page 94.
Boardroom discussions are enhanced by an understanding of the
culture and context of activities at our various sites. Along with my
fellow Directors, I regularly visit the Group’s operations and projects
to understand first-hand the realities and challenges that exist on site.
These visits provide us with a deeper understanding of the topics
that are important for our workforce, local communities and
other stakeholders.
86
Antofagasta plc Annual Report 2019
External Board evaluation
Our 2019 Board evaluation was performed by independent external
consultant, Clare Chalmers. As part of her review, Ms Chalmers
conducted interviews with Directors and senior management,
observed a Board meeting and participated in a safety leadership
site visit to Los Pelambres. The review was designed so Ms Chalmers
could identify and record observations as well as any key themes
identified collectively by the Directors during one-to-one interviews.
Further details on the process and actions arising from the review
can be found on page 106.
Shareholder engagement
I encourage all Directors to meet with shareholders. During
the year, Ollie Oliveira, Senior Independent Director, Chair of
the Audit and Risk and Projects Committees, and Francisca Castro,
Chair of the Remuneration and Talent Management Committee,
met with shareholders to discuss various matters, including
corporate governance, risk management and the Company’s
remuneration policies.
The Board also receives regular summaries and feedback regarding
meetings held as part of the investor relations programme. The
Company’s Annual General Meeting is also an opportunity to
communicate with both institutional and private shareholders and,
along with my fellow Directors, I look forward to seeing you at the
Annual General Meeting.
Jean-Paul Luksic
Chairman
We engage constantly with our workforce, not only in the years when
there are scheduled union negotiations. This open dialogue is key to
maintaining good relations and is a testament to the trust that has
been built up between the Company and its employees. While this
year saw our first strike, at Antucoya, which lasted for 18 days, it
was successfully resolved after constructive talks. Wage negotiations
were also satisfactorily completed at Los Pelambres and Zaldívar and
with one of the other unions at Antucoya. Details of our workforce
engagement mechanisms are on page 95.
Risk management and internal control
The Board oversaw the further maturation of the Group’s risk
management and internal control framework during the year. The
Board has established a framework of prudent and effective internal
controls and a system for the identification and management of risk
to ensure the financial viability of the Group. As part of this process
the Board decides the nature and extent of the significant risks
the Group is willing to take to achieve its strategic objectives.
The framework provides structure to our policies and practices
throughout the business, which also ensures that the Board can
focus on the most appropriate issues. This also enables the Board
to prioritise its time and resources properly in order to actively
monitor management’s execution of approved strategic plans,
as well as the transparency and adequacy of the internal and external
communication of strategic plans. Further details can be found on
pages 22-23 and 110-111.
Board changes and succession planning
Wider succession and diversity planning has been a key area of focus
for the Board for a number of years.
Following nine years of dedicated service, Tim Baker, a Non-Executive
Director of the Company since 2011, will not stand for re-election as a
Director at the Company’s upcoming Annual General Meeting. I would
like to thank Tim for the significant contribution he has made to
the Company as a Director, Remuneration and Talent Management
Committee Chair, and member of all Board Committees at different
stages over this time. The Group has benefited enormously not only
from Tim’s vast mining operations experience, but also from his
dedicated stewardship of the Remuneration and Talent Management
Committee from 2011 until 2019.
We were delighted to appoint two new Directors to the Board over
the last year. Michael Anglin was appointed in May 2019. He then
joined the Remuneration and Talent Management and Projects
Committees in September 2019 and his significant mining operations
experience will continue to be of great value to the Board following
Tim’s departure.
Tony Jensen was appointed on 13 March 2020. Shareholders will be
invited to vote on the election of Tony Jensen and the re-election of
all other Directors (other than Tim Baker) at the Company’s Annual
General Meeting in May.
antofagasta.co.uk
87
Corporate Governance Senior Independent Director’s introduction
ENSURING
EFFECTIVE GOVERNANCE
“My role is to ensure that the Chairman, the
Board and the management team receive
independent and objective feedback and
challenge, as well as a balanced view of
issues that are relevant and important for
shareholders of UK-listed companies.”
Ollie Oliveira
Senior Independent Director
Q. What are your responsibilities as Senior
Independent Director?
I am appointed by the Board to act as a sounding board for the
Chairman and to serve as an intermediary for the other Directors
and shareholders. My role is to support the Chairman on several
levels. I advise him on corporate governance matters and I seek
to ensure that the issues that are especially important to the
Board’s independent Non-Executive Directors are reflected in
Board discussions. I lead the annual review of the Chairman’s
performance and follow up on the closure of gaps identified in
internal and externally facilitated reviews of Board and Committees’
performance. Most importantly, I provide feedback on issues that
matter to the Company’s shareholders.
I live in Europe, close to many shareholders, directors at other
UK-listed companies and advisers, and I am senior independent
director at another large FTSE-listed mining company and a large
global mining investment trust, which helps me to ensure that the
Chairman, the Board and the Group receive independent and
objective feedback and challenge, as well as a balanced view
of issues that are relevant and important for shareholders of
UK-listed companies.
Q. What impact does the controlling shareholding have on
Company decisions?
The Luksic family first acquired an interest in the Company
40 years ago. Since then, the Company has demonstrated an
excellent track record in terms of safety, operational expertise
and financial acumen.
First as an Independent Director and now as the Senior
Independent Director, I have discussed the role of the controlling
shareholder with other shareholders, proxy advisers and policy
makers. The widely held view is that the substantial controlling
interest is regarded positively, with shareholders satisfied that
the interests of the controlling shareholder are aligned with theirs,
and appreciative of their understanding of the copper price cycle
and market fundamentals, long-term vision of the industry, and
well-known conservative operating, financial and growth strategy.
Their support is – of course – conditional on the continuation of
the current corporate governance framework, which rigorously
protects the interests of all shareholders equally.
88
Antofagasta plc Annual Report 2019
I, and all the Independent Directors, place a strong emphasis on
maintaining this governance and protection regime. We guard our
independence and preside over a framework and processes that
go beyond the regulatory norm. We are supported and encouraged
by the other Directors who – like the Independent Directors –
bring their own perspectives and opinions and are committed
to the long-term sustainable success of the Company.
The controlling shareholder, and the members of the Luksic
family who serve on the Board (including the Chairman), are
not just supportive of this framework but actively encourage
the Independent Directors to provide the independent input
and challenge that we are convinced proves indispensable
in Board decision-making.
Q. What did you discuss with shareholders in 2019?
I initiated meetings with a number of shareholders and proxy
advisers during the year to understand their perspectives
ahead of the 2020 AGM and reporting season, and to explain:
the Company’s adoption of the 2018 Code, particularly regarding
the Board’s position with respect to new Code Provision 19, which
recommends that the Chairman should not remain in post beyond
nine years from the date of his first appointment to the Board,
as set out in more detail on page 84; and the Group’s existing
effective workforce engagement mechanisms which are described
in more detail on page 95. I was pleased to receive unanimous
support from investors for the Board’s position that it is not
appropriate to fix a limit on the Chairman’s length of service.
I was delighted to hear that levels of concern regarding the
Company’s corporate governance arrangements continue to
be very low and to receive assurances that explanations and the
particular circumstances of the Group will be carefully considered
when assessing how the Company has applied the new Code
in 2019.
Ollie Oliveira
Senior Independent Director
Relationship agreement
The E. Abaroa Foundation is a controlling shareholder of the
Company for the purposes of the Listing Rules and certain other
shareholders of the Company (including Aureberg Establishment) are
also treated as controlling shareholders. Details of the Company’s
substantial shareholders are set out on page 139.
In 2014, the Company entered into relationship agreements in
respect of each controlling shareholder, which contain the mandatory
independence provisions required by the Listing Rules. The Company
has complied with, and, so far as the Directors are aware, each
controlling shareholder and its associates (including Metalinvest
Establishment and Kupferberg Establishment) has complied with
the mandatory independence provisions at all times during 2019.
Related party transactions
Certain related party transactions outside the ordinary course of
business must be subject to independent assessment and approval.
The Company has for many years presented all such related party
transactions between the Company and the controlling shareholders
or their associates to a committee of Directors independent from
the controlling shareholders, to support the negotiation process
and ultimately to make an assessment as to whether the Company
should enter into such transactions. In most cases, transactions of
this nature will also be subject to independent review by third-party
shareholders in each of the Group’s mining operating companies.
Any other proposed related party transaction over $25 million,
whether or not in the ordinary course of business, is also tabled
for Board approval. Any Director with a potential conflict or
connection with the related party will not take part in the
decision on that transaction.
Related party governance in practice
There are a number of checks and balances to ensure that there is full transparency in the way that related party transactions are handled
by the Board. The following diagram summarises the approach taken to identify and manage related party transactions and actual or potential
conflicts of interest.
Identifying Directors’ interests
Process
How this is managed
Monitoring of
Directors’
interests
If a Director has an interest in any other company, the Board will normally
consider that interest under its arrangements for authorising conflicts of
interest under section 175 of the Companies Act.
+ See page 139 for more information
Responsibility
Directors
Managing related party transactions
Process
How this is managed
Proposed
transaction
Ongoing monitoring of Directors’ interests and the Company’s related
parties provides information to determine if a related party approval is
required for a proposed transaction.
Contract
negotiation and
verification
The Executive Committee seeks to ensure that the best possible terms are
achieved for a proposed transaction and, where appropriate or necessary,
that they are verified by industry benchmarking reports or independent
third-party valuation or assessment.
If the potential transaction is between the Group and a controlling shareholder
or its associates and requires independent assessment and approval, a
committee of Directors independent from the controlling shareholder and
its associates is formed to oversee and support management with this
process and to ensure compliance with the Relationship Agreement.
Responsibility
Company Secretary,
Antofagasta Group
management and the
Executive Committee
Antofagasta Group
management and Executive
Committee and, if involving
a controlling shareholder,
Directors who are
independent from the
controlling shareholder
Approval by
Independent
Directors
Potential related party transactions outside the ordinary course of
business that involve a controlling shareholder or its associates are
reviewed, and if appropriate, approved by Directors independent from
the controlling shareholders.
Directors who are
independent from
the related party
All other potential related party transactions over $25 million, whether or not in
the ordinary course of business, are approved by the Board and any Director
with a potential conflict or connection with the related party will not take part
in that decision. Transactions within the ordinary course of business that are
below $25 million require approval by the relevant operating company board.
antofagasta.co.uk
89
Corporate Governance Group corporate governance overview
A STRUCTURE FOR EFFECTIVE
DECISION-MAKING
Antofagasta plc Board
The Board’s role is to promote the long-term, sustainable
success of the Company, generating value for shareholders
and contributing to wider society. The Board has established
the Company’s purpose, values, strategy and risk appetite and
monitors the culture of the Group as well as ongoing performance
against these measures.
The schedule of matters reserved for the Board was revised
in 2019 and is available on the Company’s website at
www.antofagasta.co.uk.
KEY RESPONSIBILITIES
• Culture
• Strategy and management
• Governance
• Shareholder engagement
• Internal controls, risk
management and compliance
• Financial and
performance reporting
• Structure and capital
• Approving material
transactions
Nomination
and Governance
Audit
and Risk
Board Committees
Sustainability
and Stakeholder
Management
Projects
Remuneration and
Talent Management
The Board is assisted in its responsibilities by five Board
Committees. The Board has delegated authority to these
Committees to perform certain activities as set out in their
terms of reference.
The Chair of each Committee reports to the Board following each
Committee meeting, allowing the Board to understand and, if
necessary, discuss matters in detail and consider the Committee’s
recommendations.
The terms of reference for each Committee were revised
in 2019 and are available on the Company’s website at
www.antofagasta.co.uk.
KEY RESPONSIBILITIES
The key responsibilities of each Committee are set out on page 102.
CEO and Executive Committee
The Board has delegated day-to-day responsibility for implementing
the Group’s strategy and fostering the corresponding organisational
culture to the Company’s CEO, Iván Arriagada.
Mr Arriagada chairs the Executive Committee.
The Executive Committee reviews significant matters and
approves expenditure within designated authority levels.
Mr Arriagada is not a Director of the Company but is invited to
attend all Board and Committee meetings and is supported by
the members of the Executive Committee, each of whom has
executive responsibility for his or her respective functions.
The Executive Committee leads the annual budgeting and planning
processes, monitors the performance of the Group’s operations
and investments, evaluates risk and establishes internal controls,
and promotes the sharing of best practices across the Group.
Subcommittees of the Executive Committee
Operating Performance
Review
Business Development
Disclosure
Ethics
Project Steering
The Executive Committee is assisted in its responsibilities by
the Operating Performance Review Committee, the Business
Development Committee, the Disclosure Committee, the Ethics
Committee and, from time to time, Project Steering Committees.
Members of the Executive Committee also sit on the boards of
the Group’s operating companies and report on the activities
of those companies to the Board, Mr Arriagada and the
Executive Committee.
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Antofagasta plc Annual Report 2019
Following the introduction of the EU Market Abuse Regulation,
the Board adopted its current Disclosure Procedures Manual
and delegated to the Disclosure Committee primary internal
responsibility for identifying information that may need to be
disclosed to the market and for managing the disclosure of
such information.
Board and Committee information flows
The Chairman tables an
agenda of standing topics to
be considered by the Board
each year, which is then
supplemented, during the
year, with agreed key topics
and events requiring
consideration.
Materials are sent to Board and Committee members
a week in advance of each meeting.
Each presentation has a summary sheet setting out
the objective, background, proposal, justification and
risk analysis and next steps. Materials include the
CEO’s report, which is an open and candid summary
of his views on evolving strategic challenges, changes
in risk assessments and emerging issues, as well as
the management report with detailed information
on the Group’s performance against key safety,
health, environmental, community, financial, project
development and organisational culture indicators.
Each Board and Committee meeting
has one or more short sessions without
management present to allow Directors
to set expectations for the meeting and
to reflect on and evaluate the meeting’s
progress. The CEO provides timely
updates to the Board on emerging issues,
and executives present to the Board
and its Committees on operating and
development matters, allowing close
interaction between Board members and
a wide range of executive management.
Chairman
agrees agenda
with Directors
Papers circulated
in advance of
meetings
Information
between meetings
Board and
Committee
meetings
Action lists
prepared and
updated as key
actions are
implemented
Minutes
prepared,
circulated and
approved
Between Board meetings, Directors receive flash reports
with monthly and year-to-date production and financial results,
including key metrics in respect of safety, environmental and
community-relations performance, ensuring that the Board is
regularly updated on the Group’s performance. Occasionally,
Directors may receive additional reports highlighting key
developments in the Group’s exploration, projects and
business development activities, or general information
on the commodity markets or innovations in mining.
The Group’s management team, led by Iván Arriagada, performs
an essential role in ensuring that the Board has the information
required to make effective decisions, reporting in real time on
the Company’s performance and implementation of the
Group’s strategy.
The Board and each
Committee maintains its own
action list that is reviewed
at the beginning of each
meeting to ensure that
Directors’ enquiries and
concerns are clearly
identified and addressed
in a timely manner.
The Company Secretary
minutes all Board and
Committee meetings, and
these are circulated and
reviewed by the Board and
management before being
updated as necessary
and tabled for approval.
antofagasta.co.uk
91
Corporate Governance Board activities
STRATEGIC OVERSIGHT
The Board’s 2019 activities focused on oversight and pursuit of the Group’s strategy,
ensuring critical issues were not overlooked and advising management in the
development of strategic priorities and plans that align with the values of the
Group and the best interests of our stakeholders.
OUR STRATEGIC FRAMEWORK
We are committed to Developing Mining for a Better Future.
This is the purpose that mobilises us and gives meaning to
everything we do.
We seek to continue being an international mining company
based in Chile, focused on copper and its by-products, known
for its operating efficiency, creation of sustainable value,
high profitability and as a preferred partner in the global
mining industry.
We want to generate an inclusive culture, with values shared
by all. We have a Code of Ethics and our own way of doing
things, while managing our risks. To be able to achieve this,
we rely on the capacity and talent of our workforce and
our flexible organisation allows us to overcome current
and future challenges.
Below are examples of how the Board’s 2019 activities have
furthered the Group’s strategy.
STRATEGY
• People
• Safety and Sustainability
• Competitiveness
• Growth
• Innovation
PURPOSE
CULTURE
Shared values
and our own
way of doing
business
ORGANISATION
Organised
to meet our
objectives
Visio n
Culture
• Visited operations and projects to
understand the progress on developing
the Group’s culture, particularly
around safety.
• Oversaw updates to the Group’s strategic
framework, which in part defines the
Group’s culture.
• Monitored progress on the
implementation of the Group’s
Diversity and Inclusion Strategy.
• Monitored the implementation of
behavioural guidelines which connect
specific expected behaviours to the
Group’s culture.
Governance and engagement
• Implemented revised governance
protocols in accordance with the
2018 Code.
• Reviewed Board succession plans.
Each Director withdrew from any
meeting when his or her own position
was being considered.
• Appointed Michael Anglin to the Board.
• Reviewed Director independence.
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Antofagasta plc Annual Report 2019
• Reviewed Directors’ conflict of
• Reviewed budgets for initiatives designed
interest declarations.
• Approved requests by Directors to
to mitigate material identified risks.
• Commissioned an independent audit of
undertake additional external appointments.
data protection.
• Approved updates to Committees’ terms
• Approved the Group’s Modern Slavery
of reference.
Act statement.
• Reviewed half-yearly compliance reports.
• Reviewed results of the Group’s
whistle-blowing processes.
• Reviewed an update on the Company’s
compliance related training.
• Approved changes to the Group’s
Compliance and Crime Prevention Models.
Financial and performance reporting
• Approved the Group’s 2018 full-year
and 2019 half-year results.
• Recommended and approved the dividends
paid to shareholders during 2019.
• Reviewed the Group’s financial
investment policy.
• Oversaw the implementation of key
recommendations arising from the 2018
internal and 2019 externally facilitated
Board effectiveness reviews.
• Engaged with shareholders on corporate
governance matters at the 2019 AGM.
• Monitored feedback from investors
regarding the Group’s corporate
governance arrangements.
Internal controls, risk management
and compliance
• Reviewed the risk management system’s
maturity level.
• Approved updates to the Group’s Risk
Management Policy.
• Reviewed the Group’s risk appetite
statements, which are aligned with
the Group’s strategic pillars.
• Reviewed the Group’s risk matrix,
materialised risks and risk
mitigation actions.
We have a solid strategy, structured around five pillars: People, Safety and
Sustainability, Competitiveness, Growth and Innovation. For each of them,
we have long-term objectives with defined, concrete, short- and medium-term
goals that will allow us to continue develop mining for a better future.
People
• Reviewed the annual talent management exercise, including
• Monitored the development of the new employee Total
succession plans for the Executive Committee.
Rewards programme.
• Monitored progress on the implementation of the Group’s Diversity
and Inclusion Strategy.
• Monitored the implementation of behavioural guidelines which
connect specific expected behaviours to the Group’s culture.
• Monitored labour relations at the Group’s mining operations and
reviewed the results of collective bargaining negotiations.
• Monitored the impact of the civil unrest in Chile, including
contingency measures to protect the Group’s workforce.
Safety and Sustainability
• Reviewed and monitored the Group’s safety and
health performance.
• Reviewed the Group’s compliance with environmental
commitments and the results of a sustainability audit.
• Reviewed progress of the Somos Choapa community relations
model and its extension to the operations in the north of Chile.
• Continued to monitor the progress of local community interactions
at Los Pelambres.
• Continued to monitor the independent review of tailings dam
safety at Los Pelambres and Centinela.
• Reviewed the Group’s disclosures in relation to tailings dam safety.
• Monitored progress on the ICMM’s global classification standard for
tailings storage facilities.
Competitiveness
• Monitored results of the Group’s Cost and Competitiveness
• Reviewed and approved the Group’s copper concentrate and
Programme, including possible future savings.
copper cathode sales strategy.
• Approved the renegotiation of key energy contracts at
Los Pelambres and Centinela.
• Approved key procurement and sales contracts.
• Reviewed and monitored the Group’s financial and
operating performance.
Growth
• Approved an upgrade to the Los Pelambres ore transport system.
• Reviewed and monitored the successful financing of the
Los Pelambres Expansion project and refinancing of
Antucoya’s third-party debt.
• Reviewed execution progress for the Los Pelambres
• Reviewed and approved the acquisition and divestment of mining
Expansion project.
properties in Chile.
• Approved the execution of the opening of the Esperanza Sur pit.
• Approved the submission by Twin Metals Minnesota of the
Mine Plan of Operations to the relevant US authorities.
• Reviewed development and exploration activities, including
business development opportunities.
• Reviewed progress on the feasibility study on the expansion
of Centinela and approved the 2019 work plan.
• Reviewed progress on the Environmental Impact Assessment
submitted in 2018 to extend Zaldívar’s water extraction permit
from current sources beyond 2025.
Innovation
• Reviewed and approved the Group’s commercial parameters.
• Reviewed and approved the base case and development case
for the Group’s assets.
• Reviewed and approved the Group’s 2020 budget.
• Reviewed the Group’s reserves and resources statements.
• Reviewed the progress of proposed legislation which could affect
the Group’s growth possibilities.
• Approved the Zaldívar Chloride Leach project.
• Reviewed progress on the implementation of the Group’s digital transformation programme.
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93
Corporate Governance Stakeholder engagement
MAKING DECISIONS FOR
A BETTER FUTURE
The Board closely monitors the Group’s projects pipeline, ensuring that capital
costs are controlled and that projects only proceed following detailed review of
the long-term proposition for the Group’s stakeholders.
The Group maintains ongoing dialogue with stakeholders to
understand their expectations and concerns and to include this
information in the Board’s deliberations. A description of the Group’s
key stakeholders, their importance to the long-term success of the
Group and the key initiatives that are in place to recognise their
interests and concerns is set out in detail within the Strategic
Report on pages 32 to 50. Further details on the Board’s
workforce engagement mechanisms are set out on page 95.
Construction of the $1.3 billion Los Pelambres Expansion project,
which includes $500 million for a 400-litres per second desalination
plant and water pipeline, started in early 2019 and the Board
monitored construction progress throughout the year, discussing
and making recommendations to management in relation to the
design and execution of the project to ensure the following:
Our people
The project continues to meet the commitment
that 30% of the project’s workers come from the
Coquimbo Region and that they are fully trained to
meet the safety and other standards required by
the Group and for this project.
Communities
Voluntary commitments are in place to provide
professional development to local suppliers, keep
roads maintained, and to reinforce the availability
of emergency healthcare for local communities.
Feedback from the communities in relation
to these commitments is reviewed by the Board.
Suppliers
The business relationship with the project’s main
EPCM contractor, Bechtel, is working effectively
in accordance with the Group’s core values
and the Group’s audit processes and mechanisms
are reviewed to ensure that Bechtel’s interactions
with local supplier associations and local suppliers
for the project are functioning in accordance with
the Group’s policies in relation to safety and health,
the environment, ethics, labour conditions,
compliance and risk management.
Customers
The interaction between the project’s construction
and the operations of Los Pelambres is effectively
managed to ensure that there is no interference to
the operations of Los Pelambres that could impact
its commitment to its customers. This is especially
important at the plant, where project construction
activities have commenced within the existing plant.
Shareholders
Capital costs and project execution timing are
monitored and controlled to ensure that the
project’s economics are maintained and that
construction progress, including any unforeseen
interruptions, is notified to shareholders.
Governments and regulators
Commitments made under the project’s permits,
including the environmental permit, are monitored
and included within the Group’s environmental
compliance management system, the results of
which are periodically reported to the Board.
The Board also approved construction of the Esperanza Sur project at Centinela and the Zaldívar Chloride Leach project, both in Chile, during the year
as well as Twin Metals Minnesota’s presentation of a Mine Plan of Operations to the US authorities, which is the first stage of the required permitting
process. In approving the progress of these projects, the Directors took into account stakeholder interests in Chile and the US, respectively.
+ Further information on the Group’s growth projects and opportunities are on pages 64-66.
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Antofagasta plc Annual Report 2019
UNDERSTANDING THE
VIEWS OF OUR WORKFORCE
Mining is a long-term business and timescales often run into decades. Our
relationships with our stakeholders are central to our long-term success and
to our purpose of developing mining for a better future. The Group’s governance
structures include a network of arrangements to ensure that the views and interests
of stakeholders, including our employees and contractors, are represented in the
boardroom and considered as part of the Board’s deliberations.
The Group maintains strong relations with its workforce based
on trust, continuous dialogue and favourable working conditions.
Over the last two years, the Board has carefully considered and
thoroughly reviewed the mechanisms that are in place to allow the
Board to understand the views of the Group’s workforce. Ultimately,
the Board has decided not to adopt any of the three workforce
engagement mechanisms that are recommended in the Code.
The Board considers that adopting any of these mechanisms
would interfere with the effective, structured and formal
combination of mechanisms that the Board already has in place.
The Group’s workforce comprises approximately 25,000 people.
More than 99% are in Chile and more than 41% come from
communities in the Antofagasta and Coquimbo Regions, where all
of the Group’s operating companies are located. Approximately 25%
of the workforce are Group employees and 75% are contractors
or subcontractors.
Approximately 75% of the Group’s employees are unionised. This
number is close to 100% at the operator level. The Group maintains
ongoing dialogue with labour unions and all key issues are raised
with, and discussed by, the Remuneration and Talent Management
Committee and the Board.
The Group has established control mechanisms to ensure that
contractors and subcontractors, who are often members of their own
labour unions, meet the Group’s standards and guidelines on labour,
environmental, social and ethical matters and adopt good practices
with regard to safe workplaces and quality employment. Contractors
and subcontractors receive the same protections as the Group’s
employees under Chilean labour law and the Group requires
contractors to pay their employees ethical wages at least two-thirds
higher than Chile’s legal minimum and to provide other basic benefits
including life and health insurance. These protections are reinforced
through bank guarantees and contractors and subcontractors are
subject to regular audits by independent third parties to ensure
full compliance with these standards.
Below is a selection of the workforce engagement mechanisms that
the Board currently has in place:
• Directors visit the Group’s operations individually or in small
groups throughout the year where they engage informally with
the workforce. Impressions and views arising from these visits
are reported to the Board and related questions are raised with
the management team.
• Labour relations matters and the feedback from labour negotiations
are reported directly to the Board and the Remuneration and
Talent Management Committee throughout the year and typically
form a key part of the CEO’s general update to the Board.
• The CEO, Vice President of Operations, Vice President of Human
Resources and the General Managers and HR Managers of each
relevant operation meet with unions at least annually to share
relevant information and listen to concerns and suggestions, the
results of which are shared with the Remuneration and Talent
Committee and the Board.
• Group-wide employee engagement surveys are conducted every
two or three years. These surveys are conducted by independent
third parties on behalf of the Group and results are reported to the
Remuneration and Talent Management Committee and the Board.
An employee engagement survey is planned for 2020. Following
the most recent employee engagement survey in 2017, a more
targeted labour relations monitoring programme has been
performed at each of the Group’s mining operations. This
process was performed by an independent third party and
included individual, group and union interviews and a review of
documentary processes and collective agreements to measure the
state of labour relations at each mining operation according to the
measures of people management, regulatory compliance and trust.
• More targeted and specific “ad-hoc” workforce surveys are
conducted and/or face-to-face focus groups are convened
throughout the year in relation to specific areas of interest such
as the Group’s Diversity and Inclusion Strategy, flexitime working
programme and employee value proposition. The results of these
activities are overseen by the Executive Committee and included in
information reported to the Remuneration and Talent Management
Committee and the Board.
• The workforce is engaged in the design and development of
programmes that impact culture or have a high impact on working
conditions. Recently, the workforce participated in proposing
changes to the Group’s Leadership Model and in the design
and implementation of the Group’s purpose and updates and
amendments to the Group’s charter of values. These programmes
have been reviewed and overseen or approved by the Board.
• The Group’s workforce is encouraged to report any concerns
to the Ethics Committee through the confidential whistleblowing
hotline. Reports may be made anonymously, and all reports are
investigated and reported to the Audit and Risk Committee and
the Board.
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95
Corporate Governance Directors’ biographies
CONSTRUCTIVE CHALLENGE
Biographical details for each Director standing for re-election at the 2020 AGM are set
out below.*
Ramón
Jara
Non-Executive Director, 67
PC
ST
Juan
Claro
Non-Executive Director, 69
ST
Andrónico
Luksic C
Non-Executive Director, 66
Independent: No
Appointed to the Board 2003
Independent: No
Appointed to the Board 2005
Independent: No
Appointed to the Board 2013
Lawyer with considerable
legal and commercial
experience in Chile
Previous roles
• Partner, Jara del
Favaro Abogados
• Director of Empresa
Nacional del Petróleo
(“ENAP”)
Current positions
• Chairman of Fundación
Minera Los Pelambres
(charitable foundation)
• Director of Fundación
Andrónico Luksic A
(charitable foundation)
Extensive industrial
experience in Chile, including
an active role representing
Chilean industrial interests
nationally and internationally
Previous roles
• Chairman of the Sociedad
de Fomento Fabril
(Chilean Industrial Council)
• Chairman of the
Confederación de
la Producción y del
Comercio (Chilean
Business Confederation)
• Chairman of the Consejo
Binacional de Negocios
Chile-China (Council for
Bilateral Business
Chile-China)
Current positions
• Chairman of Embotelladora
Andina SA (Coca Cola)
and Energía Coyanco SA
• Director of Empresas Melón
and Agrosuper
• Member of the governing
board of Centro de
Estudios Públicos, a
Chilean not-for-profit
academic foundation
• Country adviser,
Goldman Sachs
Extensive experience across
a range of business sectors
throughout Chile, Latin
America and Europe
Current positions
• Chairman of Quiñenco
SA and of Compañía
Cervecerías Unidas SA;
Vice Chairman of Banco
de Chile and Compañía
Sudamericana de Vapores
SA, all of which are listed
companies in the
Quiñenco group
• Director of Nexans SA, a
company listed on NYSE
Euronext Paris
• Director of la Sociedad de
Fomento Fabril (SOFOFA)
(Manufacturing Development
Company in Chile)
• Member of the International
Business Leaders Advisory
Council of the Mayor of
Shanghai, the International
Advisory Council of the
Brookings Institution, the
International Advisory Board
of Barrick Gold Corporation,
the Advisory Board of the
Panama Canal and the
Chairman’s International
Advisory Council of the
Council of the Americas
Jean-Paul
Luksic
Chairman, 55
NG
Independent: No
Appointed to the Board 1990
Appointed Chairman 2004
(Non-Executive since 2014)
Over 30 years’ experience
with Antofagasta, including
responsibility for overseeing
development of the Los
Pelambres and El Tesoro
(Centinela Cathodes) mines
Previous roles
• Chairman of Consejo
Minero, the industry body
representing the largest
mining companies
operating in Chile
• CEO of the Group’s
Mining division
Current positions
• Member of the board of
Consejo Minero
• Non-Executive Director of
Quiñenco SA; and of Banco
de Chile and Sociedad
Matriz SAAM SA, both of
which are listed companies
in the Quiñenco group
• Member of the governing
board of Centro de Estudios
Públicos, a Chilean
not-for-profit academic
foundation
PC
NG
AR
Ollie
Oliveira
Senior Independent
Director, 68
Independent: Yes
Appointed to the Board 2011
Appointed Senior
Independent Director 2016
Chartered accountant,
management accountant
and economist with over
35 years of strategic and
operating experience in
the mining industry and
corporate finance
Previous roles
• Senior executive positions
within the Anglo American
group, including Executive
Director Corporate Finance
and Head of Strategy and
Business Development of
De Beers SA
• Director and audit
committee chairman
of Dominion Diamond
Corporation
Current positions
• Director, senior independent
director, nomination
committee chairman and
audit and risk committee
and remuneration
committee member of
Polymetal International plc
• Director, audit and
management engagement
committee member of
BlackRock World
Mining Trust plc
Gonzalo Menéndez
Gonzalo Menéndez served as a Non-Executive Director
since 1985 until his death in June. A tribute to
Mr Menéndez can be found on page 86.
* Tim Baker will not be standing for re-election at the 2020 AGM. All Directors have confirmed that their other commitments do not prevent them from devoting sufficient
time to fulfilling their roles, and the Board acknowledges that the skills and experience gained by the Directors from these external appointments are of benefit to the
Group. Additional external appointments cannot be undertaken without the prior approval of the Board. Ages are as at the date of the AGM.
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Antofagasta plc Annual Report 2019
Key to Committees
Nomination and
Governance
NG
AR
Audit and Risk
ST
Sustainability and
Stakeholder Management
PC
Projects
RT
Remuneration and
Talent Management
Chairman
Board meeting attendance
Number attended
Number attended
Number attended
Jean-Paul Luksic
Ollie Oliveira
Gonzalo Menéndez1
Ramón Jara2
8/8
8/8
4/5
7/8
Juan Claro
William Hayes
Tim Baker
Andrónico Luksic C3
8/8
4/4
8/8
1/8
Vivianne Blanlot4
Jorge Bande
Francisca Castro
Michael Anglin
7/8
8/8
8/8
5/5
1. Gonzalo Menéndez was unable to attend one meeting during the year due to illness.
2. Ramón Jara was unable to attend one meeting during the year due to international travel to a business meeting on behalf of the Group.
3. Andrónico Luksic C. was unable to attend meetings during the year due to a period of medical leave of absence.
4. Vivianne Blanlot was unable to attend one meeting during the year due to the illness of a close family member.
ST
AR
Vivianne
Blanlot
Non-Executive Director, 65
RT
NG
AR
Jorge
Bande
Non-Executive Director, 67
ST
PC
Francisca
Castro
Non-Executive Director, 57
AR
RT
Michael
Anglin
Non-Executive Director, 64
RT
PC
Independent: Yes
Appointed to the Board 2014
Independent: Yes
Appointed to the Board 2014
Independent: Yes
Appointed to the Board 2016
Independent: Yes
Appointed to the Board 2019
Mining engineer with over
30 years’ experience in
base metals, including the
development, construction and
operation of large-scale mining
operations in the Americas.
Previous roles
• Vice President Operations
and Chief Operating Officer
of BHP Base Metals
• Director of EmberClear Corp
Current positions
• Chairman of SSR Mining Inc
Commercial engineer with
over 25 years’ experience
in industry, including mining,
energy, finance and public/
private infrastructure projects
in the United States and Chile
Previous roles
• Executive Vice-President
of Strategic Business
at Codelco
• General Co-ordinator of
Concessions at the Chilean
Ministry of Public Works
• Various roles within the
Chilean Finance Ministry
and the World Bank,
Washington DC
Current positions
• Member of the Chilean
Pension Funds Risk
Classification Committee
• Member of the independent
Technical Panel of Chilean
Public Works Concessions
• Director of SalfaCorp SA
• Director of the Fraunhofer
Chile Research Foundation
Economist with extensive
experience across the
energy, mining, water and
environmental sectors in the
public and private sectors
in Chile
Previous roles
• Executive Director of the
Comisión Nacional de Medio
Ambiente (Environmental
Agency in Chile)
Economist with over 40 years’
experience in the mining,
energy and water industries
in Chile
Previous roles
• Co-founder and Executive
Director of Copper and
Mining Studies “CESCO”,
an independent not-for-
profit think tank focused
on mining policy issues
• Undersecretary of Comisión
• Vice President of
Nacional de Energía
(National Energy
Commission in Chile)
• Minister of Defence for Chile
• Director of Scotiabank Chile
• Member of the Consejo
para la Transparencia
(Transparency Council),
the Chilean body responsible
for enforcing transparency
in the public sector
Current positions
• Director of Empresas CMPC
SA, a pulp and packaging
company listed in Chile
• Director of Colbún SA,
an energy company
listed in Chile
Development and later
director of Codelco
• CEO of AMP Chile
• Adviser to the World Bank
• Member of the Global
Agenda Council for
Responsible Minerals
Resource Management at
the World Economic Forum
• Director of Edelnor SA,
Electroandina SA (now
E-CL SA) and Bupa
Chile SA
• Member of the Experts
Committee for Copper
Prices for the Chilean
Ministry of Finance
Current positions
• Director of CESCO
• Director of NextMinerals SA
• Professor of the
International Postgraduate
Programme in Mineral
Economics at the University
of Chile
• Member of the Advisory
Council of the School of
Economics and Business
at the University of Chile
Tony
Jensen
Non-Executive Director, 58
AR
Independent: Yes
Appointed to the
Board on 13 March 2020
and will be standing for
election by shareholders
at the AGM.
Mining engineer with
over 35 years of mining
experience in the United
States and Chile in
operational, financial,
business development
and management roles.
Previous roles
• Director of Golden
Star Resources Limited
• Director and CEO of
Royal Gold Inc
• Mine General Manager
of the Cortez joint
venture in Nevada
• Treasury, business
development and a wide
range of other operating
roles with Placer Dome
in the USA and Chile
Current positions
• Director of Black Hills
Corporation
• Director of the
University Advisory
Board for the South
Dakota School of Mines
and Technology
antofagasta.co.uk
97
Corporate Governance Board balance and skills
A DIVERSE AND
EFFECTIVE BOARD
The Board comprises 11 Directors with a broad and complementary set of technical skills, educational and professional experience, nationalities,
personalities, cultures and perspectives.
Board balance1
Independence2
1
3
Chairman
Independent
Non-Independent
Gender diversity
Tenure
Nationality3
2
Male
Female
7
9
3
4
1-5 years
6-9 years
9+ years
4
1
2
1
Chile
USA
Canada
UK
7
1. Tim Baker will not be standing for re-election at the 2020 AGM. The above figures reflect the Board balance as at the date of the Annual Report.
2. The Board reviews the independence of Directors annually. None of the factors set out in Code Provision 10 apply to the Company’s Independent Directors.
3. The Company has met the Parker Review target and there is more than one Director of colour on the Board. Although the Group’s footprint is primarily in Chile, the mining
industry is international, and the Board includes a number of Directors from outside Chile in support of its vision and strategy.
Board skills matrix
Director
Jean-Paul Luksic
Ollie Oliveira
Ramón Jara
Juan Claro
Andrónico Luksic C
Vivianne Blanlot
Jorge Bande
Francisca Castro
Michael Anglin
Tim Baker
Tony Jensen
Professional development
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Induction
Continuing personal development
Resources
New Directors receive a thorough induction on
joining the Board. This includes meetings with
the Chairman, other Directors, the CEO and
Executive Committee members; briefings
on the Group’s strategy, UK corporate
governance, operations, projects and
exploration activities; and visits to the
Group’s operating companies.
Directors receive an annual briefing on
governance, legal, regulatory and market
developments that are relevant to directors
of UK-listed companies complemented by
discussions on Board-related matters.
Directors have access to, and are encouraged
to regularly attend, round-table discussions,
seminars and other events that cover topics
relevant to the Group and their role.
The Company provides Directors with
the necessary resources to maintain and
enhance their knowledge and capabilities.
All Directors have access to management
and to such information as they need to
discharge their duties and responsibilities
fully and effectively.
Directors are also entitled to seek independent
professional advice concerning the affairs of
the Group at the Company’s expense.
98
Antofagasta plc Annual Report 2019
Roles in the boardroom
ROLES IN THE BOARDROOM
Non-Executive Chairman
Independent Non-Executive Directors
CEO
Jean-Paul Luksic
Leads the Board and ensures its
effectiveness in all aspects of its duties.
• Promotes the highest standards of integrity,
probity and corporate governance.
• Sets the agenda for Board meetings
in consultation with other Directors,
members of senior management and
the Company Secretary.
• Chairs meetings and ensures that there is
adequate time for discussion of all agenda
items, focusing on strategic, rather than
routine, issues.
• Promotes a culture of openness and
debate within the Board by facilitating
the effective contribution by all Directors.
• Oversees Director development, induction
and performance review.
• Leads relations with shareholders.
Ollie Oliveira
Tim Baker
Jorge Bande
Vivianne Blanlot
Francisca Castro
Michael Anglin
Tony Jensen
Ensure that no individual or small group
of individuals can dominate the Board’s
decision-making.
• Meet the independence criteria set out
in the UK Corporate Governance Code.
• No connection with the Group or any
other Director which could be perceived
to compromise independence.
• Provide a range of outside perspectives to
the Group and encourage robust debate
with, and challenge of, the Group’s
executive management.
Iván Arriagada1
Leads the implementation of the Group’s
strategy set by the Board.
• Manages the overall operations and
resources of the Group.
• Leads the Executive Committee and
ensures its effectiveness in all aspects
of its duties.
• Provides information to the Board and
participates in Board discussion regarding
day-to-day activities of the Group.
Senior Independent Director
Non-Executive Directors
Executive Committee members
Ollie Oliveira
Provides a sounding board for the
Chairman and supports the Chairman
in the delivery of his objectives
as required.
• Where necessary, acts as an intermediary
between the Chairman and the other
members of the Board or the CEO.
• Acts as an additional point of contact for
shareholders, focusing on the Group’s
governance and strategy, and gives
shareholders an alternative means of
raising concerns other than with the
Chairman or senior management.
Juan Claro
Ramón Jara
Andrónico Luksic C
Provide a range of outside perspectives
to the Group and encourage robust debate
with, and challenge of, the Group’s
executive management.
+ See pages 100-101 for more information
Present proposals, recommendations
and information to the Board within
their areas of responsibility.
• Support the CEO in the implementation
of the Group’s strategy set by the Board.
• The Board does not consider these
Directors to be independent because
they do not meet one or more of the
independence criteria set out in the
UK Corporate Governance Code.2
• Ensure that no individual or small group of
individuals can dominate the Board’s
decision-making.
Company Secretary
Julian Anderson
Ensures that Directors have access to
the information they need to perform
their roles.
• Provides a conduit for Board and Committee
communications and provides a link
between the Board and management.
• Advises the Board on corporate governance
and supports the Board in applying the Code
and complying with listing obligations.
1. The Group’s CEO, Iván Arriagada, is not a Director. This is consistent with practice in Chile where local law prohibits CEOs of public companies from being directors of
those companies. Despite this, interaction between the Board and executive management is as you would expect between Non-Executive Directors and management in a
typical UK-listed company. The CEO and CFO are invited to attend all Board meetings, the CEO is also invited to attend all Board Committee meetings and there is regular
formal and informal dialogue between management and the Board. The Board considers that there are considerable benefits associated with having a Board comprising
exclusively Non-Executive Directors. Not only does it provide a broad range of perspectives, but it also encourages robust debate with, and independent oversight of,
the Group’s executive management.
2. Ramón Jara provides advisory services to the Group. Andrónico Luksic C is the brother of Jean-Paul Luksic, the Chairman of the Company, and is Chairman of Quiñenco
SA and Chairman or Director of Quiñenco’s other listed subsidiaries. Jean-Paul Luksic is also a Non-Executive Director of Quiñenco and some of its listed subsidiaries.
Like Antofagasta plc, Quiñenco is controlled by a foundation in which members of the Luksic family are interested. Ramón Jara and Juan Claro have served on the Board
for more than nine years from the date of their first election.
antofagasta.co.uk
99
Corporate Governance Executive Committee members’ biographies
A MANAGEMENT TEAM WITH
STRONG MINING EXPERIENCE
Iván Arriagada
CEO
BD
D
P
Alfredo Atucha
CFO
BD
E
D
P
Mauricio Ortiz
Vice President of Finance
BD
E
D
P
Hernán Menares
Vice President of Operations
OP
P
Joined the Group in 2015
• Commercial engineer and economist
with over 20 years’ international
experience in the mining and oil
and gas industries.
Previous roles
• Chief Financial Officer of Codelco
• Various positions at BHP Billiton,
including President of Pampa Norte
(Spence and Cerro Colorado), Vice
President Operations and Chief
Financial Officer of the Base
Metals division
• Over 15 years’ experience with
Shell in Chile, the United Kingdom,
Argentina and the United States
Joined the Group in 2013
• Chartered accountant with an MBA
and over 30 years’ financial and
international experience in the
mining, energy and fast-moving
consumer goods industries.
Previous roles
• 10 years at BHP Billiton as Vice
President of Finance for Minera
Escondida and Senior Manager
of Base Metals Major Projects
Joined the Group in 2015
• Electrical engineer and Master
of Science (Metals and Energy
Finance) with 14 years’ experience
in the energy, mining and
railway industries.
Previous roles
• General Manager at FCAB
(Transport division)
• Business Development Manager
at Antofagasta plc
• Finance and Administration Manager
• Finance Manager at Codelco –
at Chilquinta Energía (part of
Sempra Energy and PSG Group)
• CFO at Reckitt Benckiser in Spain,
Brazil and Chile
• Tax Planning and Treasury Manager
at British American Tobacco
Chuquicamata
• Business Development Principal
at Rio Tinto plc, London
• Various operating and project
roles at BHP Billiton
Joined the Group in 2008
• Mining engineer and mineral
economist with 30 years’
experience in mining.
Previous roles
• Project Development Manager
for the Centinela District
• Operating and business planning
roles at Codelco
• Various positions at Compañía
Minera del Pacífico and Compañía
Minera Huasco SA
Ana María Rabagliati
E
Vice President of Human Resources
Gonzalo Sánchez
Vice President of Sales
Francisco Walther
Vice President of Projects
P
Mauricio Larrain
General Manager – Los Pelambres
Joined the Group in 1996
• Civil engineer with over 25 years’
experience in marketing and
hedging metals.
Previous roles
• Deputy Commercial Director,
Antofagasta Minerals
• Copper sales at Codelco
Joined the Group in 2007
• Mining engineer with over 25 years’
experience in mining operations and
engineering for open pit and
underground mines.
Previous roles
• Project Director of Reko Diq
• Director of Codelco’s Chuquicamata
underground mine project
• Head of engineering for
Codelco’s Mansa Mina
(now Ministro Hales) project
Joined the Group in 2017
• Civil mining engineer and Master of
Science (Mineral Economics) with
28 years’ experience in mining.
Previous roles
• General Manager at El Teniente
• Operations Manager at El Teniente
• Mine Planning Corporate Director
at Codelco
• Various positions at Codelco and
Los Pelambres
Joined the Group in 2013
• Human resources specialist with
more than 25 years’ experience
in international companies across a
range of industries, including financial
services, industrials and oil and gas.
Previous roles
• Corporate Human Resources
Manager at Masisa
• Country Human Resources
Vice President at Citigroup
• Human Resources Manager
of the Lafarge Group in Chile
• Various positions across several
divisions and areas at Shell,
including Human Resources
Manager at the Lubricants Business
of Shell Oil Latin America
100
Antofagasta plc Annual Report 2019
Key to Committees
OP Operating Performance
Review Committee
BD Business Development
Committee
E Ethics Committee
D Disclosure Committee
P Project Steering
Committees
René Aguilar
Vice President of Corporate
Affairs and Sustainability
Joined the Group in 2017
• Industrial psychologist with
20 years’ experience in mining,
including in sustainability,
safety, human resources
and corporate affairs.
Previous roles
• Group Head of Safety at
Anglo American plc, London
• Vice President of Corporate Affairs
and Sustainability at Codelco, Chile
• Health and Safety Director at
International Council on Mining
and Metals “ICMM”, London
E
P
Patricio Enei
Vice President of Legal
E
D
P
Andrónico Luksic L
Vice President of Development
BD
Joined the Group in 2014
• Lawyer and MBA, with over
20 years’ experience in mining,
including roles at some of the
largest international copper
companies operating in Chile.
Previous roles
• General Counsel at Codelco
• Corporate Affairs Manager
at Minera Escondida
Joined the Group in 2006
• Business administrator with
broad mining experience in sales,
exploration, business development
and general management.
Previous roles
• Corporate Manager in the
Mining division
• Director, Antofagasta Minerals
Toronto Office
• Senior lawyer at BHP Billiton
• Various positions at Banco de Chile
in Chile
• Chief Legal Counsel at Minera
Doña Inés de Collahuasi
• Lawyer at the Instituto de
Normalización Previsional and
in private practice
Carlos Espinoza
General Manager – Centinela
Leonardo Gonzalez
General Manager – Antucoya
Luis Sanchez
General Manager – Zaldívar
Joined the Group in 2010
• Civil mining engineer and MBA,
Joined the Group in 2015
• Civil mining engineer and MBA,
with 27 years of mining experience.
with 24 years’ experience in mining.
Previous roles
• Planning and Development Manager
at Centinela
• Head of Mining Operations
at Centinela
• Operations Manager at Michilla
• Planning positions at Minera
Escondida and Minera Spence
Previous roles
• General Manager at Zaldívar
• Operations Manager at Zaldívar
• Mining Superintendent at Minera
Doña Inés de Collahuasi
Joined the Group in 2016
• Civil metallurgical engineer and
MBA, with 24 years’ experience
in mining.
Previous roles
• Operations Manager at Centinela
• President of Pampa Norte
(Spence and Cerro Colorado)
• General Manager at Spence
• Various roles at Escondida,
Codelco and Minera Doña Inés
de Collahuasi
Katherina Jenny
General Manager –
FCAB (Transport division)
Joined the Group in 2016
• Mining engineer and MBA, with
15 years’ experience in mining.
Previous roles
• Safety and Health Manager
at Antofagasta plc
• Productivity and Costs Manager
at Codelco
• Various roles at BHP Billiton,
including mine planning, safety,
health and environment
antofagasta.co.uk
101
Corporate Governance Introduction to the Committees
BOARD COMMITTEES
The Board’s Committees ensure that Board deliberations are
focused on key issues and that proposals are submitted after
specialist debate and rigorous challenge.
Each Committee provides a forum to allow the views and
perspectives of stakeholders to be discussed, so that they
can be represented in the Board’s deliberations.
Nomination
and Governance
Committee
Audit and Risk
Committee
Sustainability and
Stakeholder Management
Committee
Projects
Committee
Remuneration and Talent
Management Committee
102
Antofagasta plc Annual Report 2019
Chair
Jean-Paul Luksic
Key responsibilities
• Corporate governance
Members
Tim Baker
Vivianne Blanlot
Ollie Oliveira
Chair
Ollie Oliveira
Members
Jorge Bande
Vivianne Blanlot
Francisca Castro
Tony Jensen
Chair
Vivianne Blanlot
Members
Jorge Bande
Juan Claro
Ramón Jara
Chair
Ollie Oliveira
Members
Michael Anglin
Tim Baker
Jorge Bande
Ramón Jara
Chair
Francisca Castro
Members
Michael Anglin
Tim Baker
Vivianne Blanlot
framework
• Succession planning for
the CEO and the Board
• Board and Committee
composition
• Board effectiveness reviews
Key responsibilities
• Financial reporting
• External audit
• Internal audit
• Risk and internal control
• Compliance
Key responsibilities
• Policies and commitments
• Safety and health
• Community relations
• Environment
Key responsibilities
• Policies and commitments
• Project reviews
• Lessons learned from
completed projects
Key responsibilities
• Remuneration governance
• Directors’ remuneration
• Executive remuneration
• Group pay structures
• Talent management and
succession planning for
the Executive Committee
p103
p107
p112
p114
p116
Nomination and Governance Committee report
“The Committee supports the Board in ensuring
that effective governance structures are in place
and that the Board and its Committees have the
appropriate balance of skills, experience and
knowledge to operate effectively.”
Jean-Paul Luksic
Chair
2019 Membership and meeting attendance
Jean-Paul Luksic (Chair)
Tim Baker
Ollie Oliveira
Number
attended
5/5
5/5
5/5
• Other regular attendees include the CEO and the
Company Secretary.
• The Committee meets as necessary and at least twice per year.
• Except for the Chairman, all Committee members are independent.
Key responsibilities
The Nomination and Governance Committee supports the Board in
ensuring that the Group has effective governance structures in place
and that the Board and its Committees are appropriately staffed and
operate effectively. The Committee identifies qualified individuals
to join the Board, recommends any changes to the Board and
Committee composition and monitors an annual process to
assess Board effectiveness.
This involves:
• monitoring trends, initiatives and proposals in relation to
corporate governance
Key activities in 2019
• overseeing and facilitating annual reviews of the Chairman,
the Board and the CEO, including externally-facilitated reviews
• evaluating and overseeing the balance of skills, knowledge and
experience on the Board and its Committees, and reviewing
the independence of Directors
• overseeing Board succession plans and leading the process
of identifying suitable candidates to fill vacancies, nominating
such candidates for approval by the Board and ensuring that
appointments are made on merit and against objective criteria
• overseeing CEO succession plans.
Corporate governance
Succession
planning
Board and Committee
composition
Board effectiveness
reviews
• Reviewed and endorsed
detailed succession
plans for the Board
and its Committees.
• Reviewed updated
succession plans
for the CEO.
• Continued to provide
input to the Remuneration
and Talent Management
Committee in relation
to succession plans for
the Executive Committee
(excluding the CEO) and
the Group’s diversity and
inclusion programme.
• Oversaw the implementation of plans in
response to the new requirements and
expectations of the Code.
• Reviewed Board Governance
Responsibility documents, including
updates to the Schedule of Matters
Reserved for the Board and all Board
Committee terms of reference.
• Sought feedback from shareholders
on the Group’s corporate governance
arrangements.
• Attended meetings with shareholders.
• Reviewed Directors’ potential conflict
of interest declarations.
• Reviewed requests by Directors to
undertake additional appointments.
• Reviewed the Governance section of the
2018 Annual Report and recommended
it to the Board for approval.
• Reviewed the effectiveness of the Group’s
workforce engagement mechanisms.
• Reviewed the
• Oversaw the
independence of all
Directors, making
recommendations
to the Board.
• Engaged Spencer Stuart in
the search for Independent
Non-Executive Directors.
• Interviewed and
considered potential
Board candidates.
• Recommended
that Michael Anglin
be appointed to the Board,
and subsequently to the
Remuneration and Talent
Management and Projects
Committees.
• Reviewed and endorsed
updates to the Board’s
Skills Matrix.
implementation of
recommendations arising
from the 2018 internal
evaluation of Board and
Committees’ performance.
• Engaged external
board evaluator Clare
Chalmers to carry out an
external evaluation of the
Board and Committees’
performance.
• Reviewed and commenced
implementation of
the recommendations
arising from the external
evaluation of the Board and
Committees’ performance.
antofagasta.co.uk
103
Corporate Governance Nomination and Governance Committee report continued
BOARD COMPOSITION AND
SUCCESSION PLANNING
The Company’s Directors possess a range of skills and perspectives that contribute to
Board discussions that allow us to fully assess the challenges and opportunities facing
our business.
Q. What is the scope of the Board’s succession planning?
The Board’s succession plan is reviewed formally once a year
and addresses Board size, Committee structure and composition,
skills on the Board, Board and Committee members’ tenure,
independence of Directors, diversity (including gender), Board
roles, Board policies, and succession plans for all Board and
Committee positions. Succession plans include contingency plans
in the event of an unexpected departure, medium-term plans for
orderly replacement of current Board members and long-term
plans linking strategy with the skills needed on the Board in
the future.
Q. How does the Board identify desirable skills for new
Board candidates?
The Board maintains a Board skills matrix and the Committee
reviews the balance of skills, experience and expertise at least
annually. This process enables the Board and the Committee to
identify the desirable skills required of new Board candidates and
to instruct search firms to identify the candidates who fit these
criteria when making new appointments to the Board.
Q. What steps does the Committee take to identify
and appoint new Directors?
The Committee discusses relevant profiles for future appointments
and potential candidates, taking into account the results of Board
effectiveness reviews, as shown on page 106, the Group’s vision
and strategy, as shown on pages 12-15 and 92-93, the Board’s
diversity policy (below) and the core competencies and areas of
expertise on the Board, as shown on page 98.
When making new appointments of Directors to the Board,
the Committee has appointed independent external search
consultancies, who do not have any connection to the Group,
to assist with searches for Board candidates. During 2019, the
Committee appointed Spencer Stuart to assist with the search for
a new independent Non-Executive Director. Spencer Stuart were
briefed on the skills and experience of the existing Directors and
were asked to identify potential candidates who would best meet a
number of criteria, including relevant experience, skills, personality
type, contribution to Board diversity and whether they had
sufficient time to devote to the role. Members of the Committee
interviewed short-listed candidates and collectively selected
Michael Anglin to be recommended to the Board for appointment.
Q. What is the Board’s position in relation to diversity?
The Board believes in the benefits of diversity and that more
diverse companies attract the best talent and achieve stronger
overall performance. The Board considers a broad definition of
diversity when setting policies and appointing Directors, including
gender, disability, nationality, educational and professional
experience, personality type, culture and perspective.
104
Antofagasta plc Annual Report 2019
The Committee has worked hard to ensure that the Board is
suitably diverse according to these criteria. The Board reviews
its effectiveness in meeting diversity goals each year as part of
the annual Board evaluation process.
As previously noted, the Group’s current activities are focused in
Chile, but for many years the Board has included a number of
Directors from outside Chile in support of the Group’s vision
and strategy.
Gender diversity is an important part of the Group’s diversity
objectives and the Board recognises and supports the important
work performed by the Hampton-Alexander Review in setting a
33% target for women on FTSE 350 boards and on executive
committees and their direct reports by the end of 2020. Two of
the five Board appointees since 2014 have been women and the
Board actively seeks to increase female representation beyond
the current level, while ensuring that appointments continue to
be made on merit. Searches for new Directors access the widest
possible talent pool and as part of the global searches conducted
for the two most recent Board appointments, Spencer Stuart were
instructed to specifically identify potential female candidates. It is
important for overall Board effectiveness that potential candidates
are proficient in Spanish and it is preferable for candidates to have
relevant mining or extractive industry experience. For the most
recent search, several hundred potential candidates were
considered, from which a shortlist of seven were interviewed,
four of whom were female. Although it was not possible to
appoint female candidates for these most recent appointments,
the Group is committed to developing a pipeline of diverse talent
for the future.
Q. What policies are in place to promote a diverse pipeline
of talent for the future?
To further promote diversity at the Executive Committee level and
below, a new Diversity and Inclusion Strategy was approved by the
Board in 2017. This was prepared following an exercise to assess
whether the Group’s then existing diversity and inclusion model
was appropriate, which included interviews with stakeholders,
a bench-marking exercise and a comprehensive review of the
Group’s policies and processes. The review assessed whether
any structural impediments needed to be addressed in order to
achieve a sustained improvement in the Group’s diversity and
inclusion model. The Board has reviewed the progress in the
implementation of this strategy during 2019 and the corresponding
targets and results which are described in more detail on page 38.
The Group carefully considered the elements of diversity that would
most contribute to achieving the Group’s vision and strategy and
has committed to increasing the percentage of women, people with
disabilities and those who have international backgrounds and/or
experience in the workforce by 2022, and for these improvements
to be embedded, sustained and improved upon from that point.
The current levels of gender diversity within the Mining division’s
workforce and further rationale behind the Diversity and Inclusion
Strategy are set out within the Strategic Report on page 38.
As shown on page 131, metrics associated with the development
of the Diversity and Inclusion Strategy were included as part of
the Group’s Annual Bonus Plan in 2019 and will again be included
in 2020. Performance will be assessed by the Remuneration
and Talent Management Committee at the end of the year.
The Remuneration and Talent Management Committee is also
responsible for succession planning for the Executive Committee
(excluding the CEO) which allows for ongoing monitoring of the
impact of the Diversity and Inclusion Strategy on appointments that
are made and their progress within the Company, including at the
level of those who report to the Executive Committee, as noted
on page 38.
Q. What support does the Company provide to facilitate
induction and assist with professional development?
The Company provides new Directors with a thorough induction
on joining the Board. This includes meetings and briefings with
the Chairman, other Directors, the Group CEO and Executive
Committee members and visits to the Group’s operating
companies. Details of the induction process for Michael Anglin
are set out below.
Incumbent Directors are provided with access to resources and
continuing professional development. Further details are set out
on page 98.
Jean-Paul Luksic
Chair of the Nomination and Governance Committee
MICHAEL ANGLIN – INDUCTION PROGRAMME
May 2019
Joined the Board
Introductions, meetings and briefing with the Chairman and other
Directors, the CEO, each member of the Executive Committee, and
the Company Secretary.
Commencing
May 2019
Board introductions,
meetings and briefings
June 2019
Site visit to
Centinela
Commencing
June 2019
Management
briefings
September 2019
Joined the Remuneration
and Talent Committee and
Projects Committee
CEO:
• Implementation of the Group’s strategy
• Culture − Challenges and opportunities facing the Group
• Safety
• Production
• Costs
• Projects
• Sustainability
• Business development
Vice Presidents and General Managers:
• Financial position and outlook
• Audit plan
• Talent management strategy and compensation mechanisms
• Legal strategy and outstanding claims
• Exploration and business development opportunities
• Projects under execution and studies for future project development
• Challenges of the current copper market and the sales strategy
• The Group’s community relations model
• The Group’s interactions with stakeholders
• UK financial and tax regulations
• Overview of the Group’s operations and the new Operating Model
Company Secretary:
• Information flows and expectations of Directors
• Directors’ duties and liabilities
• The Company’s share dealing policy
• The Company’s disclosure procedures
• The UK Corporate Governance Code
• Requirements of the EU Market Abuse Regulation
• Latest Annual Report and Sustainability Report
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Corporate Governance Board effectiveness
EXTERNAL BOARD REVIEW
The 2019 independent, externally-facilitated Board evaluation provided the Board with
a fresh perspective and balanced feedback on its effectiveness, based on one-to-one
interviews with Directors and observing Board dynamics at meetings.
In accordance with the Code, the Board aims to undertake an
externally-facilitated effectiveness review at least once every three
years. In 2019, the effectiveness review was facilitated by an external
consultant, Clare Chalmers, who is independent and has no other
connection with the Group.
The 2019 review process commenced with the Nomination and
Governance Committee planning the scope of the evaluation. The
Committee considered a shortlist of external evaluators for approval
by the Board. The selected evaluator discussed the process with the
Chairman, Senior Independent Director and the Company Secretary
and agreed the questions to be put to Board members and members
of the Executive Committee who regularly attend Board and
Committee meetings.
Interviewees held one-on-one interviews with the evaluator. Ms
Chalmers also observed a Board meeting, visited Chile twice and
participated in a safety leadership site visit to Los Pelambres. The
review was designed to recognise and raise key themes identified
collectively by the Directors and for the Directors to reflect on how
these themes should be addressed going forward. Ms Chalmers
discussed her report initially with the Chairman and the Senior
Independent Director and then presented it to the full Board in
October 2019.
The findings of the review were discussed by the Board and, based
on Ms Chalmers’ report, the Directors were satisfied that the Board
and its Committees operated effectively in 2019.
Ms Chalmers highlighted the Board’s strengths as its diversity,
the experience and balance of skills of the Directors, its collegiate
working environment and the contribution of each Director at
meetings. The Group’s strong safety culture and relations with local
communities were also highlighted as key strengths. Recommended
opportunities for further improvement were also highlighted. These
are set out below.
“The Antofagasta Board and Directors work
effectively and co-operatively to ensure strategic
oversight of the business, demonstrating open
dialogue and strategic questioning in the ever
changing global environment.”
Clare Chalmers
Board effectiveness reviewer
2019
The external review focused on evaluating
the following key areas:
• The focus and prioritisation of the Board
• Alignment of the Company’s purpose, strategy,
values and culture with its vision
• The nature and quality of the information and
support provided to the Board by management
• The visibility of the Board within the organisation
• The interests of shareholders and stakeholders
• The composition of the Board and its Committees,
including balance of skills, size, succession
and dynamics
• The leadership of the Chairman
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Antofagasta plc Annual Report 2019
2020
The Board will focus on a number of areas to
improve its, and its Committees’, effectiveness:
• greater strategic scene-setting in executive summaries
provided to the Board before Board meetings
to ensure that appropriate time is spent on
strategic discussions;
• the requirement for more information to be presented
to the Board in relation to talent management and
succession planning;
• continuing to keep the targets in mind regarding
the appointment of women to Board and Executive
Committee positions when making appointments;
• the need for Directors to visit the Group’s operations
at least once a year; and
• paying special attention to emerging risks
such as cyber security, climate change and
digital transformation.
Audit and Risk Committee report
“The Audit and Risk Committee is focused
on ensuring the Group has strong financial
controls and risk management.”
Ollie Oliveira
Chair
2019 Membership and meeting attendance
Ollie Oliveira (Chair)
Jorge Bande
Vivianne Blanlot
Francisca Castro
Number
attended
4/4
4/4
4/4
4/4
• Other regular attendees included representatives from PwC, the
Group’s external auditor, the CEO, the CFO, the Vice President of
Finance, the Group Financial Controller, the Head of Internal Audit,
the Head of Risk, Compliance and Internal Control and the
Company Secretary.
• At least one Committee member serves on each of the other Board
Committees, which allows the Committee to take into account the
full spectrum of risks faced by the Group.
• The Committee meets as necessary and at least twice a year.
• All Committee members are independent.
• Ollie Oliveira, Jorge Bande and Francisca Castro are all considered
to have recent and relevant financial experience.
• The Committee as a whole has significant experience relevant to
the mining sector.
Key responsibilities
The Audit and Risk Committee assists the Board in meeting
its responsibilities relating to financial reporting and control and
risk management. The Committee’s main responsibilities cover:
• financial reporting, which includes responsibility for reviewing the
year-end and half-year financial reports, and monitoring the overall
financial reporting process
• overseeing the external audit process and managing the
relationship with PwC, the Group’s external auditor
• reviewing and monitoring PwC’s independence and objectivity
• internal audit, including monitoring and reviewing the effectiveness
of the Group’s internal audit function, processes and findings
• assisting the Board with its responsibilities in respect of risk
management, including reviews of the Group’s risk appetite
and key risks
• monitoring the performance of the compliance and crime
prevention models.
Key activities in 2019
Financial reporting
External audit
Risk and internal control
Compliance
• Reviewed the 2018
year-end and 2019
half-year financial
reports, focusing on the
significant accounting
issues relating to the
Group’s results.
• Reviewed the Group’s
2018 reserves and
resources statement.
• Assisted the Board in
ensuring that the 2018
Annual Report was fair,
balanced and
understandable, and
reviewed the long-term
viability statement.
• Reviewed the Group’s
tax position.
• Assisted the Board with its
assessment of the Group’s
key risks and its review of
the effectiveness of the risk
management and internal
control processes.
• Assisted the Board
in updating the Group’s
risk appetite assessment,
including the incorporation
of new risk areas.
• Conducted detailed reviews
with the General Managers
of each of the Group’s
operations, covering the
operations’ key risks.
• Reviewed the ongoing
activities undertaken during
the year to further develop the
maturity of the Group’s risk
management processes.
• Reviewed and approved the 2019
audit plan, including fees.
• Assessed the effectiveness of
the external audit process.
• Reviewed PwC’s independence
and objectivity.
• Reviewed PwC’s audit partner
transition plan.
• Reviewed the key audit findings
in respect of the 2018 audit, and
reviewed progress reports from
the external auditor in relation to
the 2019 audit.
Internal audit
• Reviewed the key findings from the
internal audit reviews conducted
during 2019.
• Reviewed the quality, experience and
expertise of the function, confirming
that it is appropriate to the business.
• Agreed the scope and areas of focus
for the 2020 internal audit plan.
• Reviewed the Group’s
whistleblowing arrangements,
including details of the most
significant reports and the
actions taken.
• Reviewed the process to identify
and manage potential conflicts
of interest for the Group’s
employees, and the due
diligence process conducted in
respect of the Group’s suppliers.
• Reviewed the Group’s
Compliance Model, including
amendments to the Group’s
Crime Prevention Manual to
reflect updates made to Chilean
anti-corruption legislation.
• Reviewed the Company’s 2018
Modern Slavery Act statement.
• Monitored the functioning of the
Group’s crime prevention model,
in accordance with Chilean and
UK anti-corruption legislation.
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Corporate Governance
Audit and Risk Committee report continued
INTEGRATED RISK
MANAGEMENT
The Group’s integrated risk management framework is a key tool in ensuring and
measuring optimal performance and driving appropriate behaviour across the Group.
Q. What were the significant accounting issues in relation
to the financial statements considered by the Committee
during 2019?
The main accounting issues considered in detail by the Committee
in respect of the 2019 financial statements were:
• Asset valuations: we have considered whether there were any
indicators of impairment (or reversal of previous impairments)
at the Group’s operations, and concluded that there were not.
Accordingly, we have not performed any impairment reviews
in respect of the Group’s assets at the 2019 year end. However,
in order to assess the sensitivities of the valuations of the
Group’s mining operations, and to make appropriate disclosures
within the financial statements in respect of this, a valuation and
sensitivity analysis has been performed. As part of this analysis,
we have considered the appropriate copper price forecasts to
use in these valuation models, with reference to the forward
curve as at 31 December 2019 and consensus analyst forecasts
of the long-term copper price. We have also reviewed the key
operational assumptions in the valuation models, in particular
in respect of significant future development projects included
within the models.
• Inventories: we have reviewed relevant aspects of the valuation
and control over the Group’s inventory balances. This is relevant
because of the value of the inventories, the long-term nature of
some of the balances, and the fact that the monitoring of mining
work-in-progress inventories, particularly in respect of leaching
processes, can be complex. In addition, the relative uncertainty
in the copper market during 2019, and the consequent volatility
in the copper price during the year, has an impact on the
assessment of the net realisable value of the inventory balances.
• Provision for decommissioning and restoration costs at the
Group’s mining operations: we have reviewed updates to the
mine closure provisions. These are important balances in terms
of their value, and there is also a significant inherent level of
estimation involved in the calculation of the provision balances,
both in terms of the exact nature of the decommissioning and
restoration activities which will be required, and the future cost
of those activities. We have reviewed changes in the mine
closure plans agreed in the regular reviews of the plans with
Sernageomin, the Chilean government agency which regulates
the mining industry in Chile, as well as changes to the financial
parameters used in calculating the provision balance.
Q. What were the key areas of focus for the Committee
in 2019?
In terms of financial reporting, given the relative uncertainty in
the copper market during 2019, we have monitored the potential
impact on the carrying value of the Group’s assets. We have also
worked closely with PwC to ensure a smooth transition to our
new lead audit partner from 2020 onwards, both in terms of
the selection of the new partner, and ensuring an appropriate
transition plan.
With risk management, we assisted the Board with updating the
Group’s risk appetite assessment, including the incorporation
of new risk areas, as well as reviewing the ongoing process to
further develop the maturity of our risk management processes.
Financial reporting
Q. What are the Committee’s main activities in respect of
the Group’s financial reporting?
The Committee reviews the year-end financial statements and
half-yearly financial report, and ensures that the key accounting
policies, estimates and judgements applied in those financial
statements are reasonable.
We also monitor the overall financial reporting process to ensure
it is robust and well-controlled. This includes ensuring that the
Group’s accounting and finance function is adequately resourced,
with the appropriate segregation of duties and internal review
processes, that the Group’s accounting policies are appropriate
and clearly communicated, and that the Group’s accounting and
consolidation systems are in line with expectations.
The Committee assists the Board in undertaking its assessment
that the Annual Report is, when taken as a whole, fair, balanced
and understandable, and provides the necessary information
to allow shareholders to assess the Group’s position and
performance, business model and strategy. As part of this
assessment, we use our detailed knowledge of the financial
results and the key accounting judgements applied in the
financial statements to ensure that the tone and content of the
narrative reporting fairly reflects the financial results for the year.
We also review the going concern basis adopted in the financial
statements, as well as the detailed long-term viability statement
in the Annual Report.
We monitored the implementation of the new IFRS 16 Leases
accounting standard, which has applied since 1 January 2019.
All necessary elements of the implementation process had been
completed during 2018, and the effectiveness of the process has
been confirmed by the smooth transition to the new standard from
January 2019 onwards.
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Antofagasta plc Annual Report 2019
External audit
Q. What are the Committee’s activities in respect of the
external audit process?
The Committee is responsible for overseeing Antofagasta’s
relationship with PwC, the Group’s external auditor. I have a key
direct relationship with Jason Burkitt, the lead PwC audit partner.
2019 has been Jason’s final year as lead audit partner, as, in
line with normal regulatory requirements he is rotating off the
engagement after five years in the role. I would like to thank
Jason for the support and constructive and rigorous challenge he
has provided to us during his time in the role. I have been closely
involved with the process with PwC to select the new lead audit
partner from 2020 onwards, and the Committee has approved the
choice of Simon Morley as the new lead audit partner from 2020
onwards. The selection process was completed prior to the 2019
year-end, allowing Simon to observe relevant aspects of the 2019
year-end audit process, to ensure a smooth transition.
The Committee reviews and approves the scope of the external
audit, the terms of engagement and fees. The Committee monitors
the effectiveness of the audit process and we are responsible for
ensuring the independence of the external auditor. The Committee
informs the Board of the outcome of the external audit and explains
how the external audit contributes to the integrity of the Group’s
financial reporting. We also make recommendations to the Board
in respect of the appointment, reappointment or removal of the
external auditor. The Committee formally meets with PwC
without management present at least once a year.
Q. How long has PwC been the Group’s auditor?
PwC has been our external auditor for five years. We carried
out a tender process during 2014, which resulted in PwC being
appointed with effect from 2015 onwards. In line with relevant
regulatory guidance we expect to undertake a tender process in
respect of the external audit at least every 10 years. As noted
above, Jason Burkitt has been the lead audit partner for five
years from 2015 to 2019, and, in line with normal regulatory
requirements has now rotated off the engagement, and will
be replaced by Simon Morley as lead audit partner from
2020 onwards.
Q. How do you assess the effectiveness of the external
audit process?
The Committee considered the following factors as part of its review
of the effectiveness of the external audit process during the year:
• the appropriateness of the proposed audit plan, the significant
risk areas and areas of focus, and the effective performance
of the audit
• the technical skills and industry experience of the audit
engagement partner and the wider audit team
• the quality of the external auditor’s reporting to the Committee
• the effectiveness of the co-ordination between the UK and
Chilean audit teams
• the effectiveness of the interaction and relationship between the
Group’s management and the external auditor
• feedback from management in respect of the effectiveness of the
audit processes for the individual operations and the Group overall
• the review of reports from the external auditor detailing
its own internal quality control procedures, as well as its
annual transparency report. In light of this assessment, the
Committee considers it appropriate that PwC be reappointed
as external auditor.
Independence and objectivity
of the external auditor
The Committee monitors the external auditor’s independence and
objectivity in line with Group policy, which covers the potential
employment of former auditors, the types of non-audit services
that the external auditor may and may not provide to the Group,
and the approval process in respect of permitted non-audit services.
Our policy is in compliance with the new 2019 Ethical Standard,
and no services not included on the whitelist are permitable.
The policy specifies services which the external auditor may not
provide to any Group entity. This includes playing any part in the
management or decision-making of a Group entity, preparing
accounting records and financial statements and designing or
implementing internal control procedures relating to the preparation
of financial information. In addition, a number of more specific
services are prohibited, including internal audit services and
valuation services that would have a material effect on the financial
statements and the preparation of material tax calculations. The policy
also includes “blacklisted” services that may not be provided to
Antofagasta plc or its subsidiaries within the European Union (EU) –
for instance, virtually all services in respect of taxation are prohibited.
The policy also requires prior approval by the Committee for all
non-audit services, other than services considered to be clearly
trivial, which the Committee has defined as being services with
fees of $25,000 or less. In addition to this pre-approval process for
specific non-audit services, the Audit and Risk Committee monitors
the total level of non-audit services provided by the external auditor
in order to ensure that neither the auditor’s objectivity nor
its independence is put at risk.
A breakdown of the audit and non-audit fees is disclosed in Note 7
to the financial statements. The Company’s external auditor, PwC, has
provided non-audit services (excluding audit-related services) which
amounted to $39,000, or 3% of the fees for audit and audit-related
services. This mainly related to assurance services relating to the
Group’s sustainability reporting and company secretarial
compliance services.
In general, where the external auditor is selected to provide non-audit
services, it is because it has specific expertise or experience in the
relevant area and is considered to be the most suitable provider. The
Committee has reviewed the level of these services in the course of
the year and is confident that the objectivity and independence of
the auditor is not impaired by such non-audit work.
The external auditor provides a report to the Committee at least once
a year, setting out its firm’s policies and procedures for maintaining
its independence.
The Committee considers that PwC remained independent and
objective throughout 2019.
The UK regulatory requirements in respect of competitive audit
tendering and other related Audit Committee responsibilities in
respect of the external auditor are set out in the Competition &
Markets Authority´s “The Statutory Audit Services for Large
Companies Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities) Order 2014”
(“the Order”). The Company has been in compliance with the
provisions of the Order during 2019.
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109
Corporate Governance Audit and Risk Committee report continued
Internal audit
Q. What are the Committee’s main activities in relation
Risk management and internal control
Q. What are the Committee’s main activities in relation to
to internal audit?
The Committee monitors and reviews the effectiveness of the
Group’s internal audit function. The Head of Internal Audit reports
directly to the Committee and meets us without management
present at least once a year.
The Committee reviews and approves Internal Audit’s plan of work
for the coming year, including the department’s budget, headcount
and other resources. We ensure there are sufficient resources
in the plan to allow for special reviews that may be required
during the year.
We also monitor the resources available to the Internal Audit team
so that it has the appropriate mix of skills and experience for the
Group’s businesses. Internal Audit utilises a mix of permanent team
members, temporary secondees from elsewhere in the Group and
third parties, particularly for areas such as IT-related reviews.
The permanent team includes members with specific expertise in
some of the most relevant areas for the Group, including mining
technical experience, IT, risk, compliance and internal control
and sustainability.
Internal Audit presents to the Committee summaries of the key
findings from the reviews conducted during the year and any
actions that have been taken or proposed. All Internal Audit
reports are distributed to the Committee members once they
have been finalised.
The Committee monitors the interaction between Internal Audit and
PwC, to ensure an efficient relationship between the internal and
external audit processes, avoid duplication of work, and achieve
the effective and timely sharing of findings.
risk management and internal control?
The Committee plays an important role in assisting the Board
with its responsibilities with regard to risk management and related
controls. The Board has ultimate responsibility for overseeing the
Group’s principal risks and its risk appetite, as well as maintaining
control systems. In order to achieve our business objectives,
internal control systems are designed to identify and manage,
rather than eliminate, the risk of failure, and can only provide
reasonable, not absolute, assurance against material
misstatement or loss.
Q. What were the Committee’s main activities in 2019
relating to risk?
We assisted the Board with its update of the Group’s risk appetite
assessment. This included the incorporation of two new separate
risk areas, in respect of tailing storage and climate change (which
had previously been considered as part of the overall operations
and environmental management risk areas respectively). The
separation of these two risk areas reflects the focus which the
Group places on these two aspects, which are of key importance to
the safe and sustainable long-term future of the Group. The Board
defined the Group’s risk appetite in respect of both of these risk
areas as low.
The Committee reviewed the ongoing activities undertaken by the
Group during the year to further develop the maturity of its risk
management processes. In particular, there has been an extensive
programme of training and communication across the Group’s
employees, to ensure a high level of understanding of the
Group’s risk management objectives and processes.
The risk management function presented to the Committee
several times during the year on developments in the Group’s
risk management processes and Group-level strategic risks.
The General Managers of the Group’s operations presented to
the Committee their assessments of their respective operations’
key potential risks and any significant materialised risks.
The analysis of key risks includes an assessment of the significance
of the risks based on the probability of the risk materialising and
the potential impact of the risk, as well as an evaluation of the
quality of the controls in place in respect of those specific risks.
Audit and Risk Committee, Board and risk management function interaction
Board
The Chair of the Audit and Risk Committee reports to the Board following
each Committee meeting, allowing a wider discussion of the risk and
compliance issues reviewed in detail by the Committee.
Audit and Risk Committee
The Committee supports the Board in its review of the effectiveness of the
Group’s risk management and internal control systems.
General Managers of the operations
The General Managers are responsible for the risks relating to their operation
and give detailed presentations to the Committee at least once a year,
including on each operation’s key risks and materialised risks.
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Antofagasta plc Annual Report 2019
The risk management function provides
regular presentations covering changes in
the Group’s key risks, major materialised
risks, and updates on the risk management
and compliance processes.
Risk management function
There are detailed presentations at
each Committee meeting covering the
risk management process, significant
whistleblowing reports, and updates
on compliance processes and activities.
Compliance
Q. What are the Committee’s main responsibilities relating
to compliance?
The Committee ensures that appropriate compliance policies and
procedures are observed throughout the Group. The Group’s
Risk Management function makes regular presentations to the
Committee covering developments in the Group’s compliance
processes and significant compliance issues. Chilean law requires
the Group to appoint a Crime Prevention Officer and the Committee
makes recommendations to the Board regarding this appointment
as well as monitoring and overseeing the performance of the role.
The Crime Prevention Officer is currently Alfredo Atucha, the CFO.
The Committee receives reports from the Risk Management
function in respect of the Group’s crime prevention model, in
accordance with Chilean and UK anti-corruption legislation.
Q. What were the Committee’s main activities
in 2019 relating to compliance?
The Committee reviewed the Group’s whistleblowing
arrangements, which enable employees and contractors to
raise concerns in confidence about possible improprieties or
non-compliance with the Group’s Code of Ethics. This is important
to encourage any potential issues to be raised. We received regular
reports on reported whistleblowing incidents, detailing the number
and type of incidents, along with details of the most significant and
the actions resulting from their investigation.
We reviewed the process to identify and manage potential
conflicts of interest for the Group’s employees, and the due
diligence process conducted in respect of the Group’s suppliers.
We also reviewed the Group’s Compliance Model and details of the
compliance training undertaken by the Group’s employees during
the year. Additionally, updates to the Group’s Crime Prevention
Manual were recommended to the Board for approval.
Ollie Oliveira
Chair of the Audit and Risk Committee
The evaluation of the potential impact is not limited to economic
factors but includes issues such as safety, health, environmental,
regulatory, community and reputational issues. We also look
at whether those risks have been increasing or decreasing in
significance and the budget for each risk mitigation objective. The
General Managers present their forecasts of any expected change
in key risks over the coming 12 months. If there is a specific issue
at one of the operations that requires more detailed understanding,
we will ask the General Manager to attend the next meeting to
discuss that issue. This direct interaction between the Committee
and the General Managers is extremely valuable – not just in terms
of the direct insight into each operation it affords the Committee,
but also in allowing us to emphasise the importance we attach to
strong risk management processes.
Q. How does the Committee interact with the Board
and other Committees?
I report to the Board following each Committee meeting,
summarising the main matters reviewed by the Committee.
These regular reports allow the Directors to understand the
main issues under consideration, and, when relevant, to discuss
them in more detail with the Board.
The risk management function presents directly to the Board,
providing updates of the analysis of the Group’s key risks
and relevant developments in the risk management and
compliance processes.
We try to ensure that the review of risk by the Board is not
compartmentalised into isolated sessions, but is integrated into
everything that the Board considers. To this end, the operating
update provided by the CEO to the Board at each meeting covers
any significant materialised risks, and each proposal presented
to the Board incorporates an analysis of its impact on the
principal risks.
These processes have assisted the Board in carrying out a robust
assessment of the principal risks facing the Company, including
those that could threaten its business model, future performance,
solvency or liquidity, and to assess the acceptability of the
level of risks that arise from the Group’s operations and
development activities.
Each year the Board, with the support of the Committee, reviews
the effectiveness of the Group’s risk management and internal
control systems. The review covers all material controls, including
financial, operating and compliance controls. The 2019 review
confirmed the effectiveness of the Group’s risk management and
internal control systems with no significant failures or weaknesses
being identified.
We also have members of the Audit and Risk Committee
participating on the Nomination and Governance Committee, the
Projects Committee, the Remuneration and Talent Management
Committee and the Sustainability and Stakeholder Management
Committee, allowing close co-ordination between these Committees.
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Corporate Governance Sustainability and Stakeholder Management Committee report
“Understanding our stakeholders is critical
to our long-term success. We set ambitious
environmental, social and safety and
occupational health commitments that are
designed to take into account the interests
of our stakeholders.”
Vivianne Blanlot
Chair
2019 Membership and meeting attendance
Vivianne Blanlot (Chair)
Jorge Bande
Juan Claro
William Hayes
Number
attended
7/7
7/7
4/7
2/3
• Other regular attendees include the CEO, the Vice President
of Corporate Affairs and Sustainability and the Company Secretary.
• Sessions are also regularly attended by Directors who are not
Committee members.
• The Committee meets as necessary and at least twice per year.
Key responsibilities
• The Sustainability and Stakeholder Management
Committee supports the Board in the stewardship of the
Group’s environmental, social responsibility and safety and
health programmes and makes recommendations to the Board to
ensure that the considerations that are important for the Group’s
stakeholders are taken into account in the Board’s deliberations.
• The Committee reviews the Group’s framework of safety and
health, environmental, human rights and social policies, monitors
the Group’s performance in setting and meeting environmental,
social and safety and occupational health commitments and
provides guidance on the views and interests of stakeholders
in relation to potential projects and other business matters.
Key activities in 2019
Policies and
commitments
• Reviewed the Group’s
2018 Sustainability
Report.
• Reviewed the
sustainability aspects of
the Group’s expansion
projects at Los
Pelambres and
Centinela.
• Reviewed proposed
amendments to the
Committee’s terms
of reference.
Safety and health
Community relations
Environment
• Reviewed the Group’s 2020 Safety
• Reviewed the Group’s
and Occupational Health Plan.
• Monitored Group safety and
occupational health performance,
including high potential accidents.
• Reviewed reports issued by the
Independent Technical Review Board
appointed to advise Los Pelambres
and Centinela in the operation
of their tailings deposits.
• Reviewed the statement on the
stability of the Group’s tailings
dams and deposits.
• Reviewed the Group’s approach to
supporting the ICMM proposal to
develop a global tailings standard.
social management model.
• Reviewed public perception
survey results in connection
with the Group’s operations in
the north of Chile.
• Reviewed the community
relations programme for operating
companies in the north of Chile.
• Reviewed an evaluation of
the social programmes at
Los Pelambres.
• Monitored results from the Group’s
communications activities.
• Reviewed environmental
management reports.
• Reviewed the
Environmental Impact
Study for the Transport
division’s plans to make a
railway yard in the centre
of Antofagasta available
for other uses.
• Reviewed the
results of Centinela’s
implementation of the
Group’s environmental
management model.
• Reviewed the Transport
division’s environmental
commitments.
112
Antofagasta plc Annual Report 2019
MONITORING OUR
COMMITMENTS TO
STAKEHOLDERS
The Committee plays a vital role in monitoring the Group’s relationships with
stakeholders, ensuring that stakeholders’ interests are considered as part of the
Board’s deliberations.
Q. How does the Committee ensure that the Board takes
into account the views and interests of stakeholders?
Committee meetings provide a forum for detailed discussion of
many of the key issues that matter for our workforce (such as
safety and health), local communities and other stakeholders.
These issues are identified as part of the risk management
and community engagement processes and are brought to the
Committee by management. As Chair of the Committee, I report
to the Board following each Committee meeting, summarising
the main matters reviewed by the Committee.
Q. What were the key achievements overseen by the
Committee during the year?
Our first priority is the safety and health of our people and the
Group’s 2019 safety performance has been particularly pleasing.
Apart from there being no fatalities during the year, the Group has
also had its strongest safety performance against the measurable
indices that are used to track safety performance. This result
has followed the emphasis in recent years on the systematic
and thorough application of safety standards and high levels of
near-miss reporting. As the Group’s safety model matures further,
the Group is focusing on refining and further developing controls,
and measuring leading fatality risk indicators.
In 2018, Antofagasta launched a new Social Management
Model that has been implemented in 2019 in both the Mining and
Transport divisions. This model enhances social management and
introduces standards for engagement, management of initiatives,
management of social risks and impact measurement of projects
and programmes. The objective of the Social Management Model
was to have a single, integrated way of operating at Group level.
This enables the application of common engagement principles,
methodologies and practices, guarantees excellence in project
execution, measures impacts and has a social risk management
system that offers the quantity and quality of information needed
to make evidence-based decisions.
Q. How does the Committee ensure that the Group’s
tailings facilities are safe?
The stability and safety of tailings storage facilities are a key part
of the Committee’s and Board’s deliberations.
Chile’s location means that it experiences a significant amount of
seismic activity and as a consequence there are strict regulations
governing construction in the country. These regulations apply to
all mining and other construction, including the dams where tailings
are deposited. Chilean standards have prohibited the construction
of tailings using the upstream method, which is commonly used in
other countries but poses significant safety risks. Current Chilean
legislation also requires stability analysis of dam walls, a review of
safety measures and the development of detailed emergency plans
in the event of a major incident.
The Group’s governance structures are designed to encourage the
independent management and monitoring of our tailings facilities.
This includes internal teams with reporting lines that are not linked
to the mine operation teams and an independent tailings review
board that visits our tailings facilities regularly, assessing risks
and making recommendations to continue to ensure safety. The
Committee and the Board review these reports and challenge
management on any recommendations that are made. Further
information in relation to our tailings facilities, including the risks
and the governance measures in place, can be found on page 28.
Q. How are community relations managed throughout
the Group?
Dialogue with local communities is crucial for aligning views,
preventing disputes and addressing concerns. To strengthen such
dialogue, Antofagasta uses various engagement mechanisms,
including dialogue with individual members of the community,
round tables, community meetings, participatory environmental
monitoring with the community and community visits to the
Group’s operations, as well as communications in the media,
on websites and social networks.
Q. What are the Committee’s priorities in 2020?
Our number one priority continues to be the safety and health
of our employees and contractors. As noted above, 2019 saw
our strongest safety and health performance, including no fatal
accidents. We will strive to achieve a similar record in 2020. Our
safety and occupational health system is well-established and the
relevant management teams are working to further define, refine
and embed the controls that mitigate high potential accidents,
ensuring that they are well understood and that near-miss
accidents are thoroughly investigated with lessons learned
effectively communicated across the Group.
The Committee will continue to monitor the implementation of
the Group’s environmental management system by the Group’s
operating companies.
Work is underway to achieve our greenhouse gases target for
reduced carbon dioxide emissions. The Group has contracted
power supply agreements that will provide 65% of the Group’s
power requirements from renewable sources from 2022.
The Committee will continue to monitor the implementation of the
Group’s social programmes and the work done with communities
close to our operations in accordance with the Group’s Social
Management Model.
Vivianne Blanlot
Chair of the Sustainability and Stakeholder Management Committee
antofagasta.co.uk
113
Corporate Governance Projects Committee report
“The Committee oversees the full project
lifecycle, from concept to start of operations,
carefully assessing and robustly challenging
investment proposals prior to submission to
the Board, monitoring construction progress
and ensuring lessons learned are applied to
future proposals.”
Ollie Oliveira
Chair
2019 Membership and meeting attendance
Ollie Oliveira (Chair)
Michael Anglin1
Tim Baker
Jorge Bande
Ramón Jara
1 Michael Anglin joined the Committee from 1 September 2019.
• Other regular attendees include the CEO, the Vice President
of Projects and the Company Secretary.
• Sessions are also regularly attended by Directors who are not
Committee members.
• The Committee meets as necessary and at least twice per year.
Number
attended
6/6
2/2
6/6
6/6
4/6
Key responsibilities
• The Projects Committee reviews all aspects of projects to be
submitted for Board approval, highlighting key matters throughout
the project development lifecycle for the Board’s consideration
and making recommendations to management to ensure that all
projects submitted to the Board are aligned with the Group’s
strategy and risk appetite.
• The Committee adds an important level of governance and
control to the evaluation of the Group’s projects and plays a key
role in providing the Board with additional overview of the projects
portfolio. This includes overview of the establishment of project
development guidelines, which draw from best practice, industry
experience and lessons learned from other Group projects.
Key activities in 2019
Policies and commitments
Project reviews – Studies Phase
Project reviews – Execution Phase
• Reviewed the Group’s projects portfolio,
including budgets and schedules.
• Reviewed project development guidelines.
• Reviewed proposed amendments to the
Committee’s terms of reference.
• Reviewed progress in the execution of
the Los Pelambres Expansion project.
• Reviewed progress in the execution of
a sustaining capital expenditure project
for Centinela’s tailings deposit.
• Reviewed the results of the feasibility study
for Zaldívar’s Chloride Leaching project
and a proposal to proceed with execution.
• Reviewed preliminary results of Centinela’s
Second Concentrator project feasibility
study and a proposed 2019 work plan.
• Reviewed updated results of the pre-
feasibility study for the Twin Metals project,
incorporating a dry-stack tailings storage
facility and a proposal to submit the Mine
Plan of Operation to the relevant US
authorities.
• Reviewed the results of the feasibility study
to open the Esperanza Sur pit at Centinela.
• Reviewed a sustaining capital
expenditure project for Los Pelambres’
ore transport system.
114
Antofagasta plc Annual Report 2019
THOROUGH PROJECT REVIEW
The Committee supports the Board by ensuring that project development deliberations
follow approved guidelines and that project execution decisions create value for
the Company.
Q. What is the Projects Committee’s approval authority?
Zaldívar
The Committee is not responsible for approving projects – that is
for the Board to decide. Our role is to assist the Board by ensuring
that projects follow a standard, structured process with consistent
analysis, execution and evaluation practices. The Committee invites
management to consider different perspectives, ideas and
improvements to enhance the value of the Group’s projects,
enabling a focused discussion once the project is presented
to the Board.
Q. What tools does the Committee use?
The Committee provides guidance to each project manager, from
the early stages of project planning through to completion, to
ensure that policies, strategies and the Group’s standard Asset
Delivery System (ADS) implementation framework are applied.
ADS is a project management system whose processes and
practices are widely used in the mining industry. ADS defines
standards and common criteria, including governance by
a steering committee, functional quality assurance reviews
and risk management.
Q. What were the Committee’s key activities in 2019?
Centinela
The Committee reviewed progress on the Centinela Second
Concentrator project’s feasibility study, including the 2019 work
plan and budget which included further proposals in relation to
detailed engineering and trade-off analysis.
Twin Metals
The Committee reviewed the updated pre-feasibility study for the
Twin Metals project, outcomes of the functional quality assurance
review, technical permitting processes and matters, detailed
engineering, project execution plan and project risks. During the
course of the year, the Committee reviewed a proposal to change
the project design to incorporate a dry-stack tailings storage facility
in place of the originally proposed conventional downstream
tailings dam.
These activities aided the Board in its approval of a proposal to
submit the Mine Plan of Operations and associated documents
(MPO) for the Twin Metals project to authorities in the USA to
commence the environmental review and permitting phase for
the project and approval of the 2019 work plan and budget, as
explained in more detail on page 66.
The Committee monitored various aspects of Zaldívar’s Chloride
Leaching project, including the outcomes of the functional quality
assurance review process, detailed engineering progress and
project sensitivities.
These activities aided the Board in its approval of construction of
the Zaldívar Chloride Leach project, as explained in more detail on
page 66.
Los Pelambres
The Committee reviewed progress made on the execution of the
Los Pelambres Expansion project. This included monitoring key
risks and mitigations, and performance against budget, as well
as the interaction between the activities of the project team and
the operating team at Los Pelambres. The Committee met with
key members of the EPC contractor team to understand the
innovations being deployed and associated benefits and risks.
The Committee also reviewed conceptual studies in relation to
a possible future phase 2 expansion.
Q. What are the Committee’s priorities in 2020?
• To oversee progress in the construction of the Los Pelambres
Expansion project, Zaldívar’s Chloride Leach project and the
Esperanza Sur pit project.
• To review proposals in relation to the Centinela Second
Concentrator project.
• To oversee progress following submission of the Mine Plan
of Operations for the Twin Metals project.
• To monitor the progress of projects at Los Pelambres,
Centinela and Zaldívar.
• To review lessons learned from the Centinela Molybdenum
Plant project.
• To continue to review and further enhance the Group’s ADS
framework and project development guidelines.
Ollie Oliveira
Chair of the Projects Committee
antofagasta.co.uk
115
Corporate Governance Remuneration and Talent Management Committee report
“The Committee ensures that conditions for
the wider workforce are taken into account
when setting incentives and determining
the remuneration of the CEO and his senior
management team.”
Francisca Castro
Chair
2019 Membership and meeting attendance
Francisca Castro (Chair1)
Michael Anglin
Vivianne Blanlot
Tim Baker
Number
attended
7/7
1/12
7/7
7/7
1. Tim Baker served as Chair until 1 May 2019. Francisca Castro first joined the
Committee on 1 January 2017.
2. Michael Anglin joined the Committee from 1 September 2019.
• Other regular attendees include the CEO, the Vice President
of Human Resources and the Company Secretary.
• At least one Committee member serves on each of the other
Board Committees which allows the Committee to take into
account strategic priorities and the views of all stakeholders
in its deliberations.
• The Committee meets as necessary and at least twice per year.
• All Committee members are independent.
Key responsibilities
• The Remuneration and Talent Management Committee ensures
• The Committee actively participates in the Group’s talent
that the Group’s remuneration arrangements support the effective
implementation of the Group’s strategy and enable the recruitment,
motivation, reward and retention of talent.
management strategy, including the review, consideration and
implementation of succession plans for members of the Executive
Committee (excluding the CEO).
• The Committee is responsible for setting the remuneration for
the Chairman, Directors and the CEO and for monitoring the
compensation strategy, level, structure and outcomes for
Executive Committee members.
• The Committee also reviews workforce remuneration and related
policies, including the diversity and inclusion policy, and the
alignment of incentives and rewards with the Group’s culture.
Key activities in 2019
Governance
• Reviewed the Company’s application
of the 2018 UK Corporate
Governance Code.
• Reviewed the Remuneration Policy
which will be put to shareholders for
approval at the Company’s 2020 AGM.
• Reviewed Gender Pay Gap and
CEO Pay Ratio figures for the Group
(although not mandatory for the
Group to disclose due to UK-based
employee numbers).
• Reviewed feedback from shareholders
on the Group’s remuneration
arrangements and proposed
Remuneration Policy in advance
of the 2020 AGM.
• Reviewed proposed amendments to
the Committee’s terms of reference.
• Reviewed proxy voting advisory
reports and shareholder feedback
prior to the 2019 AGM.
Directors’
remuneration
• Evaluated
Chairman,
Director and
Committee fees,
recommending
no change.
• Reviewed Ramón
Jara’s services
contract with
Antofagasta
Minerals SA.
• Reviewed the
2018 Directors’
Remuneration
Report prior to
its approval by
the Board and
subsequent
approval by
shareholders at
the 2019 AGM.
Executive remuneration
Human resources and policy
• Evaluated the CEO’s performance
• Reviewed the 2019 Human
and determined the variable
compensation payable to
him under the 2018 Annual
Bonus Plan.
• Reviewed LTIP eligibility,
participants and criteria and
approved the grant of the
2019 awards.
• Reviewed performance for LTIP
awards granted in 2016 and
approved the vesting level.
• Reviewed Group performance
against the 2018 Annual Bonus
Plan performance metrics and
reviewed the metrics to apply
to the 2019 Annual Bonus Plan.
• Reviewed and approved the
individual performance of
Executive Committee members
under the 2018 Annual
Bonus Plan.
Resources plan.
• Reviewed progress with the
implementation of the Diversity
and Inclusion Strategy.
• Monitored collective bargaining
negotiations at Los Pelambres,
Antucoya and Zaldívar.
• Approved implementation of a
new Total Rewards Programme to
ensure that the Group’s total rewards
proposition remains competitive,
motivating and appropriately aligned
with the Group’s strategy, vision and
risk appetite.
• Reviewed a remuneration proposal
in connection with the Group’s
innovation programme.
• Reviewed the Group’s Health and
Life insurance policy and approved
its renewal.
Talent management and succession planning
• Reviewed the Group’s talent management strategy and
• Approved the implementation of succession plans and revisions
succession plans for members of the Executive Committee.
to the composition of the Executive Committee and the appointment
of new directors in the Group’s operating companies.
116
Antofagasta plc Annual Report 2019
Committee Chair’s introduction
ALIGNING PAY WITH
STRATEGY TO ACHIEVE LONG-
TERM SUSTAINABLE SUCCESS
Dear Shareholders,
I am delighted to present the 2020 Directors’ and CEO Remuneration
Policy and the 2019 Directors’ and CEO Remuneration Report.
2020 Directors’ and CEO Remuneration Policy
The 2020 Directors’ and CEO Remuneration Policy is set out on
pages 120 to 125 and is being presented to shareholders for
approval at the 2020 Annual General Meeting. Subject to shareholder
approval, this policy will supersede the Directors’ Remuneration
Policy that was approved at the 2017 Annual General Meeting.
I met with the Company’s major shareholders and proxy advisers
during the year to discuss the proposed Policy. It is clear that,
above all else, we do not overpay our CEO relative to our peers and
I was pleased to engage in constructive discussions with investors,
particularly in relation to our LTIP. It was also valuable to understand
investors’ perspectives on the appropriateness and balance of
performance KPIs that should be included in the Annual Bonus Plan
and the LTIP. This feedback was reported to, and discussed in detail
with, the Committee and we will continue to take these perspectives
into account as we apply the Policy in the coming years.
Following the implementation of the European Shareholders’
Rights Directive II during the year, the 2020 Policy will apply to
the Company’s CEO for the first time. Although this requirement is
new, the Policy is consistent with the pay practices that have been
in place for the CEO and disclosed voluntarily for many years.
The CEO receives a base salary and benefits in line with market
conditions in Chile, taking into consideration international factors, as
appropriate. He participates in the Annual Bonus Plan and LTIP which
are designed to align remuneration with overall Group performance
and promote outcomes that are for the long-term benefit of the Group.
Market conditions and remuneration structures available in Chile
are a central consideration when setting the CEO’s remuneration.
While the Committee has carefully considered some of the features
of variable remuneration that have evolved for UK-listed companies in
recent years, we continue to maintain the structure we have applied
for many years which includes the grant of a combination of restricted
and performance “phantom share” awards under the LTIP and the
delivery of both the LTIP and annual bonus in cash. Our variable
remuneration arrangements are simple, understandable and work
effectively for our circumstances.
2019 Directors’ and CEO Remuneration Report
As in previous years, although our CEO is not a Director, we
voluntarily disclose his remuneration as if he were and provide
details on the Group’s executive pay structures to allow shareholders
to understand how these structures support strategy and promote
long-term sustainable success. These disclosures will become
mandatory from next year, when we report on how we have
applied the 2020 Directors’ and CEO Remuneration Policy in 2020.
As set out earlier in the Annual Report, the Group has had a very
strong year with record copper production and the Group’s strongest
safety performance to date.
We are committed to Developing Mining for a Better Future and our
vision is to continue being an international mining company based in
Chile, focused on copper and its by-products, known for its operating
efficiency, creation of sustainable value, high profitability and as a
preferred partner in the global mining industry.
Echoing the comments of our Chairman and CEO, the Group’s
performance this year has been particularly impressive given
the challenges associated with the civil unrest in Chile and lower
than forecast copper price during the year owing to the global trade
uncertainties. I believe our management team has worked extremely
hard to deliver against this challenge and can take pride in the results
for the year.
The requirements of the revised UK Corporate Governance Code
have provided the Committee with an opportunity to consider whether
our approach to executive pay remains appropriate for our business
and in line with regulatory and key stakeholder expectations and we
explain why we believe this to be the case throughout this report.
antofagasta.co.uk
117
Corporate Governance Committee Chair’s introduction continued
Performance and incentive outcomes for the year
As well as recording its strongest safety performance to date, the Group also achieved outstanding environmental and social performance
results during the year which led to these elements of the annual bonus paying out at maximum. Furthermore, the CEO has demonstrated
commitment and perseverance in delivering against challenging individual objectives which are described on page 132. An illustration of the
outcomes is shown below.
Group annual bonus outcomes (% of maximum)
The annual bonus payable to the CEO and members of the Executive Committee was 70% attributable to Group annual bonus outcomes and
30% attributable to personal performance according to measures and targets set at the beginning of the year. The overall Group annual bonus
score was 75% of maximum, taking into account the Group annual bonus outcomes as shown below and the adjustments applied by the
Committee explained on page 119.
Link to strategy
Objective
Threshold (0% vesting)
Target (50% vesting)
Maximum (100% vesting)
Link to strategy
People
Safety &
sustainability
Competitiveness
Growth
Innovation
EBITDA – Mining division (15%)
Copper production (25%)
Costs (20%)
Growth projects execution (15%)
Exploration programme (5%)
Safety (5%)
People (5%)
Environmental performance (5%)
Social performance (5%)
+ See page 131 for more information
CEO’s bonus outcome (% of maximum)
The CEO’s 2019 bonus outcome was 82.5% of maximum.
70%
50%
50%
50%
85%
85%
100%
100%
100%
Objective
Threshold (0% vesting)
Target (50% vesting)
Maximum (100% vesting)
Overall Group annual bonus score (70%)
Individual bonus score (30%)
CEO’s annual bonus outcome
+ See page 131 and 132 for more information
75%
82.5%
100%
Forecast LTIP Performance Award outcomes (% of maximum)
The Performance Awards granted under the LTIP in 2017 will vest following the publication of the Group’s full-year results. It is currently
anticipated that these will pay out at 77% of the maximum based on exceptional EBITDA, mineral resources increase and projects, development
and sustainability performance over the three-year performance period. This is also reflected in target anticipated performance against our
relative total shareholder return KPI. An illustration of the anticipated outcomes is shown below.
Link to strategy
Objective
Threshold (0% vesting)
Target (57% vesting)
Maximum (100% vesting)
Relative total shareholder return (35%)
33%
EBITDA (20%)
Mineral resources increase (15%)
Projects, development and sustainability (30%)
100%
100%
100%
+ See page 135 for more information
118
Antofagasta plc Annual Report 2019
Committee decisions on outcomes
Responsibility for safety and health is one of the Group’s core
values and in 2016 the Committee implemented an automatic 15%
adjustment to the Group’s performance score under the Annual
Bonus Plan (downwards if there is a fatality during the year, and
upwards if there are no fatalities during the year) to further align the
Group’s incentives with this core value and our goal of zero fatalities.
As there were no fatalities during the year, the Committee was
delighted to endorse the automatic 15% upward adjustment for
the Group performance score under the 2019 Annual Bonus Plan.
As mentioned by the Chairman, the Group also faced unforeseen
civil unrest in Chile during the year. The Board believes that the
Group’s employees, led by the CEO, handled these circumstances
in an exceptional manner, exercising discretion to increase the
formulaic outcome of the Group’s performance score under the
Annual Bonus Plan from 73.5% to 75% of the maximum. Discretion
was also applied to adjust the performance scores for each of the
Group’s operating companies and in the cases of Los Pelambres and
Centinela, discretion was also applied to decrease performance score
outcomes for specific areas of performance that were not included
within the scorecard KPIs.
The anticipated level of vesting of the LTIP is considered
appropriate in light of the Group’s performance over the
three-year performance period.
+ See page 131 for more information
Single total figure outcome
The chart below shows the 2019 single figure of remuneration for the
CEO compared with the expected level of remuneration for the CEO
for the year.
$3.43m
45%
$3.15m
41%
39%
36%
$2.73m
39%
37%
$2.16m
42%
28%
$0.65m
100%
30%
21%
19%
24%
Minimum
Target
Maximum
Max + 50%
share price
growth
Actual
FIXED PAY
ANNUAL BONUS
LTIP
Pay for performance
We are committed to ensuring that the pay delivered to our CEO
aligns with the performance of the Company and reflects the
achievement against our strategic goals.
The graph below shows the Company’s share price performance
over the last 10 years, compared with the performance of the FTSE
All-Share Index and the Euromoney Global Mining Index, measured
by total shareholder return.
500
400
300
200
100
0
Dec 9
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
ANTOFAGASTA
FTSE ALL SHARE
EUROMONEY GLOBAL MINING
+ See page 129 for more information
The Company’s share price performance has outperformed the
Euromoney Global Mining Index over the last 10 years, including the
years since our CEO has been in place, and we are comfortable that
the CEO is incentivised to work towards the Group’s long-term
sustainable success.
Shareholders
It is critical that the remuneration of our CEO is aligned with the
return delivered to shareholders. We align the pay of our CEO in two
ways. Our LTIP is delivered in phantom shares and the Performance
Awards are subject to a three-year vesting period. In addition, relative
total shareholder return is a core performance measure for our
LTIP which means that our CEO is rewarded based on relative
outperformance for shareholders.
Corporate governance
At the start of the year, the Committee agreed that the publication
of the 2018 Code provided an opportunity to review the Committee’s
terms of reference. The Committee has always had a broad remit,
covering the Executive Committee and the key HR policies for the
Group. Nevertheless, this provided a valuable opportunity to further
align the remit of the Committee with the new requirements of the
2018 Code. The terms of reference can be found on our website.
I hope that this report demonstrates the importance that we place on
transparency of the decisions we make and how they are arrived at
and I look forward to meeting shareholders at our AGM where I will
be available to answer questions.
As can be seen, the majority of the CEO’s total remuneration package
is variable pay, the outcome of which depends on the achievement of
both financial and non-financial performance targets.
Francisca Castro
Chair of the Remuneration and Talent Management Committee
antofagasta.co.uk
119
Corporate Governance 2020 Directors’ and CEO Remuneration Policy
2020 DIRECTORS’ AND
CEO REMUNERATION POLICY
The Committee presents the 2020 Directors’ and CEO Remuneration Policy which
will be put to a binding vote of shareholders at the Company’s 2020 Annual
General Meeting.
Subject to shareholder approval, this Policy will take effect from the
2020 AGM with the intention that it will supersede the remuneration
policy approved by shareholders at the 2017 AGM. Once the Policy
is approved, the Group will only make remuneration payments to
Directors and the CEO, or payments for loss of office, if the payment
is in line with the Policy. If the Committee is required, or wishes, to
change the Policy within this period, it will submit a revised Policy
for shareholders to approve.
Policy scope
There has been no change to the composition of the Board of
Directors this year which continues to comprise only Non-Executive
Directors. The Board has considered the pros and cons of having
executives on the Board and continues to be of the view that the
existing structure is effective in ensuring that the Board maintains
objectivity and independence from management. In addition, the
structure is appropriate since the CEO, Executive Committee and
most senior managers are based in Chile where company law
prohibits CEOs of public companies from serving as Directors of
those companies.
While historically not required, in previous years the Company has
embraced the spirit of the UK remuneration reporting regulations and
the UK Corporate Governance Code by voluntarily reporting annually
on the remuneration and incentive structure for the CEO as if he
were a Director. This has been done on a voluntary basis for a
number of years to invite feedback from our various stakeholders
and we are pleased with the strong level of support we have
received on our Directors’ Remuneration Report each year. Given
the implementation of the European Shareholders’ Rights Directive II
and subsequent changes to regulations for the first time in the UK,
the 2020 Policy is required to cover payments to the CEO even
though he is not a Director. In line with the regulations, this Policy
also covers the Non-Executive Directors of the Company.
The Company’s policy is to ensure that we pay fairly with regard to
the responsibilities undertaken and to consider comparable pay levels
and structures in the UK, Chile and the international mining industry.
The Policy being tabled for shareholder approval is consistent with
pay practices that have been in place, and disclosed voluntarily by
the CEO, for several years. The Committee is of the view that the
approach to pay for the CEO and Non-Executive Directors is
aligned to the strategy, and is effective and well understood.
Policy table for the CEO
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Both individual and Group
performance are considered
when determining base salaries
and any increases.
Base salary
To retain and
attract high-calibre
executives by offering
globally competitive
salary levels.
Typically, base salaries will be
reviewed annually.
Base salaries are usually
paid in local currency but can
be paid in any currency to
attract or retain high-calibre
executives.
Base salary levels and any
increases take into account:
• the individual’s role,
performance and
experience;
• business performance, the
external environment and
cost to the Company;
• salary increases for the
wider workforce; and
• salary levels for
comparable roles
at relevant comparators.
There is no prescribed maximum although
salary increases will take into account
those of the wider workforce. Chilean labour
contracts are adjusted periodically to reflect
Chilean inflation and adjustments may be
made under any other labour contracts.
Increases may be made above this
level where the Committee considers it
appropriate including (but not limited to):
• a significant increase in the scale, scope,
market comparability or responsibilities
of the role; and
• where an individual has been appointed
on a salary lower than market levels,
increases above those of the wider
workforce may be made to recognise
experience gained and performance
in the role.
Such increases will be explained in the
relevant Annual Report.
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Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Benefits typically include
maintenance of insurance
policies including life and
health insurance. Where
appropriate, other benefits
may be offered including, but
not limited to, car allowance,
pension contribution, and
allowances for relocation.
The bonus is earned based on
the achievement of one-year
performance targets and is
delivered in cash.
Benefits
To provide market
competitive benefits.
Annual Bonus Plan
To focus on the
delivery of annual
financial and non-
financial targets
designed to align
remuneration with the
Group’s strategy and
create a platform for
future sustainable
performance.
Benefits are reviewed
periodically and may vary
by role.
There is no overall maximum.
None
Maximum of 200% of salary.
The bonus is based on a combination of financial,
operational, strategic and individual measures.
Performance measures and weightings are
reviewed annually to ensure they continue to
support the key strategic priorities. At least
50% of the bonus will be based on the Group’s
financial, operational and strategic performance.
Other metrics include, but are not limited to
business development, organisational capabilities,
sustainability and safety.
Currently, an automatic adjustment applies to
the Group’s performance score under the Annual
Bonus Plan (downwards if there is a fatality
during the year, and upwards if there is no fatality
during the year) to further align the Group’s
incentives with the core value of safety and our
goal of zero fatalities. The Committee will consider
whether this should continue to apply on an
annual basis, taking into account the Group’s
safety culture and performance.
The bonus starts accruing at threshold
performance (0% payout), with a payout of
50% of the maximum opportunity when target
or mid-point performance is achieved.
The Committee retains discretion to adjust the
bonus outcomes to ensure they reflect underlying
business performance, the impact of the commodity
price and any other relevant factors to ensure an
appropriate payout.
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Corporate Governance
2020 Directors’ and CEO Remuneration Policy continued
Policy table for the CEO continued
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Long-Term Incentive Plan (LTIP)
To align with
the shareholders’
experience and
focus on long-term,
sustainable
performance.
Awards under the LTIP will
typically comprise:
• Performance Awards –
performance typically measured
over a three-year period with
vesting thereafter, comprising
at least 70% of the total
LTIP awards.
• Restricted Awards – typically
vest one-third each year over
a three-year period following
grant, comprising a maximum of
30% of the total LTIP awards.
Due to the tax regime in Chile,
awards will usually be made in
the form of a conditional right
to receive a cash payment by
reference to the value of a
specified number of the Company’s
shares (phantom shares).
Malus provisions may be applied
in exceptional circumstances as
detailed in the notes to this table.
Maximum of 200%
of salary with
a maximum of
325% of salary
in exceptional
circumstances.
Performance Awards will be based on a combination of
financial, shareholder return and strategic performance
measures aligned with the business priorities, usually
measured over a three-year period.
The targets, measures and weightings will be determined
by the Committee annually. Typically, the financial and total
shareholder return measures are at least 50% of the
Performance Awards.
Performance Awards begin vesting at threshold
performance, the amount depending on the performance
metrics chosen. It is intended that this level across all
metrics should be 25% or less at threshold. The goals for
each performance criteria are designed so that the minimum
level of performance delivers 0% pay-out and at target or
mid-point performance represent an aggregate average of
approximately 50% of the maximum opportunity.
No performance conditions other than continued
employment usually apply to Restricted Awards.
The Committee retains discretion to adjust the payments to
ensure they reflect underlying business performance, the
impact of the commodity price and any other relevant
factors to ensure an appropriate payout.
Notes to the Policy table
Changes from last approved policy
This Policy will apply to the Company’s CEO for the first time. It is
consistent with the pay practices that have been in place for the CEO
and disclosed voluntarily for many years.
Operation of incentive plans
The incentive plans will always be operated within the Policy and in
accordance with the relevant plan rules. There are several areas
over which the Committee retains flexibility as detailed below:
• who participates in each plan;
• the timing and size of an award and/or payment subject to
Policy limits;
• the performance measures, weightings and targets that will apply
each year and any adjustments thereof;
• treatment of awards in the event of a change of control,
restructuring or other corporate event;
• treatment of leavers; and
• amendments to the plan rules in accordance with their terms.
In the case of the CEO, any use of discretion by the Committee will
be disclosed in the relevant Annual Report and may be subject to
consultation with the Company’s shareholders.
Performance measures and targets
Awards under both the Annual Bonus Plan and a significant proportion
of awards under the LTIP are subject to financial and non-financial
performance metrics determined annually by the Committee.
The financial metrics align participants with the Group’s strategy
and the sustainable creation of value for our shareholders over
the long term.
The non-financial metrics measure the development of important
projects and exploration activities that are essential for future
mining activities. Other metrics may relate to safety, people and
environmental and social targets, which ensure that we act in a way
that preserves our social licence to operate and takes into account
the interests of all the Group’s stakeholders.
Targets are set taking into account a number of internal and
external factors including implementation of the Group’s strategy and
delivering growth in line with budgeted and forecast expectations.
Restricted Awards are not subject to performance conditions as it
is appropriate given market conditions in Chile for part of variable
remuneration to be subject to a time condition and continued
employment only.
Malus and clawback
Malus provisions apply in exceptional circumstances, including:
If the regulations and practice change in Chile to allow payment in
shares without adverse consequences, and this practice is seen as
desirable by the Committee, the Company reserves the right to make
payment of the incentive plans to some or all participants in shares
rather than cash. Any change will be disclosed in the Annual Report.
• Actions by a participant that, in the reasonable opinion of the
Committee, amount to gross misconduct that has or may have a
material effect on the value or reputation of the Company or any
of its subsidiaries.
• A materially adverse error in the consolidated financial statements
of the Group during the performance period.
• Any reasonable circumstances that the Committee determines in
good faith to have resulted in an unfair benefit to the participant.
Clawback has not been introduced due to uncertainty around its legal
validity in Chile.
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Legacy arrangements
Payments may be made to satisfy commitments made prior to the
approval of this Policy. This may include, for example, payments
made to satisfy legacy arrangements agreed prior to an employee
(and not in contemplation of) being promoted to the position of
CEO or the Board of Directors. All outstanding obligations may
be honoured, and payment will be permitted under this Policy.
Minor amendments
The Committee may make minor amendments to the Policy (for
example for tax, regulatory, exchange control or administrative
purposes) without obtaining shareholder approval.
Difference in CEO and employee remuneration policy
Apart from participation in the LTIP, which is limited to the Executive
Committee and certain senior employees, there are no differences
between the Policy as it applies to the CEO and the remuneration
policy for employees generally.
Illustrations of application of Policy
The graph below provides estimates of the potential remuneration
opportunity for the CEO under three different performance scenarios:
‘Minimum’, ‘Target’ and ‘Maximum’. In line with the reporting
regulations, a scenario assuming 50% share price growth over the
three-year Performance Awards performance period is also shown
below (for the maximum performance scenario). Because the CEO is
paid in Chilean pesos and reporting is in US dollars at the date of this
Policy, this reflects the prevailing exchange rate as at the date of this
Policy. The assumptions used for these charts are set out in the table
below.
CEO total remuneration
$2.01m
39%
31%
31%
$0.64m
100%
$3.50m
47%
$3.07m
40%
40%
40%
20%
18%
Minimum
Target
Maximum
Max + 50% share
price growth
FIXED PAY
ANNUAL BONUS
LTIP
Minimum
performance
Target
performance
• Fixed remuneration (salary and benefits) only.
• No payout under the annual bonus or LTIP.
• Fixed remuneration.
• 50% of the maximum payout under the
Maximum
performance
Maximum
performance
+ 50% share
price growth
annual bonus.
• Vesting under the LTIP assumed as follows:
50% of Performance Awards, 100% of
Restricted Awards.
• Fixed remuneration.
• 100% of the maximum payout under the
annual bonus.
• Maximum vesting under the LTIP assumed as
follows: 100% of Performance Awards, 100%
of Restricted Awards.
• Fixed remuneration.
• 100% of the maximum payout under the
annual bonus.
• Maximum vesting under the LTIP assumed as
follows: 100% of Performance Awards, 100%
of Restricted Awards. 50% assumed share
price growth for Performance Awards over
three-year performance period.
Other than for the scenario ‘Maximum + 50% share price growth’,
no share price growth has been assumed in the charts above. Also,
no dividend assumptions have been included in the charts above.
Service contracts and letters of appointment
All Directors’ letters of appointment and the CEO’s service contract
are available for inspection at the Company’s registered office
during normal business hours and at the Annual General Meeting
(for 15 minutes prior to and during the meeting).
CEO
Iván Arriagada is employed under a contract of employment with
Antofagasta Minerals SA, a subsidiary of the Company. His contract
is governed by Chilean labour law. It does not have a fixed term
and can be terminated by either party on 30 days’ notice in writing.
Except in the case of termination for breach of contract or misconduct
under the Chilean Labour Code, Mr Arriagada is entitled to receive
one month’s base salary for each year of service on termination,
otherwise no other compensation or benefits are payable on
termination of his employment.
Under his employment contract Mr Arriagada is entitled to
20 working days’ paid holiday per year.
Because Mr Arriagada’s salary is paid in Chilean pesos, it is subject
to exchange rate movements when reported in US dollars.
Chairman and Non-Executive Directors
Each Non-Executive Director has a letter of appointment from
the Company. The Company has a policy of putting all Directors
forward for re-election at each AGM, in accordance with the UK
Corporate Governance Code. Under the terms of the letters, if a
majority of shareholders do not confirm a Director’s appointment,
the appointment will terminate with immediate effect. In other
circumstances, the appointment may be terminated by either party
on one month’s written notice. The letters require the Directors
to undertake that they have sufficient time to discharge
their responsibilities.
There is a contract between Antofagasta Minerals and Asesorías
Ramón F Jara Ltda dated 2 November 2004 for the provision of
advisory services by Ramón Jara. This contract does not have
an expiry date but may be terminated by either party on one
month’s notice.
No other Director is party to a service contract with the Group.
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Corporate Governance 2020 Directors’ and CEO Remuneration Policy continued
Policy on payments for loss of office
The CEO’s contract can be terminated by either party on 30 days’ notice in writing. Except in the case of termination for breach of contract or
misconduct under the Chilean Labour Code, the CEO is entitled to receive one month’s base salary for each year of service on termination.
The treatment of any outstanding incentive awards will be determined based on the relevant plan rules or as summarised in the table below:
Annual bonus
LTIP
If employment lasts for at least six months of the financial year, leavers are entitled to be considered for a bonus
depending on whether performance conditions have been met and any payment will usually be pro-rated for the
period of employment, with Committee discretion to treat otherwise. If an individual’s employment does not last for at
least six months, leavers will not typically be entitled to be considered for a bonus, with Committee discretion to treat
them otherwise.
The default treatment is that any outstanding Performance Awards lapse on cessation of employment. However, if an
individual is considered a good leaver, awards will usually vest subject to the satisfaction of the relevant performance
criteria (if applicable) and, ordinarily, on a time pro-rated basis with the Committee’s discretion to treat them
otherwise. The balance of the awards will lapse.
Corporate event/
change in control
Restricted Awards will usually lapse on cessation of employment unless the Committee determines otherwise.
In the event of a change of control or winding up of the Company, LTIP awards will vest subject to the extent to
which the performance conditions have been satisfied (if applicable) and time pro-rating, unless the Committee
decides otherwise.
In the event of an internal reorganisation, LTIP awards may (with consent from any acquiring company) be replaced
by equivalent awards. Alternatively, the Committee may decide that LTIP awards will vest as in the case of a change
of control described above.
In the event of a demerger, special dividend or other corporate event that will materially impact the share price,
the Committee may, at its discretion, allow LTIP awards to vest on the same basis as for a change of control as
described above.
The Committee reserves the right to make other payments in connection with the CEO’s cessation of employment. Any such payment may
include paying a reasonable level of fees for outplacement assistance and/or the CEO’s legal or professional advice fees in connection with
his cessation of employment.
The letters of appointment for the Non-Executive Directors do not provide for any compensation for loss of office beyond payments in lieu of
notice, and therefore the maximum amount payable upon termination of these letters is limited to one month’s payment.
Policy on recruitment
When determining remuneration on recruitment of a CEO, the Committee will take into account an individual’s role, experience and relevant data
points such as market data and internal comparisons. The Committee is mindful to pay no more than is necessary to facilitate recruitment of the
right talent. On appointment, remuneration will generally be in line with the Policy and the maximum aggregate value of incentives (excluding
buyouts) will be no more than the maximums in the Policy table. The approach on recruitment is summarised below:
Element
Policy and operation
Base salary
Benefits
Annual
bonus
LTIP
Buyout
awards
Base salary will be determined with reference to the individual’s role and responsibilities, experience and skills, relevant
market data and internal comparisons. Salaries may be set at a level lower than the prevailing market rate with increases
made at a higher than usual rate as the individual gains experience and performs in the role.
Benefits in line with the Policy, including relocation benefits if appropriate.
The structure described in the Policy table will normally apply for new appointees with the relevant maximum typically
pro-rated to reflect service during the year. For the first year of appointment, the Committee may determine that the annual
bonus may be subject to modified terms considered appropriate in the context of the recruitment.
LTIP awards will normally be on the same terms as described in the Policy table although the Committee does have the
flexibility to make changes in the first year of employment, including the performance measures applied. Any change will
be fully disclosed in the relevant Directors’ and CEO Remuneration Report.
The Committee recognises that it may be necessary, in certain circumstances, to provide compensation for amounts
forfeited from a previous employer. Generally, any buyout awards will be made on a like-for-like basis in terms of
commercial value, form, application of performance conditions and timing of receipt to ensure they reflect the incentives
they are replacing.
The approach for an internal promotion will be consistent with the policy outlined above. Where an individual has contractual commitments or
outstanding awards made prior to their promotion, the Company will honour these legacy arrangements.
For interim positions a cash supplement may be paid rather than salary (for example a Non-Executive Director taking on an executive function
on a short-term basis).
On appointment of a new Non-Executive Director or Chairman, the information set out in the Policy table will apply.
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Antofagasta plc Annual Report 2019
Policy table for the Chairman and Non-Executive Directors
Purpose and link to strategy
Operation
Fees
To attract and retain high calibre,
experienced Directors by offering
globally competitive fee levels.
The Chairman receives an annual base fee.
Non-Executive Directors receive an annual base fee.
Directors may receive further fees for additional
responsibilities including:
• Senior Independent Director
• Board Committee Chair
• Committee member
Separate base fees are paid for services to the Antofagasta
Minerals Board and for serving as a Director on, or chairing,
any subsidiary or joint-venture company.
Ramon Jara also receives a base fee (adjusted for Chilean
inflation) for advisory services provided to Antofagasta
Minerals pursuant to his service agreement.
Fees are subject to review taking into account time
commitment, responsibilities and market practice.
Maximum opportunity
Performance
measures
None
Total fees paid will
be within the limit
stated in the Articles
of Association.
Changes may be
made to Chilean-
peso-denominated
fees to take
into account
Chilean inflation.
Benefits
To provide appropriate benefits and
reimburse appropriate expenses that
are incurred in the performance of
duties of the Directors.
Non-Executive Directors are entitled to be reimbursed for
reasonable expenses incurred during the performance of
their duties, including any tax due.
Benefits may include the provision of life, accident and
health insurance, professional advice and certain other
minor benefits including occasional spousal travel in
connection with the business.
None
Benefits set at a level
appropriate to the
individual’s role and
circumstance. The
maximum opportunity
will depend on the type
of benefit and cost
of its provision.
In line with the UK Corporate Governance Code, Non-Executive Directors do not participate in incentive or share schemes or receive a
pension provision.
Consideration of employment conditions elsewhere in
the Group
When the Committee reviews remuneration of the Directors and CEO,
it takes into consideration pay conditions across the Group. This is set
in the context of different working environments and geographies
and therefore is not a mechanical process. The Committee does
not currently use any other remuneration comparison metrics when
determining the quantum and structure of Director remuneration
and does not seek employee views. The Directors’ and CEO’s
Remuneration Policy is well understood by employees and employees
are aware that the CEO’s Remuneration Policy is substantially similar
to their own remuneration policy. The Chair of the Remuneration
and Talent Management Committee has not therefore explained
this to employees.
During 2019 the Antofagasta HR team and management undertook
a review of the reward and remuneration structure of the business
with a view to reviewing market pressures and business interactions
and whether the current processes and structures should change in
order to better meet the needs of the business. As part of the review
the HR team sought engagement with employee stakeholders,
through leadership and senior management interviews, and focus
groups with employees from across the business ensuring a full
range of views from our diverse employees were represented.
Additionally, with its advisers, the Group reviewed market practice
and considered the developing environment for talent and the needs
of the business before making proposals to the Remuneration and
Talent Management Committee across a number of areas impacting
the reward and talent proposition for employees. The proposals
sought to continue to maximise value and increase the overall
employee experience and ensure that the Group remains a world
class employer attracting and retaining the best mining talent
to succeed.
Consideration of shareholder views
The Company maintains a dialogue with institutional shareholders and
sell-side analysts, as well as potential shareholders. This communication
is managed by the Investor Relations team and includes a formal
programme of presentations to update institutional shareholders and
analysts on developments in the Group following the announcement
of the half-year and full-year results.
In addition, as part of the review of Director and CEO remuneration
ahead of a new Policy being tabled for approval at the 2020 AGM,
a consultation exercise was undertaken by the Chair of the
Remuneration and Talent Management Committee with top
shareholders and proxy agencies. The Company values the feedback
received during this process and it was taken into account when
determining the final Policy to be approved by shareholders.
The Board receives regular summaries and feedback in respect
of the meetings held as part of the investor relations programme,
as well as receiving research analysts’ reports on the Company.
The Senior Independent Director meets with shareholders regularly
and the Chairman and the Chair of the Remuneration and Talent
Management Committee are also regularly available to meet
shareholders to discuss matters of importance, including the Group’s
remuneration structures. The Company’s Annual General Meeting is
also used as an opportunity to communicate with both institutional
and private shareholders. This ongoing dialogue allows us to respond
to the needs and concerns of all shareholders throughout the year
and the Directors’ and CEO’s pay arrangements will continue to be
reviewed each year in line with the Policy, taking into account the
views of all the Company’s shareholders.
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Corporate Governance
2019 Directors’ and CEO Remuneration Report
2019 DIRECTORS’ AND CEO
REMUNERATION REPORT
Statement of shareholder voting
The tables below show the voting results on the 2018 Directors’
Remuneration Report and 2017 Directors’ Remuneration Policy at
the 2019 and 2017 AGMs respectively:
Resolution to approve the 2018 Directors’ Remuneration Report
As a Remuneration and Talent Management Committee, the
Committee also has oversight of the approach to pay for the wider
workforce and receives regular updates on workforce policies and
practices which were taken into account during the Policy review.
Further details on the specific activities undertaken by the Committee
in 2019 are on page 116.
Votes for
Votes against
Votes cast as a percentage of issued share capital
Votes withheld
1,060,477,326
98.36%
17,686,386
1.64%
90.92%
1,462,356
Resolution to approve the 2017 Directors’ Remuneration Policy
Votes for
Votes against
Votes cast as a percentage of issued share capital
Votes withheld
1,073,241,098
99.08%
9,917,915
0.92%
91.34%
113,419
The considerable vote in favour of both the 2018 Directors’
Remuneration Report and 2017 Policy confirms the strong
support received from shareholders for the Group’s
remuneration arrangements.
Review of remuneration ahead of 2020 AGM
As noted in the Chair’s statement, the implementation of the
European Shareholders’ Rights Directive II requires disclosure of
the policy of pay for the CEO for the first time. This will be subject
to shareholder approval at the 2020 Annual General Meeting.
In the spirit of transparency with our shareholders and for the
purposes of providing shareholders with an opportunity to review and
comment on the Company’s pay arrangements, we have disclosed
the CEO’s pay on a voluntary basis for a number of years. We do
so once again this year.
This section of the Report therefore provides information on:
• how we propose to implement our Policy for 2020 for Directors
and the CEO; and
Furthermore, the Committee plays an important role in ensuring
that the views of the Group’s workforce are represented in the
boardroom. A description of the Board’s workforce engagement
mechanisms is on page 95.
As outlined in our Policy, our Directors are paid an annual fee
and may receive a fee for additional Board responsibilities such
as chairing a Board Committee. This structure continues to be
appropriate and therefore there are no significant changes
proposed for 2020.
Iván Arriagada is the CEO and is responsible for leading the senior
management team and for the executive management of the Group.
Members of the Executive Committee report to Mr Arriagada and
are responsible for leading the day-to-day operation of the Group’s
mining and transport businesses. No member of the Executive
Committee, including the CEO, sits on the Board of the Company,
however following the implementation of new regulations we are
required to disclose the policy for the CEO’s pay for the first time
for 2020.
The CEO’s pay comprises the following main elements:
• Fixed pay – base salary of $613,629 and benefits including
amounts paid to maintain life and health insurance policies.
According to Chilean law, all employees are required to pay
their own pension contribution and therefore no Company
pension contributions are made.
• Annual bonus – maximum of 200% of salary with payout
dependent on annual performance against Group (70%) and
personal (30%) performance targets set at the beginning of each
year. Paid in cash following the end of the performance period.
• Long-term incentive plan – maximum of 200% of salary
(325% of salary in exceptional circumstances) comprising
two main elements:
i. Performance Awards (70% of overall award) – based on
three-year Group performance measures.
• how Directors and the CEO were paid for the year ending
ii. Restricted Awards (30% of overall award) – one-third vest
31 December 2019.
each year over a three-year period following grant.
As noted in the Chair’s statement, ahead of the Policy being tabled for
shareholder approval at the 2020 AGM, a review of our remuneration
structure was conducted considering a number of reference points
including our current strategy, performance of the Group, external
market practice, peer practice and the evolving UK regulatory and
governance landscape. The review covered our Directors, all of
whom are Non-Executive, and our CEO and executive team.
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Antofagasta plc Annual Report 2019
Share awards have historically been taxed in full at grant in Chile,
therefore awards are made in the form of cash-settled phantom share
awards to ensure a link to share price. No holding period applies.
When reviewing our approach to remuneration, the Committee
considered practice at global mining peers, UK listed companies
and in Chile.
While we acknowledge that there are some differences between
our approach and typical UK practice, we have sought to operate
a structure that is appropriate for the Chilean market where almost
all of our employees are based and enables us to attract and retain
talent there rather than one that may work for our mining peers who
operate across a number of geographies including the US, Australia
and Canada.
We appreciate that share-based awards are common in the UK and
considered this during our review. Due to the taxation laws in Chile
in recent years, they are not common practice in the Chilean market.
While a number of potential approaches for utilising shares were
discussed, the Committee agreed to continue to use cash-based
awards, linked to share price movement prior to vesting, due to the
negative tax implications of granting share awards in Chile. As such,
we do not operate a shareholding guideline for our CEO, who is
based in Chile.
As part of the review, the Committee consulted with major
shareholders and proxy agencies and actively took into account the
feedback received during this process. Following the review of our
Policy, the Committee has concluded that the overall structure has
worked well at the Company and ensures that the CEO continues
to focus on the delivery of sustained value for our shareholders.
No changes from 2019 are therefore proposed.
The Company’s approach results in pay which continues to be
positioned at or below the lower quartile of the FTSE 100 and our
global mining peers while ensuring we can maintain competitiveness
in both local Chilean and international markets and attract the talent
needed to successfully execute our strategy.
Implementation of the Directors’ Remuneration Policy
in 2019
Remuneration arrangements for the Chairman and Non-Executive
Directors were considered ahead of the 2020 AGM and it was
agreed that they continued to be appropriate and therefore no
changes are proposed.
Chairman
Jean-Paul Luksic’s total fee in 2019 was $1,005,000,
(2018 – $1,003,750) comprising:
• $730,000 per annum for his services as Chairman of the Board;
• $15,000 per annum for his services as Chairman of the Nomination
and Governance Committee; and
• $260,000 per annum for his services as Chairman of the
Antofagasta Minerals board.
This fee level reflects his responsibility, experience and time
commitment to the role.
Non-Executive Directors
There has been no change to Non-Executive Director base fees
since 2012. The base Non-Executive Director’s fee in respect
of the Board remains $130,000 per annum. Given the core role
which Antofagasta Minerals plays in the management of the mining
operations and projects, all Directors also serve as directors of
Antofagasta Minerals. The annual fee payable to directors
of Antofagasta Minerals remains $130,000. Therefore, the
combined base fees payable to Non-Executive Directors
amount to $260,000 per annum.
The Board periodically reviews both the structure and levels of
fees paid to Non-Executive Directors and will continue to review
these fees from time to time, in accordance with the Directors’
Remuneration Policy.
Additional fees are paid for additional Board responsibilities as set out
in the table below:
Additional Director fees payable in 2019
Role
Senior Independent Director
Audit and Risk Committee Chair
Audit and Risk Committee member
Nomination and Governance Committee Chair
Nomination and Governance Committee member
Projects Committee Chair
Projects Committee member
Remuneration and Talent Management
Committee Chair
Remuneration and Talent Management
Committee member
Sustainability and Stakeholder Management
Committee Chair
Sustainability and Stakeholder Management
Committee member
Additional fees ($000)
20
25
12
15
6
21
12
21
12
21
12
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Corporate Governance 2019 Directors’ and CEO Remuneration Report continued
Audited single figure of Directors’ total remuneration table
The remuneration of the Directors for 2019 is set out below in US dollars. Unless otherwise noted, amounts paid in Chilean pesos have
been converted at the exchange rate on the first day of the month following the date of payment. Any additional fees payable for serving on
subsidiary and joint venture company boards are also included in the amounts below.
As explained in the Directors’ Remuneration Policy, Directors do not receive pensions or performance-related pay and are not eligible to
participate in the LTIP.
Chairman
Jean-Paul Luksic
Non-Executive Directors
Ollie Oliveira
Gonzalo Menéndez (passed away in June 2019)
Ramón Jara1
Juan Claro
William Hayes (retired 22 May 20192)
Tim Baker
Andrónico Luksic
Vivianne Blanlot
Jorge Bande
Francisca Castro
Michael Anglin (appointed 1 May 2019)
Total Board
Fees
2019
$000
2018
$000
Benefits3,4
2019
$000
1,005
1,004
332
130
945
272
130
293
260
305
296
290
181
4,440
329
260
991
272
327
297
260
303
295
283
4,614
9
73
3
5
10
71
69
3
7
10
13
41
314
2018
$000
12
158
10
13
9
38
64
4
9
7
8
–
332
Total5
2019
$000
2018
$000
1,014
1,016
405
133
950
282
201
362
263
312
306
303
222
4,754
487
270
1,004
281
358
361
264
312
302
291
–
4,946
1. During 2019, remuneration of $649,000 (2018 – $695,000) for the provision of services by Ramón Jara was paid to Asesorías Ramón F Jara Ltda. The reported decrease
in 2019 is due to a decrease in the CLP/USD exchange rate, partially offset by an annual adjustment for inflation in Chile. This amount is included in the amounts
attributable to Ramón Jara of $945,000 (2018 – $991,000).
2. William Hayes continues to receive remuneration from the Group for his ongoing role as Chairman of the Group’s joint venture, Tethyan Copper Company Pty Limited.
3. Amounts for Jean-Paul Luksic include the provision of life and health insurance. Amounts for Ramón Jara include the provision of life insurance. These insurances are
not in place for other Directors.
4. Except as described in footnote 3, all “benefits” amounts included in this table arose in connection with the fulfilment of Directors’ duties and, in particular, the cost
of attending Board meetings. These calculations have been based on what the Company believes would be deemed by HMRC to be taxable benefits if the Non-Executive
Directors were UK tax resident and domiciled, relating to the costs of flights for attending Board meetings in Santiago, Chile and associated hotel and subsistence expenses,
and for the cost of flights for attending Board meetings in London. Given these expenses are incurred by Directors in connection with the fulfilment of their duties, the
Company also pays the professional fees incurred to complete individual tax returns and the actual tax incurred by Directors on these expenses, the latter of which has
led to the higher reported figures for certain Directors. Figures are reported in the year that they are paid, or would be payable, by the Company.
5. Totals reflect the total fixed remuneration for each Director. Directors did not receive any variable remuneration in 2018 or 2019.
Statement of Directors’ and CEO’s shareholding and
share interests
The Directors who held office at 31 December 2019 had the following
interests in ordinary shares of the Company:
Jean-Paul Luksic1
Ramón Jara2
Ordinary shares of 5p each
31 December 2019
1 January 2019
41,963,110
5,260
41,963,110
5,260
1. Jean-Paul Luksic’s interest relates to shares held by Aureberg Establishment,
an entity that he ultimately controls.
2. Ramón Jara’s interest relates to shares held by a close family member.
There have been no changes to the Directors’ interests in the shares of
the Company between 31 December 2019 and the date of this report.
The Directors and CEO had no interests in the shares of the Company
during the year other than those set out above or on page 133.
No Director had any material interest in any contract (other than a service
contract in the case of Ramón Jara) with the Company or its subsidiary
undertakings during the year other than in the ordinary course of business.
Directors’ shareholding guidelines
The Group does not have shareholding guidelines or requirements for
Directors, all of whom are Non-Executive.
The Chairman Mr Luksic and Non-Executive Director Andrónico
Luksic C are members of the Luksic family. Members of the Luksic
family are interested in the E. Abaroa Foundation which controls
Metalinvest Establishment and Kupferberg Establishment (which, in
aggregate, hold approximately 60.66% of the Company’s ordinary
128
Antofagasta plc Annual Report 2019
shares and approximately 94.12% of the Company’s preference shares).
In addition, Mr Luksic controls the Severe Studere Foundation which,
in turn, controls Aureberg Establishment (which holds approximately
4.26% of the Company’s ordinary shares). This creates significant
alignment between these members of the Board and shareholders.
During the period, no Non-Executive Director was eligible for any
short-term or long-term incentive awards and no Non-Executive
Director owns any shares as a result of the achievement
of performance conditions.
Letters of appointment
Each Non-Executive Director has a letter of appointment from the
Company. The Company has a policy of putting all Directors forward for
re-election at each AGM, in accordance with the UK Corporate Governance
Code. Under the terms of the letters, if a majority of shareholders do not
confirm a Director’s appointment, the appointment will terminate with
immediate effect. In other circumstances, the appointment may be
terminated by either party on one month’s written notice.
There is a contract between Antofagasta Minerals and Asesorías Ramón
F Jara Ltda dated 2 November 2004 for the provision of advisory
services by Ramón Jara. This contract does not have an expiry date
but may be terminated by either party on one month’s notice.
No other Director is party to a service contract with the Group.
Other information
As described in this report, Directors are not entitled to payments
for loss of office and do not receive pension benefits and no such
payments were made, or benefits received, during 2019.
No payments were made to past Directors.
2019 CEO Remuneration report
CEO single figure total remuneration table
CEO (not on the Board)
Iván Arriagada1 2019
Iván Arriagada1 2018
Salary
640
668
Benefits2
Annual bonus3
7
8
1,012
577
LTIP4,5,6
Restricted
Awards
Performance
Awards
405
630
669
630
Total
2,733
2,513
Total fixed
remuneration
Total variable
remuneration
647
676
2,302
1,686
1. No pension contributions are payable to or for Iván Arriagada. Mr Arriagada is paid in Chilean pesos and amounts reported in US dollars also reflect exchange rate
movements during the year.
2. The benefits expense represents the provision of life and health insurance and does not include taxable benefits relating to expenses.
3. The annual bonus paid to Iván Arriagada in 2018 is reported based on the exchange rate as at 1 April 2019. In the 2018 Remuneration Report a slightly lower figure of
$564,000 was reported, which reflected the anticipated exchange rate at the date the 2018 Remuneration Report was published. Iván Arriagada’s 2019 annual bonus will
be paid following the date of publication of this report and the exchange rate used to calculate this figure is as at 2 January 2020 and is calculated as shown on page 132.
As noted in the Committee Chair’s introduction and on page 131, the Committee exercised its discretion to adjust the 2019 annual bonus outcome for the Group which
accounts for $13,000 in respect of Mr. Arriagada’s 2019 annual bonus. This adjustment was unrelated to share price movements.
4. As explained on page 133, awards granted pursuant to the LTIP are split between Restricted Awards and Performance Awards. Restricted Award amounts are reported in
the year of grant based on the face value of the awards on the date of the grant. Performance Awards are reported in the year the performance period ends.
5. The 2018 amounts payable to Iván Arriagada under the LTIP relate to Restricted Awards granted in 2018 and Performance Awards granted in 2016 (prior to his
appointment as CEO). The performance period for Performance Awards granted in 2016 concluded on 31 December 2018 and those awards vested on 22 March 2019.
In the 2018 Remuneration Report, a lower figure of $981,000 was reported because the Performance Awards granted in 2016 had not yet vested and were estimated
using the assumptions set out in the 2018 Remuneration Report and the amounts relating to Restricted Awards were reported in relation to those awards that vested
(rather than those that were granted) in 2018.
6. The 2019 amounts payable to Iván Arriagada under the LTIP relate to Restricted Awards granted in 2019 and Performance Awards granted in 2017. The performance
period for Performance Awards granted in 2017 concluded on 31 December 2019 and those awards will vest on or after 30 March 2020. Because the Performance
Awards granted in 2017 have not yet vested, the amounts attributable to these awards have been estimated by applying the 77% of maximum overall performance score at
vesting as described in more detail on page 135, using the average share price in US dollars for the last three months of 2019 of $11.48. The value of the amounts payable
under the LTIP for 2019 attributable to an increase in the Company’s share price is $79,000. This figure has been calculated using the market value of the date of grant of
the award versus the average share price in US dollars for the last three months of 2019. As noted on page 133, LTIP participants receive conditional rights to receive a
cash payment by reference to a specified number of the Company’s shares (“phantom share awards”). Participants are not compensated for dividends paid by the
Company between the date of grant and vesting.
Comparison of overall performance and remuneration
The following graph shows the Company’s performance compared with the performance of the FTSE All-Share Index and the Euromoney
Global Mining Index over a 10-year period, measured by total shareholder return (as defined below). The FTSE All-Share Index has been
selected as an appropriate broad equity market index benchmark as it is the most broadly-based index to which the Company belongs and
relates to the London Stock Exchange, where the Company’s ordinary shares are traded. The Euromoney Global Mining Index is also shown
because this index has been determined to be the most appropriate specific comparator group for the Company, and total shareholder return
performance, in comparison with the Euromoney Global Mining Index, is one of the performance criteria in the Group’s LTIP as set out on
page 135.
500
400
300
200
100
0
31/12/09
31/12/10
31/12/11
30/12/12
31/12/13
31/12/14
31/12/15
31/12/16
30/12/17
29/12/18
31/12/19
ANTOFAGASTA
FTSE ALL SHARE
EUROMONEY GLOBAL MINING
Total shareholder return is calculated to show a theoretical change in the value of a shareholding over a period, assuming that dividends
are reinvested to purchase additional shares at the closing price applicable on the ex-dividend date. Total shareholder return for the FTSE
All-Share Index and the Euromoney Global Mining Index are calculated by aggregating the returns of all individual constituents of those indices
at the end of a 10-year period.
antofagasta.co.uk
129
Corporate Governance 2019 Directors’ and CEO Remuneration Report continued
Lead executive remuneration for the last 10 years
The total remuneration of the lead executives in the Group for the past 10 years is as follows:
Single figure of remuneration for
the Group’s lead executive $000
Chairman – Jean-Paul Luksic
CEO – Diego Hernández
CEO – Iván Arriagada
Total
Proportion of maximum annual bonus paid
to the CEO
Proportion of maximum LTIP awards vesting
in favour of the CEO4
2010
2011
2012
2013
20141,2
2015
20163
2017
2018
3,330
–
–
3,330
3,521
–
–
3,521
3,598
–
–
3,598
3,615
–
–
3,615
2,196
688
–
2,884
–
2,445
–
2,445
–
1,525
681
2,206
–
–
1,790
1,790
–
–
2,513
2,513
2019
–
–
2,733
2,733
–
–
–
–
–
–
–
–
69%
39%
61%
79%
66%
83%
76%
16%
–
85%
60%
77%
1. The single figure of remuneration for the Group’s lead executive in 2014 comprises Jean-Paul Luksic’s remuneration until 1 September 2014 (when he became
Non-Executive Chairman) and Diego Hernández’s remuneration from 1 September 2014.
2. The Chairman was not eligible for variable remuneration and the 2014 percentage figures therefore only relate to the 2014 annual bonus and LTIP awards vesting for
the CEO.
3. The single figure of remuneration for the Group’s lead executive in 2016 comprises Diego Hernández’s remuneration until 8 April 2016 (when he stepped down as CEO)
and Iván Arriagada’s remuneration from 8 April 2016 (when he became CEO).
4. No Performance Awards vested for the CEO in 2016. As Restricted Awards do not have a performance element, they are not included in these calculations.
Relative importance of remuneration spend
The table below shows the total expenditure on employee
remuneration, the levels of distributions to shareholders and the
taxation cost in 2018 and 2019.
Employee remuneration1
Distributions to shareholders2
Taxation3
2018
($m)
447.8
431.8
404.5
2019
($m)
Percentage
change
439.8
336.2
354.4
-1.8%
-22.1%
12.4%
1. Employee remuneration includes salaries and social security costs, as set out in
Note 8 to the financial statements.
2. Distributions to shareholders represent the dividends proposed and approved for
payment in relation to the year as set out in Note 13 to the financial statements.
3. Taxation has been included because it provides an indication of the Group’s tax
contribution, almost all of which is paid by the Group’s operations in Chile to the
Chilean state. The taxation cost represents the current tax charge in respect of
corporate tax, mining tax (royalty) and withholding tax, as set out in Note 10 to
the financial statements.
Relative change in remuneration
Almost all of the Group’s employees, including the CEO, are paid in
Chilean pesos. The Chilean peso depreciated against the US dollar
during 2019 and this depreciation is reflected in the following figures
which are reported in US dollars.
The total remuneration paid to Iván Arriagada in 2019 was 9% higher
than in 2018. This included a 4.3% decrease in base salary, a 5.6%
decrease in benefits and a 75.5% increase in annual bonus.
The equivalent average percentage increase in total remuneration
for Group employees as a whole in 2019 was -4.5%. This comprised
a 6.2% decrease in salaries, a 6.7% decrease in benefits and a 4%
increase in annual bonus. It is common for employment contracts in
Chile to include a quarterly adjustment for Chilean inflation and most
Group employees’ base salaries in Chile are adjusted for inflation.
The table below compares the changes from 2018 to 2019 in
base salary, benefits and annual bonus paid to the CEO and Group
employees in US dollars. The underlying elements of the CEO’s
pay are calculated using the values reported in the single figure
of remuneration table on page 129.
CEO
Employees2
Percentage
change in
base salary
Percentage
change in
benefits
–4.3%
-6.2%
–5.6%
-6.7%
Percentage
change in
annual bonus
75.5%1
4.0%3
1. As disclosed in the 2018 Annual Report, the CEO’s maximum bonus opportunity
was increased from 133% of base salary in 2018 to 200% of salary in 2019 in
order to re-align his total package with an appropriate position in the market.
2. Mining division employees were chosen as the comparator group because the
Mining division accounts for more than 90% of the Group’s revenue and the
Annual Bonus Plan that applies to the Executive Committee is the same plan that
applies to Mining division employees at the management and professional level.
3. This figure relates to the percentage change in the average annual bonus
for Mining division employees and does not include a one-off bonus paid to
employees as a result of the conclusion of collective bargaining agreements
with labour unions at Los Pelambres, Antucoya and Zaldívar in 2019.
130
Antofagasta plc Annual Report 2019
Annual bonus
Employees are eligible to receive cash bonuses under the Annual
Bonus Plan, based on Group and individual performance. The Annual
Bonus Plan focuses on the delivery of annual financial and non-
financial targets designed to align remuneration with the Group’s
strategy and create a platform for sustainable future performance.
criteria for the Annual Bonus Plan and the individual performance
criteria for the CEO are set annually by the Remuneration and Talent
Management Committee and the Board. The individual performance
criteria for the Executive Committee are set by the CEO and reviewed
by the Committee.
Individual award levels are calibrated at the conclusion of each annual
performance period to ensure that performance targets remain
stretching and that high or maximum payments under the plan
are received only for exceptional performance.
Annual bonus payout – Group performance (70%)
For 2019, the bonus payable to the CEO and members of the
Executive Committee was 70% attributable to the performance of
the Group and 30% to personal performance, according to measures
and targets set at the beginning of the year. The Group performance
Group performance under the 2019 Annual Bonus Plan is shown in
the table below. The choice of these criteria, and their respective
weightings, reflects the Committee’s belief that any incentive
compensation should be tied both to the overall performance of
the Group and to those areas of the business that the relevant
individual can directly influence.
Weighting Objective
2019
Threshold 90
(0% vesting)
2019
Target 100
(50% vesting)
2019
Maximum 110
(100% vesting)
2019
Outcome
2019
Performance
score1
2019 vesting
(% of maximum)
Measure
60%
15%
25%
20%
20%
15%
5%
20%
5%
Core business
EBITDA – Mining division2
Copper production3
Costs4
Cash costs before by-product credits (17%)
Corporate expenditure (3%)
Business development
$m
kt
$/lb
$m
Growth projects – construction execution5
Exploration programme6
Sustainability and organisational capabilities
Safety – Frequency Index – Mining division7
Index
People – Diversity and Inclusion Strategy8
Environmental performance9
Social performance10
5%
5%
5%
Total – pre-adjustments
Adjustment for meeting zero fatality target11
Board discretion applied
Total – post-adjustments
2,262
2,036
733.1 756.5 – 779.2
2,488
803.3
2,359
770.0
1.75
75.6
1.65
72.0
1.55
69.9
1.65
72.0
Measured according to the schedule and budget
as described in more detail in the footnotes
1.20
0.75
Measured according to the KPIs and milestones
as described in more detail in the footnotes
0.90
1.00
101
104
100
100
100
102
100
107
109
110
107
110
110
102.8
1.9
0.3
105
55
70
50
50
50
60
50
88
95
100
85
100
100
64
N/A
N/A
75
1. Performance score range is 90-110 where 90 = threshold (0% bonus), 100 = target (50% bonus) and 110 = maximum (100% bonus).
2. The threshold, target and maximum target figures for EBITDA were adjusted for exchange rate fluctuations, copper price fluctuations, and the impact of one-off bonuses
paid as part of labour negotiations at Los Pelambres, Antucoya and Zaldívar, which were not included in the Group’s budget and were not included in the figures disclosed
in the 2018 Annual Report due to their commercial sensitivity.
3. 100% basis, except for Zaldívar (50%).
4. The threshold, target and maximum target figures for cash costs were adjusted for exchange rate fluctuations and the impact of one-off bonuses paid as part of labour
negotiations at Los Pelambres, Antucoya and Zaldívar. These were not included in the Group’s budget and were not included in the figures disclosed in the 2018 Annual
Report due to their commercial sensitivity. The figures for corporate expenditure were adjusted for the exchange rate fluctuations.
5. Split between the Los Pelambres Expansion (10%) and two specific one-off projects at Zaldívar (5%). Targets for the Los Pelambres Expansion project related to execution
progress and costs for the project versus budget. Targets for the Zaldívar projects were based on permitting and mine plan development progress. Outcome was 100
(50% of maximum) comprising 97 (35% of maximum) for the Los Pelambres Expansion project, and 106 (80% of maximum) for the Zaldívar projects.
6. Maximum and target were defined according to the progress of execution of planned exploration programmes, including infill campaigns, increasing the potential mineral
inventory for targets previously discovered to have potential mineralisation and the consolidation of exploration ownership interests.
7. Performance against the global lost-time accidents frequency index with threshold of 1.20, target of 1.0 and maximum of 0.9 accidents with lost time per million hours
worked. Outcome was 110 (100% of maximum) based on 0.75 accidents with lost time per million hours worked in 2019.
8. Performance against targets set at the beginning of 2019 for implementation of the Diversity and Inclusion Strategy approved by the Board in 2017. The maximum was
achievable if 1% of employees comprised those with disabilities, the percentage of female employees increased by 2% versus the 2018 baseline and the implementation
of a flexible working programme. The outcome was 107 (85% of maximum).
9. The control of risks relating to environmental performance across all companies where the maximum was achievable with no environmental incidents impacting
on production or the Group’s reputation and completion of the implementation of energy management initiatives across all companies. The outcome was 110 (100%
of maximum).
10. The control of risks relating to social incidents performance within the budget across all companies where maximum was achievable with no social incidents impacting
production or the Group’s reputation and without costs incurred outside the scope of the budget. The outcome was 110 (100% of maximum).
11. A standalone adjustment trigger amounting to 15% of the performance score applies to the Annual Bonus Plan – upwards if there are no fatalities during the year and
downwards if there are one or more fatalities during the year. This resulted in an automatic increase of 1.9 to the final Group performance score for 2019.
12. As noted in the Committee Chair’s introduction on page 117, the Group faced unforeseen civil unrest in Chile during the year. The Board believes that the Group’s
employees, led by the CEO, handled these circumstances in an exceptional manner, exercising discretion to increase the formulaic outcome of the Group’s
performance score under the 2019 Annual Bonus Plan from 104.7 to 105.0 (from 73.5% to 75% of the maximum).
antofagasta.co.uk
131
Corporate Governance
2019 Directors’ and CEO Remuneration Report continued
Annual bonus payout – individual performance (30%)
The Committee, with input from the Board, assessed Iván Arriagada’s performance against his individual objectives as 110 (within a range of 90
(Threshold 0% vesting) to 110 (Maximum 100% vesting) for his individual contribution to the business during the year. This performance score
reflects exceptional performance during the year, in which all his individual objectives were met or exceeded and counts towards 30% of his
annual bonus. Iván Arriagada’s performance against his individual objectives is summarised below:
Category
Performance
Relationship with
the Board
• Strong communication throughout the year, bringing the right issues forward for discussion and approval in a
timely manner and communicating regularly between Board meetings to ensure that Directors were apprised
of important developments.
• Receptive to Board input and feedback, ensuring that Board perspectives, ideas and feedback were shared
throughout the Group.
Leadership
• Strong leadership and behaviour representative of the Group’s core values before all stakeholders.
• Outstanding leadership on safety, operational excellence, reliability of operations, talent management, diversity
Strategic planning
and inclusion, community relations and environmental responsibility.
• Outstanding leadership during a period of civil unrest in Chile.
• Maintained respect from his peers and continued to foster constructive labour union relationships.
• Oversaw the effective transition to a new strategic framework, focusing the Group’s activities and ensuring
the right culture and organisational structures are in place to achieve the Board’s strategic vision.
• Demonstrated strong strategic alignment and planning, leading the management team in prioritising work in
accordance with the Group’s long-term strategy.
• Progressed the Group’s digital transformation and innovation initiatives to ensure the long-term success of
the Group.
Succession planning
and talent development
• Oversaw the development of a strategy for a new employee total rewards proposition which will enable the
Group to provide the flexibility and needs of a changing workforce.
• Strong progress on the development of internal talent evidenced by the internal promotion of CFO Mauricio Ortiz
and Centinela General Manager Carlos Espinoza.
Business development
Results
Project development
• Strong results from the Group’s exploration programme.
• Outstanding Group safety performance.
• Strong production and operating results.
• Construction of the Zaldívar Chloride Leach project and Esperanza Sur pre-stripping projects approved by
the Board.
• Submission of the Mine Plan of Operation for the Twin Metals project approved by the Board.
• Advancement of the Centinela Second Concentrator project studies.
Total bonus in respect of 2019
For 2019, Iván Arriagada’s actual bonus was 165% of base salary and the average bonus for the Executive Committee members (excluding
Mr Arriagada) was approximately 50% of base salary.
A critical issue for a mining company is the commodity price and the impact of changes in this price on our long-term and annual performance
targets is carefully reviewed to ensure there is fair opportunity for achievement under each metric.
Based on performance achieved against targets during the 2019 financial year, the Committee determined that Mr Arriagada would receive
a bonus payment of $1,012,488 for 2019. This figure was determined as follows:
Overall performance score (90-110 where 90 = threshold (0% bonus), 100 = target (50% bonus) and 110 = maximum (100% bonus)
(70% x 105) + (30% x 110) = 106.5
Overall performance score
(as a percentage of Maximum)
Gross annual bonus
(70% x 75) + (30% x 100) = 82.5% of maximum
82.5% of $1,227,258
= $1,012,488
Calculated in US dollars using the exchange rate as at 2 January 2020 of $1 = Ch$749.
Because the annual bonus is calculated and paid in Chilean pesos, it is subject to exchange rate movements when reported annually in
US dollars.
The amount of bonus paid was not linked to share price appreciation.
132
Antofagasta plc Annual Report 2019
LTIP awards
Eligibility to participate in the LTIP is determined by the Committee
each year on an individual basis and all members of the Executive
Committee currently participate. Awards are normally granted
annually, and the Directors are not eligible to participate.
Under the LTIP, participants receive a conditional right to receive a
cash payment by reference to a specified number of the Company’s
ordinary shares (“phantom share awards”), which are paid in cash
upon vesting based on the Company’s share price at the time
of vesting.
The Committee considers cash-based awards appropriate because
share-based awards have historically been taxable on the date of
grant for Chilean-based employees. Independent advice was sought
by the Committee on the viability of granting shares, rather than
cash-based awards and this subject was re-visited during the most
recent Policy review. On balance, the Committee determined that it
remains appropriate to continue to use cash-based awards due
to the negative tax consequences of issuing interests in shares.
However, the Committee will continue to monitor this position.
LTIP awards are split between Restricted Awards and Performance
Awards. Restricted Awards vest only if the relevant employee remains
employed by the Group on the vesting date. Performance Awards
vest subject to both the satisfaction of performance conditions and
the relevant employee remaining employed by the Group on the
vesting date. The same performance criteria apply to all participants
in the LTIP and are designed to link business objectives, shareholder
value and senior management rewards.
• Performance Awards reward performance over three years.
There is no additional holding period before these amounts
are paid.
• Restricted Awards vest one-third in each year over a three-year
period following the grant of the award.
The number of Performance Awards and Restricted Awards
granted to each member of the Executive Committee is calculated
as a percentage of salary up to a limit of 200% of base salary or
325% of base salary if the Committee determines that exceptional
circumstances apply. The market value of shares in relation to which
the award is to be granted is equal to the closing price on the dealing
day before the grant, or, if the Committee determines, the average
closing price during a period set by the Committee not exceeding
five dealing days ending with the last dealing day before the grant.
LTIP awards are subject to malus provisions under the LTIP rules.
These allow the Committee to, at its discretion, reduce the number of
shares to which an award relates or to cancel an award as a result of:
• actions by a participant that, in the reasonable opinion of the
Committee, amount to gross misconduct that has or may have a
material effect on the value or reputation of the Company or any
of its subsidiaries
• a materially adverse error in the consolidated financial statements
of the Group during the performance period
• any reasonable circumstance that the Committee determines in
good faith to have resulted in an unfair benefit to the participant.
Clawback has not been introduced due to uncertainty around its legal
validity in Chile.
Iván Arriagada’s LTIP awards
The following LTIP awards with one or more outstanding tranches have been granted to Mr Arriagada. The number of shares to which each
grant relates is determined based on the limits set out in the LTIP rules, consideration around retention and the share price at the time of grant.
Year of
grant
2017
20182
2019
Number of
shares to
which the
grant relates
Award
type
Date of
grant
Vesting
dates
Face value
of award
(using market
price at date of
grant) ‘$000
Market
price at
the date
of grant
‘$1
End of
performance
period
% of award
receivable
if Threshold
performance
achieved
% of award
receivable
if Target
performance
achieved
% of award
receivable
if Maximum
performance
achieved
Performance
Awards
Restricted
Awards
Performance
Awards
Restricted
Awards
Performance
Awards
Restricted
Awards
76,070 30–Mar–17 30–Mar–20
36,668 30–Mar–17 30–Mar–18
30–Mar–19
30–Mar–20
109,397 28–Mar–18 28–Mar–21
46,885 28–Mar–18 28–Mar–19
28–Mar–20
28–Mar–21
77,516 29–Mar–19 29–Mar–22
33,222 29–Mar–19 29–Mar–20
29–Mar–21
29–Mar–22
770
330
10.12 31–Dec–19
10.12
N/A
1,470
13.44 31–Dec–20
630
13.44
N/A
945
405
12.19 31–Dec–21
12.19
N/A
0%
0%
0%
0%
0%
0%
57%
100%
100%
100%
48%
100%
100%
100%
48%
100%
100%
100%
1. The market price used at the date of grant was the average closing share price on the five dealing days ending on the last dealing day before the grant, converted into US
dollars using the exchange rate on the date of grant.
2. Iván Arriagada received an exceptional LTIP grant of 325% in 2018. This is explained in more detail in the 2018 Directors’ Remuneration Report.
antofagasta.co.uk
133
Corporate Governance
2019 Directors’ and CEO Remuneration Report continued
Performance measures for 2019
The performance measures and targets applying to the Performance Awards granted in 2019 are as follows:
Weighting
Objective
Measure
50%
25%
Relative total
shareholder return
Mineral resources
increase
12.5%
Project portfolio
progress
12.5%
Environmental
performance
Comparison against Euromoney Global Mining Index with 0% vesting at performance below the
index during the three-year period, 33% vesting at performance equal to the index and 100%
vesting at performance equal to or greater than the index plus 5% during the three-year period.
Tonnes of contained copper at the end of 2021 with 100% vesting if mineral resources of
84.2 million tonnes of contained copper is achieved, 50% vesting if mineral resources of 83.0 million
tonnes of contained copper is achieved and 0% vesting if mineral resources of 81.8 million tonnes of
contained copper or less is achieved.
Relates to the Group’s priority projects at Los Pelambres and Zaldívar. Maximum is achievable if
construction of the Los Pelambres Expansion project reaches 85% progress (70%), the Zaldívar
Chloride Leach project is in construction (20%) and achievement of feasibility level advancement
of Phase 2 of the Los Pelambres Expansion project by the end of 2021 (10%). Target (75% vesting)
is 75% progress against the maximum objective for each goal and Threshold (0% vesting) is 50%
progress against the maximum objective for each goal.
100% vesting if 100% compliance is achieved with historical commitments and agreements with
communities surrounding Los Pelambres (80%) and concluding Zaldívar’s renewable energy power
supply agreements and progressing energy efficiency projects for the reduction of CO2 emissions in
accordance with the forecasts set on the grant date (20%). Target (50% vesting) is 75% progress
against the maximum objective for each goal and Threshold (0% vesting) is 50% progress or less
against the maximum objective for each goal.
Performance measures for 2018
The performance measures and targets applying to the Performance Awards granted in 2018 are as follows:
Weighting
Objective
Measure
50%
25%
Relative total
shareholder return
Mineral resources
increase
12.5%
Project portfolio
progress
12.5%
Environmental
performance
Comparison against Euromoney Global Mining Index with 0% vesting at performance below the index
during the three-year period, 33% vesting at performance equal to the index and 100% vesting at
performance equal to or greater than the index plus 5% during the three-year period.
Tonnes of contained copper at the end of 2020 with 100% vesting if mineral resources of
85.7 million tonnes of contained copper is achieved, 50% vesting if mineral resources of 84.7 million
tonnes of contained copper is achieved and 0% vesting if mineral resources of 82.7 million tonnes of
contained copper or less is achieved.
Relates to the Group’s priority projects at Los Pelambres, Centinela and Zaldívar. Maximum is
achievable if construction of each of the Los Pelambres Expansion project (50%), the Centinela
Second Concentrator project (35%) and the Zaldívar Chloride Leach project (15%) meets their
respective construction plans approved by the Board at the time of approving execution of the
project. If the Centinela Second Concentrator project is presented for approval but not approved
by the Board before the end of the performance period, then this goal will be excluded from the
metrics and the 35% attributable to this project will be distributed pro rata to the other two project
weightings. Target (75% vesting) is 75% progress against the maximum objective for each goal
and Threshold (0% vesting) is 50% progress or less against the maximum objective for each goal.
Maximum is achievable if 100% compliance is achieved with a plan to meet commitments for the
Group’s environmental permits and other environmental permits not connected with environmental
impact assessments. Target (75% vesting) is 100% compliance with a plan to meet commitments
for the Group’s environmental permits connected with environmental impact assessments only.
Threshold (0% vesting) is non-compliance with the plan.
134
Antofagasta plc Annual Report 2019
LTIP awards vesting in respect of 2019 – anticipated Group performance under the 2017 LTIP
As noted in the single figure table on page 129, performance against the Performance Awards granted in 2017 will not be finally determined
by the Committee until after the date of this report, once the Group’s 2019 results have been released to the market. The performance criteria
attaching to these Performance Awards and the anticipated performance against these criteria, based on estimates as at the date of this report,
are as follows:
Weighting
Objective
Threshold (0%)
Target (see below)
Maximum (100%)
Anticipated performance
Measure
35%
Relative total
shareholder return2
20%
EBITDA3
0% vesting at
performance below
the index during the
three-year period
33% vesting at
performance equal
to the index during
the three-year
period
0% vesting at
$4,955 million
or below
75% vesting at
$5,575 million
100% vesting at
performance equal
to or greater than
the index plus 5%
during the three-
year period
100% vesting
at $6,194 million
50% vesting at
79.8 million tonnes
of contained copper
100% vesting at
81.8 million tonnes
of contained copper
75% three of the
four goals achieved
100% all four
goals achieved
15%
Mineral resources increase 0% vesting at
77.7 million tonnes
of contained copper
or below as at
31 December 2019
0% two or less of
the four goals
achieved
30%
Projects, development and
sustainability
1. Los Pelambres
compliance with
environmental permits
and commitments (two
project-specific goals)4
2. Execution decisions
in respect of major
construction projects at
Minera Los Pelambres
and Minera Centinela
(two specific goals)5
Total
To be updated at
the vesting date
EBITDA for
the period was
$7,401 million
Resources
increased to
87.5 million tonnes
of contained
copper
All four goals
achieved
Both two goals
achieved
Both two
goals achieved
Anticipated
achievement1
33%
100%
100%
100%
77%6
1. Anticipated achievement is based on estimates made as at the date of this report. These awards will not vest until after the Group’s 2019 results have been released to
the market.
2. Total shareholder return is calculated to show a theoretical change in the value of a shareholding over a specified period. Total shareholder return for the Euromoney
Global Mining Index is calculated by aggregating the returns of all individual constituents of that index and, for the purposes of comparison with the Company’s share
performance, taking an average of the index over the three months before the beginning and the end of the period respectively.
3. Targets are calculated based on the mining operations’ accumulated EBITDA over the period from 2017-19, versus the 2017 budget figure and the 2017 internal base
case figures for 2018 and 2019. The final calculations have not been adjusted for commodity price or exchange rate fluctuations.
4. Goals were: (1) having in place by 2017 an environmental management system at Los Pelambres that would ensure compliance with environmental permits; and (2) full
compliance with the environmental compliance programme committed to the relevant Environmental Authority by Los Pelambres.
5. Goals were: (1) commencement of the execution phase for the Los Pelambres Expansion project during 2017; and (2) a Board decision in relation to the execution of the
Centinela Second Concentrator project by 2018. In relation to the second goal, following a full review, in 2018 the Board decided that the feasibility study for the project
should be optimised.
6. The impact of this vesting level on the CEO’s 2019 remuneration is set out in footnote 6 of the CEO single figure total remuneration table on page 129.
antofagasta.co.uk
135
Corporate Governance
2019 Directors’ and CEO Remuneration Report continued
Implementation of the CEO remuneration policy in 2020
A significant proportion of the remuneration available to the CEO is dependent on the performance of the Group and in 2020 his total
remuneration will consist of the same elements as it did in 2019.
The chart below outlines the CEO’s total potential remuneration in 2020 under different performance scenarios.
The figures are based on the following assumptions:
Description
Minimum
Target
Maximum
s
t
n
e
m
e
e
l
l
e
b
a
i
r
a
v
s
t
n
e
m
e
e
l
s
t
n
e
m
e
e
l
m
r
e
t
-
g
n
o
L
l
e
b
a
i
r
a
v
l
a
u
n
n
A
d
e
x
F
i
LTIP awards of
200% of salary,
325% in exceptional
circumstances (30%
Restricted Awards,
70% Performance
Awards)
Annual bonus,
maximum opportunity
of 200% of base
salary
Annual base salary
of Ch$459,448,716
($613,629) as at
1 January 2020,
plus benefits
No payout
100% of
Restricted
Awards, 48%
of maximum
Performance
Awards
100% of
Restricted
Awards, 100%
of maximum
Performance
Awards
No payout
50% of
maximum
bonus
opportunity
100% of
maximum
bonus
opportunity
Base salary plus benefits only and excludes
adjustments for inflation
$0.64m
100%
$3.50m
47%
$3.07m
40%
46.4%$2.01m
39%
31%
31%
40%
40%
20%
18%
All elements are estimated using an exchange rate of $1 = Ch$749 and
are therefore subject to exchange rate fluctuations during the year.
The Committee is confident that the Policy operates as intended and no
changes are necessary.
Base salary and benefits
No merit increase is expected to be applied to the CEO’s salary
resulting in a salary as at 1 January 2020 of $613,629 (2019:
$639,617). This decrease is in line with the wider workforce and
reflects depreciation of the Chilean Peso versus the US dollar in
2019, partially offset by inflation adjustments which automatically
apply to the CEO’s and employees’ base salaries.
Benefits payable to Iván Arriagada reflect amounts paid to maintain
life and health insurance policies.
According to Chilean law, all employees are required to pay their own
pension and compulsory health insurance contributions and no
additional contributions are made by the Group.
Minimum
Target
Maximum
Max + 50% share
price growth
FIXED PAY
ANNUAL BONUS
LTIP
Annual bonus
The maximum bonus opportunity for the CEO for 2020 will remain
unchanged at 200% of salary.
The annual bonus focuses on the delivery of annual financial and
non-financial targets designed to align remuneration with the Group’s
strategy and create a platform for sustainable future performance.
The Board has agreed Group performance criteria for the 2020
plan as set out in the table below.
The number of KPIs and weightings attributable to each component
of the 2020 Annual Bonus Plan is consistent with 2019 and reflects
the Committee’s view of the balance required to successfully
implement the Group’s strategy in 2020. 70% of the CEO and
Executive Committee’s 2020 annual bonus will be calculated based
on the Group’s performance against these criteria in 2020, with the
remaining 30% based on personal performance.
Weighting Objective
Measure
Threshold
Target
Maximum
Core business
EBITDA – Mining division
Copper production
Costs
60%
15%
25%
20%
20%
12%
4%
4%
$m
≤–10% The Group’s future metals price assumptions are commercially
≥+10%
sensitive and therefore the target for EBITDA will not be disclosed
in advance. However, the Company will disclose the 2020 target
and outcome in the 2020 Annual Report.
kt
698
720-743
765
1.55
59
Cash costs before by-product credits (17%)
Corporate expenditure (3%)
$/lb
$m
1.75
65
Business development – Growth and innovation projects execution
1.65
62
Growth projects
Exploration
Innovation and Digital Transformation projects
20%
Sustainability and organisational capabilities
5%
5%
5%
5%
Safety – Mining division
People
Environmental
Social
Measured according to KPIs and milestones. The Company will disclose
the 2020 targets and outcomes in the 2020 Annual Report.
Full disclosure on the targets and performance against them will be provided in the 2020 Remuneration Report.
136
Antofagasta plc Annual Report 2019
Performance adjustments and discretion
As has been the case since 2016, the final performance score under the 2020 Annual Bonus Plan will be subject to a 15% adjustment upwards
if there are no fatalities and 15% downwards if there are one or more fatalities, during 2019.
The final performance score for the “core business” component of the annual bonus score, comprising 60% of the Group performance score,
will also automatically be adjusted to 90 (0% bonus) when applied to the 2020 annual bonus for the Executive Committee if the Group does not
record a profit after tax (excluding extraordinary non-cash items and changes to legislation or accounting rules and calculated using the
statutory nominal tax rate) in 2020.
The Committee maintains discretion to adjust the final performance score within a range of three points. However, use of this adjustment must
be approved by the Board.
2020 LTIP awards
The Committee carefully considered the design of the LTIP including the vesting and holding periods for Restricted Awards and Performance
Awards and the mix of awards that are granted to participants in the LTIP. It confirmed that the current design continues to be appropriate,
taking into account the overall quantum of remuneration available to the CEO and the Executive Committee and remuneration structures
typically used in the market in Chile.
Following the Committee’s review, the maximum opportunity for 2020 will remain unchanged at 200% of salary (325% of salary in
exceptional circumstances).
The LTIP will continue to comprise two elements as follows:
• Restricted Awards (30% of overall award) – vest one-third each year over a three-year period following grant.
• Performance Awards (70% of overall award) – awards subject to a three-year performance period with no holding period. The measures for
2020 awards are:
Weighting
Objective
Measure
50%
25%
12.5%
12.5%
Relative total
shareholder return
Comparison against Euromoney Global Mining Index with 0% vesting at performance below the index during the
three-year period, 33% vesting at performance equal to the index and 100% vesting at performance equal or
greater than the index plus 5% during the three-year period.
Mineral resources
increase
Tonnes of contained copper at the end of 2022. Maximum is expected to be 87.4 million tonnes of contained
copper, with an anticipated Target and Threshold of 86.0 and 84.6 million tonnes of contained copper respectively.
Project’s
performance
Environmental
performance
Maximum is achievable if commissioning of the Los Pelambres Expansion project (70%) and the Zaldívar Chloride
Leach project (20%) has commenced before the end of 2022 and the Environmental Impact Study for Phase 2
of the Los Pelambres Expansion project has been submitted by 2021 (10%).
Maximum is achievable if 100% compliance is achieved with historical commitments and agreements with
communities surrounding all of the Group’s operations (70%) and achieving a Mining division CO2 emission
reduction target of 300,000t and transitioning mining operating companies away from coal-based long-term power
purchase agreements (20%).
Shareholding guidelines
As share awards have historically been taxed in full at grant in Chile,
it has not been viable for the Company to operate share incentive
schemes. Instead awards are granted as phantom shares which are
linked to the share price and satisfied in cash. The Company does not
therefore currently have any shareholding guidelines for the CEO
or Executive Committee members, all of whom are based in Chile.
The Committee has carefully considered whether in the absence
of shareholding guidelines, CEO incentives are sufficiently aligned
with the long-term interests of shareholders. As a Company with a
majority shareholder, the Committee and the Board believe that the
long-term interests of shareholders are monitored and protected
without the need for CEO shareholding guidelines.
External appointments
The Board will consider any proposal for an executive to serve as a
non-executive director of another company on a case-by-case basis.
The Board would carefully consider the time commitments of the
proposed role, the industry of the company, whether it is a supplier,
customer or competitor, and whether it would be appropriate for
the executive to retain remuneration for the position.
Implementation of the Directors’ Remuneration Policy
in 2020
Directors will be paid fees in 2020 in accordance with the levels set
out on page 127. Benefits that were reported in 2019 will continue to
apply. Directors are not expected to receive any other remuneration
in 2020.
Committee and arrangements in place with advisers
The names of the members of the Remuneration and Talent
Management Committee are set out on page 116 which forms part
of the Remuneration Report.
During the year, the Committee reappointed remuneration consultants
Willis Towers Watson to provide advice to the Committee on
compensation benchmarking, regulatory and corporate governance
developments and market practice. This reappointment was based
on the Committee’s satisfaction with the quality of advice received
in previous years.
Willis Towers Watson is an independent global professional
services firm that is a signatory to, and adheres to, the Code
of Conduct for Remuneration Consultants. This can be found
at www.remunerationconsultantsgroup.com.
The Committee is satisfied that the advice provided by Willis Towers
Watson in 2019 was objective and independent, that no conflict
of interest arose as a result of these services and that, except as
highlighted below, Willis Towers Watson had no other connection
with the Company. Willis Towers Watson’s fees for this work were
charged in accordance with normal billing practices and amounted
to £107,213.
Willis Towers Watson also provided advice and support during the
year to management, primarily covering a review of remuneration
policies and practices throughout the organisation that was
undertaken by a specialist team on an independent basis. The
outcomes of this workstream were tabled for the Committee’s
review and the Committee was satisfied that the advice received
was objective and independent.
The Committee also received assistance from the Chairman, the CEO,
the Vice President of Human Resources and the Company Secretary
during 2019, none of whom participated in discussions relating to
their own remuneration.
The Committee Chair and the Committee regularly speak with
advisers without management present, to provide a forum for open
discussion and the sharing of views and opinions on compensation
issues. Additionally, part of each Committee meeting is held without
management present to ensure that individual views or areas of
concern can be debated between Committee members.
antofagasta.co.uk
137
Corporate Governance Directors’ report
DIRECTORS’ REPORT
Directors
Directors who have served during the year and summaries of current
Directors’ key skills and experience are set out in the Corporate
Governance Report on pages 97 to 99.
Post-balance sheet events
There have been no post-balance sheet events.
Financial risk management
Details of the Company’s policies on financial risk management are
set out in Note 24 to the financial statements.
Results and dividends
The consolidated profit before tax has increased from $1,252.7 million
in 2018 to $1,349.2 million in 2019.
The Board has recommended a final dividend of 23.4 cents per
ordinary share (2018 – 37 cents). An interim dividend of 10.7 cents
was paid on 4 October 2019 (2018 interim dividend – 6.8 cents).
This gives total dividends per share proposed in relation to 2019
of 34.1 cents (2018 – 43.8 cents) and a total dividend amount in
relation to 2019 of $336.2 million (2018 – $431.8 million).
Preference shares carry the right to a fixed cumulative dividend
of 5% per annum. The preference shares are classified within
borrowings and preference dividends are included within finance
costs. The total cost of dividends paid on preference shares and
recognised as an expense in the income statement was $0.1 million
(2018 – $0.1 million). Further information relating to dividends
is set out in the Financial review on page 80 and in Note 13 to
the financial statements.
Political contributions
The Group did not make political donations during the year ended
31 December 2019 (2018 – nil).
Auditor
The Company’s auditor, PricewaterhouseCoopers LLP, has indicated
its willingness to continue in office and a resolution seeking its
reappointment will be proposed at the Annual General Meeting.
Disclosure of information to auditors
The Directors in office at the date of this report have each
confirmed that:
• so far as they are aware, there is no relevant audit information
of which the Group’s auditor is unaware; and
• they have taken all the steps that they ought to have taken as Directors
in order to make themselves aware of any relevant audit information
and to establish that the Group’s auditor is aware of that information.
Capital structure
Details of the authorised and issued ordinary share capital are shown
in Note 29 to the financial statements. The Company has one class of
ordinary shares, which carry no right to fixed income. Each ordinary
share carries one vote at any general meeting of the Company.
Details of the preference share capital are shown in Note 22 to the
financial statements. The preference shares are non-redeemable and
are entitled to a fixed cumulative dividend of 5% per annum. Each
preference share carries 100 votes on a poll at any general meeting
of the Company.
138
Antofagasta plc Annual Report 2019
When the preference shares were issued, they each carried one vote
at any general meeting of the Company in parity with the ordinary
shares in issue at that time. The number of ordinary shares in issue
has increased since then through stock splits and bonus issues and
because the preference shares were not split at the same time as
the ordinary shares, in order to maintain proportionate voting rights
attaching to the preference shares, the voting rights attaching to
preference shares have increased to 100 votes on a poll at any
general meeting of the Company.
There are no specific restrictions on the transfer of shares or on
their voting rights beyond those standard provisions set out in the
Company’s Articles of Association and other provisions of applicable
law and regulation (including, in particular, following a failure to
provide the Company with information about interests in shares as
required by the Companies Act 2006). The Company is not aware of
any agreements between holders of the Company’s shares that may
result in restrictions on the transfer of securities or on voting rights.
With regard to the appointment and replacement of Directors, the
Company is governed by, and has regard to, its Articles of Association,
the UK Corporate Governance Code 2018, the Companies Act 2006
and related legislation. The Articles of Association may be amended
by special resolution of the shareholders. There are no significant
agreements in place that take effect, alter or terminate upon a
change of control of the Company. There are no agreements in
place between the Company and its Directors or employees that
provide for compensation for loss of office or employment resulting
from a change of control of the Company.
The percentages of the total nominal share capital of the Company
represented by each class of share are:
Class
Ordinary shares of 5p each
Preference shares
of £1.00 each
Number in issue
985,856,695
Nominal value
per share
Percentage
of capital
5p
96.10%
2,000,000
£1
3.90%
Authority to issue shares and authority to purchase
own shares
At the 2019 AGM, held on 22 May 2019, authority was given to the
Directors to allot unissued relevant securities in the Company up to
a maximum amount equivalent to two-thirds of the ordinary shares in
issue (of which one-third may only be offered by way of rights issue).
This authority expires on the date of this year’s AGM, scheduled to be
held on 20 May 2020. No shares have been issued as at the date of
this report or during the year. The Directors propose to seek renewal
of this authority at this year’s AGM.
A further special resolution passed at the 2019 AGM granted
authority to the Directors to allot equity securities in the Company for
cash, without regard to the pre-emption provisions of the Companies
Act 2006. This authority also expires on the date of this year’s AGM
and the Directors will seek to renew this authority by way of two
separate resolutions, in line with the Investment Association’s
guidance and the Pre-Emption Group’s Statement of Principles.
The Company was also authorised by a shareholders’ resolution
passed at the 2019 AGM to purchase up to 10% of its issued ordinary
share capital. Any shares bought back may be held as treasury
shares or, if not so held, must be cancelled immediately upon
completion of the purchase, thereby reducing the amount of the
Company’s issued and authorised share capital. This authority will
expire at this year’s AGM and a resolution to renew the authority for
a further year will be proposed. No shares were purchased by the
Company during the year.
Directors’ interests and indemnities
Details of Directors’ contracts and letters of appointment,
remuneration and emoluments, and their interests in the shares of
the Company as at 31 December 2019, are given in the Directors’
Remuneration Report. No Director had any material interest in a
contract of significance (other than a service contract – see page 128)
with the Company or any subsidiary company during the year.
In accordance with the Company’s Articles of Association and to
the extent permitted by the laws of England and Wales, Directors
are granted an indemnity from the Company in respect of liabilities
personally incurred as a result of their office. The Company also
maintained a Directors’ and Officers’ liability insurance policy
throughout the financial year. A new policy has been entered
into for the current financial year.
Conflicts of interest
Each year, the Directors complete a form identifying interests
that may constitute a conflict of interest, including, for example,
directorships in other companies. Directors are also required to
notify the Company during the year of any relevant changes in
those positions or situations.
The Board, with assistance from the Nomination and Governance
Committee, considers the potential and actual conflict situations and
decides in relation to each situation the steps, if any, which need to
be taken to manage it.
The authorisation process is not regarded as a substitute for managing
an actual conflict of interest if one arises, and the monitoring, and, if
appropriate, authorisation of actual and potential conflicts of interest
is an ongoing process.
Substantial shareholdings
As at 31 December 2019, the following significant holdings of voting
rights in the share capital of the Company had been disclosed to the
Company under Disclosure and Transparency Rule 5:
Shareholder
1. Metalinvest Establishment
2. Kupferberg Establishment
3. Aureberg Establishment
Ordinary
share capital
%
Preference
share capital
%
Total share
capital
%
50.72
9.94
4.26
94.12
–
–
58.04
8.27
3.54
Metalinvest Establishment and Kupferberg Establishment are
both controlled by the E. Abaroa Foundation (“Abaroa”), in which
members of the Luksic family are interested. As explained in
Note 35 to the financial statements, Metalinvest Establishment is
the immediate Parent Company of the Group and the E. Abaroa
Foundation is the Ultimate Parent Company. Aureberg Establishment
is controlled by the Severe Studere Foundation that, in turn, is
controlled by Jean-Paul Luksic, the Chairman of the Company.
No interests have been disclosed to the Company between
31 December 2019 and the date of this report.
Exploration and research and development
The Group’s subsidiaries carry out exploration and research and
development activities that are necessary to support and expand
the Group’s operations.
Going concern
The Directors, having made appropriate enquiries, have satisfied
themselves that it is appropriate to adopt the going concern basis
of accounting in preparing the financial statements. Additionally,
the Directors have considered longer-term viability, as described
in their statement on page 30.
Business relationships with suppliers, customers and
others
A statement of how the Directors have had regard to the need
to foster the Company’s business relationships with suppliers,
customers and others and the effect of that regard, including on
principal decisions made by the Company during the year, are set
out on pages 34 to 50 of the Strategic Report and page 94 of the
Corporate Governance Report.
Other statutory disclosures
The Corporate Governance Report on pages 82 to 137, the Statement
of Directors’ responsibilities on page 140 and Note 24 to the financial
statements are incorporated into this Directors’ Report by reference.
Other information can be found in the following sections of the
Strategic Report:
Future developments in the business of the Group
Viability statement
Subsidiaries, associates and joint ventures
Employee consultation
Greenhouse gas emissions
Location in
Strategic Report
Pages 54 to 73
Page 30
Pages 54 to 73
Pages 38 to 40
Page 45
Disclosures required pursuant to Listing Rule 9.8.4R can be found
on the following pages of the Annual Report:
Statement of interest capitalised by the
Group (LR 9.8.4(1))
Relationship agreement (LR 9.8.4(14))
By order of the Board
Location in
Annual Report
See Notes 5, 9 and 15
to the financial
statements on pages
163 to 167, 172 and 177.
Page 89
Julian Anderson
Company Secretary
16 March 2020
antofagasta.co.uk
139
Corporate Governance
Statement of Directors’ responsibilities
DIRECTORS’
RESPONSIBILITIES
Each of the Directors, whose names and functions are listed in the
Corporate Governance Report, confirms that, to the best of his or
her knowledge:
• the Parent Company financial statements, which have been
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”, and
applicable law), give a true and fair view of the assets,
liabilities, financial position and profit of the Company,
• the Group financial statements, which have been prepared in
accordance with IFRS as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of the
Group, and
• the Strategic Report and the Directors’ Report include a fair
review of the development and performance of the business
and the position of the Group, together with a description of
the principal risks and uncertainties that it faces.
By order of the Board
Jean-Paul Luksic
Chairman
16 March 2020
Ollie Oliveira
Senior Independent Director
Statement of Directors’ responsibilities in
relation to the financial statements
The Directors are responsible for preparing the Annual Report,
the Directors’ Remuneration Report and the financial statements
in accordance with the applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law, the Directors have prepared
the Group financial statements in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by the European
Union, and the Parent Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law), including
Financial Reporting Standard 101 Reduced Disclosure Framework
(“FRS 101”). Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and the Company and of
the profit or loss of the Group for that period. In preparing these
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently
• make judgements and accounting estimates that are reasonable
and prudent
• state whether IFRS as adopted by the European Union and
applicable UK Accounting Standards, including FRS 101, have
been followed, subject to any material departures disclosed and
explained in the Group and Parent Company financial statements
• prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation. They are
also responsible for safeguarding the assets of the Company and the
Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors consider that the Annual Report and financial
statements, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Company’s position and performance, business model and strategy.
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Antofagasta plc Annual Report 2019
FINANCIAL
STATEMENTS
Independent auditors’ report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated balance sheet
Consolidated cash flow statement
Notes to the financial statements
Parent company financial statements
142
149
150
150
151
152
153
202
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Financial Statements Independent auditors’ report to the members of Antofagasta plc
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion:
• Antofagasta plc’s Group financial statements and Parent Company financial statements (the “financial statements”) give a true and fair view of the
state of the Group’s and of the Parent Company’s affairs as at 31 December 2019 and of the Group’s profit and cash flows for the year then
ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted
by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Annual Report and Financial Statements 2019 (the “Annual Report”), which comprise:
the consolidated and Parent Company balance sheets as at 31 December 2019; the consolidated income statement, the consolidated statement of
comprehensive income, the consolidated cash flow statement, and the consolidated and Parent Company statements of changes in equity for the
year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to the
Group or the Parent Company.
Other than those disclosed in Note 7 to the financial statements, we have provided no non-audit services to the Group or the Parent Company in the
period from 1 January 2019 to 31 December 2019.
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Antofagasta Annual Report 2019
Our audit approach
Overview
MATERIALITY
AUDIT SCOPE
KEY AUDIT
MATTERS
• Overall Group materiality: $70 million (2018: $64 million), based on 5% of three-year average profit
before tax adjusted for one off items.
• Overall Parent Company materiality: $13.0 million (2018: $14.5 million), based on 1% of total assets.
• We identified the four mine sites, Los Pelambres, Centinela, Antucoya and Zaldivar, which in our view,
required an audit of their complete financial information.
• Taken together, the locations and functions where we performed our audit work accounted for 97% of
revenue and 91% of absolute adjusted profit before tax (i.e. the sum of the numerical values without
regard to whether they were profits or losses for the relevant locations and functions.
• Assessment of indicators of impairment for the Antucoya and Centinela cash generating units.
• Provisions for decommissioning and restoration
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to
breaches of safety and environmental regulations and unethical and prohibited business practices, and we considered the extent to which non-
compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the
preparation of the financial statements such as the Companies Act 2006 and the UK Listing Rules. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal
risks were related to posting of inappropriate journal entries to increase revenue or reduce expenditure, and management bias in accounting
estimates. The Group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit
procedures in response to such risks in their work. Audit procedures performed by the Group engagement team and/or component auditors
included:
• Discussions with management, internal audit and the Group’s legal advisers, including consideration of known or suspected instances of non-
compliance with laws and regulation and fraud;
• Evaluation of management’s controls designed to prevent and detect irregularities, in particular their anti-bribery controls;
• Assessment of matters reported on the Group’s whistleblowing helpline and the results of management’s investigation of such matters;
• Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to impairment
assessments at Antucoya and Centinela (see related key audit matter below); and
• Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from
the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations, or through collusion.
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Financial Statements
Independent auditors’ report to the members of Antofagasta plc continued
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Assessment of indicators of impairment for the Antucoya and Centinela
cash generating units
In accordance with IAS 36 ‘Impairment of assets’ the Directors are
required to perform a review for impairment of long-lived assets at any
time an indicator of impairment exists.
There is a heightened level of potential impairment risk at Antucoya
from the perspective of its high cost base; and Centinela from the
perspective of its sensitivity to changes in the long term copper price
and that a significant portion of its value generation is tied up in capital
projects that have not yet been formally approved.
Based on the Directors’ considerations of the results of their carrying
value review, they concluded that no impairment indicators existed in
respect of Antucoya and Centinela.
This assessment included consideration of a valuation and sensitivity
analysis. This analysis requires judgement on the part of the Directors
in valuing the relevant CGUs. The Directors have applied assumptions
that a market participant would use to determine fair value, including
incorporating value from cash flows related to the planned construction
of a second concentrator at Centinela.
Refer to Note 4 Asset Sensitivities.
Provisions for decommissioning and restoration
The Group has provisions for decommissioning and restoration of
US$413 million as at 31 December 2019.
The calculation of these provisions requires management to estimate
the quantum and timing of future costs, discounted to present value
using an appropriate discount rate.
Management reviews the decommissioning and restoration provisions
on an annual basis, using experts to provide support in its assessment
where appropriate. This review incorporates the effects of any
changes in management’s anticipated approach to restoration and
rehabilitation, as well as the most recent plan approved by the Chilean
regulator, Sernageomin. During the year, updated plans for
decommissioning and restoration were approved by Sernageomin for
Los Pelambres, Centinela and Zaldivar.
Refer to Note 28 Decommissioning and Restoration Provisions.
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Antofagasta Annual Report 2019
We considered the Directors’ impairment indicator analysis and agree that
no impairment or reversal indicators existed as at 31 December 2019. Our
consideration is described below, and incorporates consideration of
sensitivity disclosures.
We evaluated the Directors’ future cash flow forecasts, and the process
by which they were drawn up, including verifying the mathematical
accuracy of the cash flow models and agreeing future capital and
operating expenditure to the latest Board approved budgets and the latest
approved Life of Mine plans. We assessed the reasonableness of the
Directors’ future capital and operating expenses in light of their historical
accuracy and the current operational results and concluded the forecasts
had been appropriately prepared, based on updated assessments of
future operational performance and cost saving initiatives.
We evaluated the appropriateness of key market related assumptions in
the Directors’ valuation models, including the copper prices, discount
rates and foreign currency exchange rates. For the discount rate, this
included our valuations experts independently calculating a discount rate
and comparing it with management’s own calculation. We noted that the
recoverable amount was particularly sensitive to changes in the long-
term copper price and foreign exchange assumptions and in the case of
Centinela, the expansion projects.
We formed an independent view of the copper price that a market
participant might use in a fair value less cost of disposal scenario. We
found that the Directors’ long- term copper price assumption of $3.10/lb
was within a reasonable range. We independently calculated a weighted
average cost of capital by making reference to market data, considering
the CGU specific risks. The discount rate used by the Directors of 8% fell
within a reasonable range. We performed sensitivity analysis around the
key assumptions within the cash flow forecasts using a range of higher
discount rates and lower long term copper prices.
In light of the above, we reviewed the appropriateness of the related
disclosures in Note 4 of the financial statements, including the sensitivities
provided, and concluded they were appropriate.
We assessed management’s process for the review of decommissioning
and restoration provisions and performed detailed testing in respect of
the cost estimates. As part of our detailed testing of the cost estimates,
we validated the existence of legal and/or constructive obligations with
respect to the provision and considered the intended method of
restoration and rehabilitation as set out in the plans approved by
Sernageomin. We read correspondence between Sernageomin and
management, as well as management’s experts.
We considered the competence and objectivity of management’s experts
who produced the cost estimates and engaged our own internal expert to
assess the work performed by management’s experts.
We checked the mathematical accuracy of management’s calculations
and assessed the appropriateness of the discount rate.
We considered the appropriateness of the related disclosures in Notes 3
and 28 to the financial statements.
Based on the procedures performed, we noted no material issues from
our work.
We determined that there were no key audit matters applicable to the Parent Company to communicate in our report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the Group and the Parent Company, the accounting processes and controls, and the industry in which they
operate.
The core mining business comprises four mining operations: Los Pelambres; Centinela; Antucoya and Zaldívar, a joint venture with Barrick Gold
Corporation operated by the Group. These mines produce copper cathodes, copper concentrates and significant volumes of by-products.
In addition to mining the Group has a transport division that provides rail and road cargo services in northern Chile, predominantly to mining
customers including to the Group’s own operations.
All of the above operations are located in Chile. In addition, the Group has corporate head offices located in both Santiago, Chile (Antofagasta
Minerals S.A.) and London, UK (Antofagasta plc). The Group also has exploration projects in various countries.
In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at each of the four mine sites
and the corporate offices in Chile, by us, as the Group engagement team and by component auditors from PwC Chile operating under our
instruction. Los Pelambres and Centinela were considered to be financially significant components of the Group, due to their contribution towards
Group profit before tax, and so required audits of their complete financial information. Antucoya and Zaldívar were also subject to an audit of their
complete financial information. We also requested that component auditors perform specified audit procedures over the corporate offices in Chile,
and specific line items of other entities within the Group to ensure that we had sufficient coverage from our audit work for each line of the Group’s
financial statements. For all other components, the Group team performed analytical review procedures.
Where work was performed by component auditors, we determined the level of involvement we needed to have in the audit work to be able to
conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Group financial statements as a whole.
UK staff were seconded to PwC Chile to be an integral part of the team. In addition the Senior Statutory Auditor visited Chile three times, and
attended key audit meetings with management, met with our component auditors and visited the Los Pelambres mine. The Group team also
reviewed the component auditor working papers, attended local audit clearance meetings, and reviewed other forms of communications dealing
with significant accounting and auditing issues.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
$70 million (2018: $64 million).
$13.0 million (2018: $14.5 million).
Group financial statements
Parent Company financial statements
How we determined it
5% of three year average profit before tax adjusted
for one off items.
1% of total assets.
Rationale for benchmark applied
For overall Group materiality, we chose to use an
underlying earnings measure as the benchmark
because an underlying measure removes the impact
of material items which do not recur from year to
year or otherwise significantly affect the underlying
trend of performance from continuing operations.
The adoption of a multi-year average benchmark for
materiality responds to longer term trends in
commodity markets and reduces volatility in the
measure year-on-year. Using our professional
judgement, we determined materiality for this year at
US$70 million, which equates to approximately 5.2%
of the current year’s profit before tax.
For the Parent Company materiality, we determined our
materiality based on total assets, which is more
applicable than a performance-related measure as the
company is an investment holding company for the
Group.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between $9 million and $60 million. Certain components were audited to a local statutory audit
materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above $3.5 million (Group audit) (2018:
$1.5 million) and $650,000 (Parent Company audit) (2018: $728,000) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
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Financial Statements
Independent auditors’ report to the members of Antofagasta plc continued
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw attention to in
respect of the Directors’ statement in the financial statements about whether the
Directors considered it appropriate to adopt the going concern basis of accounting in
preparing the financial statements and the Directors’ identification of any material
uncertainties to the Group’s and the Parent Company’s ability to continue as a going
concern over a period of at least twelve months from the date of approval of the
financial statements.
We are required to report if the Directors’ statement relating to Going Concern in
accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge
obtained in the audit.
We have nothing material to add or to draw attention to.
However, because not all future events or conditions can
be predicted, this statement is not a guarantee as to the
Group’s and Parent Company’s ability to continue as a
going concern. For example, the terms of the United
Kingdom’s withdrawal from the European Union are not
clear, and it is difficult to evaluate all of the potential
implications on the Group’s trade, customers, suppliers
and the wider economy.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06), ISAs (UK) and
the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below (required by
ISAs (UK) unless otherwise stated).
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Antofagasta Annual Report 2019
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the
year ended 31 December 2019 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
(CA06)
In light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group
We have nothing material to add or draw attention to regarding:
• The Directors’ confirmation on page 24 of the Annual Report that they have carried out a robust assessment of the principal risks facing the
Group, including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The Directors’ explanation on page 30 of the Annual Report as to how they have assessed the prospects of the Group, over what period they
have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the Directors’ statement that they have carried out a robust assessment of the principal
risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope than an audit
and only consisted of making inquiries and considering the Directors’ process supporting their statements; checking that the statements are in
alignment with the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering whether the statements are consistent
with the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the Directors, on page 140, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Parent Company’s position and
performance, business model and strategy is materially inconsistent with our knowledge of the Group and Parent Company obtained in the
course of performing our audit.
• The section of the Annual Report on page 107 describing the work of the Audit Committee does not appropriately address matters communicated
by us to the Audit Committee.
• The Directors’ statement relating to the Parent Company’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006. (CA06)
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Financial Statements
Independent auditors’ report to the members of Antofagasta plc continued
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 140, the Directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also
responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Parent Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent
in writing.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the audit committee, we were appointed by the members on 20 May 2015 to audit the financial statements for the
year ended 31 December 2015 and subsequent financial periods. The period of total uninterrupted engagement is 5 years, covering the years ended
31 December 2015 to 31 December 2019.
Jason Burkitt (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
16 March 2020
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Antofagasta Annual Report 2019
Financial Statements
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2019
Group revenue
Total operating costs
Operating profit from subsidiaries
Net share of results from associates and joint ventures
Total profit from operations, associates and joint ventures
Investment income
Interest expense
Other finance items
Net finance expense
Profit before tax
Income tax expense
Profit for the financial year from continuing operations
Profit for the financial year from discontinued operations
Profit for the year
Attributable to:
Non-controlling interests
Profit for the year attributable to the owners of the parent
Basic earnings per share
From continuing operations
From discontinued operations
Total continuing and discontinued operations
Notes
5,6
5,7
5,17
7
9
5
10
5
11
30
12
12
2019
$m
4,964.5
(3,588.7)
1,375.8
24.4
1,400.2
47.1
(111.1)
13.0
(51.0)
1,349.2
(506.1)
843.1
–
843.1
2018
$m
4,733.1
(3,388.1)
1,345.0
22.2
1,367.2
30.1
(113.5)
(31.1)
(114.5)
1.252.7
(423.7)
829.0
51.3
880.3
341.7
501.4
336.6
543.7
US cents
US cents
50.9
–
50.9
51.5
3.6
55.1
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Financial Statements
Financial Statements continued
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
Profit for the year
Items that may be or were subsequently reclassified to profit or loss:
Gains on cash flow hedges time value
(Losses)/gains on cash flow hedges intrinsic value
Losses in fair value of cash flow hedges transferred to the income statement
Current tax effects arising on amounts transferred to the income statement
Share of other comprehensive losses of equity accounted units, net of tax
Total items that may be subsequently reclassified to profit or loss
Items that will not be subsequently reclassified to profit or loss:
Actuarial (losses)/gains on defined benefit plans
Tax on items recognised through Other Comprehensive Income which will not be reclassified to
profit or loss in the future
Gains/(losses) in fair value of equity investments
Share of other comprehensive losses of equity accounted units, net of tax
Total items that will not be subsequently reclassified to profit or loss
Total other comprehensive (expense)/income
Total comprehensive income for the year
Attributable to:
Non-controlling interests
Equity holders of the Company
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
2019
$m
843.1
2018
$m
880.3
Note
5
24
24
17
0.4
(7.7)
(0.8)
2.0
–
(6.1)
26
(4.7)
18
0.9
0.3
(0.3)
(3.8)
(9.9)
833.2
6.8
1.4
(0.6)
–
(0.4)
7.2
3.9
–
(1.3)
–
2.6
9.8
890.1
30
338.6
494.6
339.3
550.8
At 31 December 2017
Adoption of new accounting standards
Balance at 1 January 2018
Profit for the year
Other comprehensive income for the year
Transfer to non-controlling interests
Dividends
At 31 December 2018
Profit for the year
Other comprehensive expense for the year
Dividends
Share capital
$m
Share premium
$m
Other reserves
(Note 29)
$m
Retained
earnings (Note
29)
$m
89.8
–
89.8
–
–
–
–
89.8
–
–
–
199.2
–
199.2
–
–
–
–
199.2
–
–
–
(12.5)
(5.8)
(18.3)
–
3.8
–
–
(14.5)
–
(3.6)
–
7,041.9
1.1
7,043.0
543.7
3.3
(38.2)
(466.9)
7,084.9
501.4
(3.2)
(470.3)
Equity
attributable
to equity
owners of
the parent
$m
7,318.4
(4.7)
7,313.7
543.7
7.1
(38.2)
(466.9)
7,359.4
501.4
(6.8)
(470.3)
Non-controlling
interests
$m
1,823.2
(2.0)
1,821.2
336.6
2.7
38.2
(120.0)
2,078.7
341.7
(3.1)
(400.0)
Total
equity
$m
9,141.6
(6.7)
9,134.9
880.3
9.8
–
(586.9)
9,438.1
843.1
(9.9)
(870.3)
At 31 December 2019
89.8
199.2
(18.1)
7,112.8
7,383.7
2,017.3
9,401.0
150
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Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
CONSOLIDATED BALANCE SHEET
As at 31 December 2019
Non-current assets
Intangible assets
Property, plant and equipment
Other non-current assets
Inventories
Investment in associates and joint ventures
Trade and other receivables
Derivative financial instruments
Equity investments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Derivative financial instruments
Liquid investments
Cash and cash equivalents
Total assets
Current liabilities
Short-term borrowings
Derivative financial instruments
Trade and other payables
Short-term decommissioning and restoration provisions
Current tax liabilities
Non-current liabilities
Medium and long-term borrowings
Derivative financial instruments
Trade and other payables
Liabilities in relation to joint venture
Post-employment benefit obligations
Decommissioning and restoration provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Equity attributable to equity owners of the parent
Non-controlling interests
Total equity
Note
2019
$m
2018
$m
14
15
19
17
20
24
18
27
19
20
24
21
21
22
24
23
28
22
24
23
17
26
28
27
29
29
29
30
150.1
9,556.7
2.1
208.0
1,024.8
48.2
1.7
5.1
8.2
11,004.9
586.4
682.4
140.2
3.1
1,539.7
653.7
3,605.5
14,610.4
(723.9)
(9.6)
(750.6)
(22.0)
(42.8)
(1,548.9)
(2,032.9)
(2.5)
(8.2)
(1.8)
(118.7)
(391.2)
(1,105.2)
(3,660.5)
(5,209.4)
9,401.0
89.8
199.2
(18.1)
7,112.8
7,383.7
2,017.3
9,401.0
150.1
9,184.1
2.6
172.7
1,056.1
56.1
–
4.7
37.2
10,663.6
576.3
873.5
90.7
0.8
863.2
1,034.4
3,438.9
14,102.5
(646.0)
–
(608.3)
(30.9)
(52.8)
(1,338.0)
(1,847.9)
–
(7.7)
(1.0)
(107.4)
(378.9)
(983.5)
(3,326.4)
(4,664.4)
9,438.1
89.8
199.2
(14.5)
7,084.9
7,359.4
2,078.7
9,438.1
The financial statements on pages 149 to 201 were approved by the Board of Directors on 16 March 2020 and signed on its behalf by
Jean-Paul Luksic
Chairman
Ollie Oliveira
Senior Independent Director
antofagasta.co.uk
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151
151
Financial Statements
Financial Statements continued
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2019
Cash flow from continuing operations
Interest paid
Income tax paid
Net cash from operating activities
Investing activities
Capital contributions to joint ventures
Dividends from associates
Disposal of subsidiary and associate
Acquisition of mining properties
Cash derecognised due to loss of control of subsidiary
Proceeds from sale of property, plant and equipment
Purchases of property, plant and equipment
Net (increase)/decrease in liquid investments
Interest received
Net cash used in investing activities
Financing activities
Dividends paid to equity holders of the Company
Dividends paid to preference shareholders of the Company
Dividends paid to non-controlling interests
Proceeds from issue of new borrowings
Repayments of borrowings
Principal elements of lease payments
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Net decrease in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the year
Notes
31
17
17
17
11
21
13
13
30
31
31
31
31
31
21,31
2019
$m
2,570.7
(76.3)
(403.6)
2,090.8
(1.8)
58.0
–
(5.2)
–
1.9
(1,073.6)
(676.5)
41.0
(1,656.2)
(470.3)
(0.1)
(400.0)
741.4
(588.1)
(92.5)
(809.6)
(375.0)
1,034.4
(375.0)
(5.7)
653.7
2018
$m
1,877.0
(68.2)
(498.0)
1,310.8
(8.1)
16.6
145.2
–
(13.2)
0.7
(872.9)
305.5
26.4
(399.8)
(466.9)
(0.1)
(120.0)
420.0
(733.8)
(33.3)
(934.1)
(23.1)
1,083.6
(23.1)
(26.1)
1,034.4
152
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Antofagasta Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1 BASIS OF PREPARATION
The financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) and with those
parts of the Companies Act 2006 applicable to companies reporting
under IFRS. For these purposes, IFRS comprise the standards issued
by the International Accounting Standards Board (“IASB”) and IFRS
Interpretations Committee (“IFRS IC”) that have been endorsed by the
European Union (“EU”).
The financial statements have been prepared on the going concern
basis. Details of the factors which have been taken into account in
assessing the Group’s going concern status are set out within the Risk
Management Framework section of the Strategic Report.
Antofagasta plc is a company limited by shares, incorporated and
domiciled in the United Kingdom at Cleveland House, 33 King Street,
London SW1Y 6RJ.
The immediate parent of the Group is Metalinvest Establishment, which
is controlled by E. Abaroa Foundation, in which members of the Luksic
family are interested.
The nature of the Group entities’ operations is mainly related to mining
and exploration activities and the transport of rail and road cargo.
A) Adoption of new accounting standards
The Group has applied IFRS 16 Leases in the current period. IFRS 16
has resulted in most of the Group’s operating leases being accounted
for similarly to finance leases under the previous IAS 17 Leases,
resulting in the recognition of additional assets within property, plant
and equipment in respect of the right-of-use lease assets, and additional
lease liabilities. The Group has applied the optional transitional
provisions of IFRS 16 which resulted in the initial impact of the new
standard being recognised as an adjustment to the balance sheet as
at 1 January 2019, with no restatement of the comparative period.
Leases are treated as explained in Note 2(V).
The implementation of IFRS 16 on 1 January 2019 resulted in the
recognition of additional lease assets within property, plant and
equipment and additional lease liabilities as at 1 January 2019 of
$132 million in each case.
The weighted average incremental borrowing rate applied to the
Group’s lease liabilities, recognised on the balance sheet at 1 January
2019 was 5.1%.
For the year ended 31 December 2018, operating lease costs of $107
million were recognised within operating expenses before depreciation
(impacting EBITDA). The adoption of IFRS 16 has resulted in the
following impact to the 2019 income statement: a decrease in operating
expenses before depreciation (and therefore an increase in EBITDA) of
$56 million, an increase in depreciation of $52 million, an increase in
finance costs of $7 million and a reduction in profit before tax of
$3 million.
The operating lease commitments as at 31 December 2018 disclosed
the Group’s 2018 Annual Report is reconciled to the lease liabilities
recognised at 1 January 2019 in the table below:
Total operating lease commitments of the 2018 Annual Report
Impact of discounting operating lease commitments to present value
Other adjustments
Former operating leases recognised on the balance sheet at 1 January 2019
Finance leases previously recognised at 31 December 2018
IFRS 16 lease liabilities at 1 January 2019
New leases entered into in the year ended 31 December 2019
Repayments of lease liabilities
Effects of changes in foreign exchange rates
Other movements
IFRS 16 lease liabilities at 31 December 2019
Analysed between:
Current liabilities
Non-current liabilities
The recognised right-of-use assets relate to the following types of assets:
Mining equipment and plant
Trucks
Facilities and infrastructure
Pick-up trucks
Office equipment
Total
$m
142.6
(12.5)
1.6
131.7
171.8
303.5
45.0
(92.4)
(12.0)
(0.1)
244.0
75.6
168.4
1 January
2019
$m
169.0
110.5
0.3
4.3
25.6
309.7
31 December
2019
$m
146.8
82.6
2.7
2.7
24.8
259.6
antofagasta.co.uk
antofagasta.co.uk
153
153
Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
B) Accounting standards issued but not yet effective
At the date of authorisation of these financial statements, the following
standards and interpretations, which have not been applied in these
financial statements, were in issue but not yet effective:
• IFRS 17 Insurance Contracts
• Sale or Contribution of Assets between an Investor and its Associate
• Amendments to References to the Conceptual Framework in IFRS
Standards
• Definition of a Business (Amendments to IFRS 3)
• Definition of Material (Amendments to IAS 1 and IAS 8)
The future application of these standards and interpretations is not
expected to have significant impact in these financial statements.
2 PRINCIPAL ACCOUNTING POLICIES
A) Accounting convention
These financial statements have been prepared under the historical cost
convention as modified by the use of fair values to measure certain
financial instruments, principally provisionally priced sales as explained
in Note 2(F) and financial derivative contracts as explained in Note 2(W).
B) Basis of consolidation
The financial statements comprise the consolidated financial statements
of Antofagasta plc (“the Company”) and its subsidiaries (collectively
“the Group”).
Subsidiaries – A subsidiary is an entity over which the Group has
control, which is the case when the Group is exposed to, or has rights
to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. The
consolidated financial statements include all the assets, liabilities,
revenues, expenses and cash flows of the Company and its subsidiaries
after eliminating inter-company balances and transactions. For partly-
owned subsidiaries, the net assets and profit attributable to non-
controlling shareholders are presented as “Non-controlling interests”
in the consolidated balance sheet and consolidated income statement.
Non-controlling interests that are present ownership interests and
entitle their holders to a proportionate share of the entity’s net assets in
the event of liquidation may be initially measured either at fair value or
at the non-controlling interests’ proportionate share of the recognised
amounts of the acquiree’s identifiable net assets. The choice of
measurement basis is made on an acquisition-by-acquisition basis.
Other types of non-controlling interests are measured at fair value or,
when applicable, on the basis specified in another IFRS. Subsequent to
acquisition, the carrying amount of non-controlling interests is the
amount of those interests at initial recognition plus the non-controlling
interests’ share of subsequent changes in equity. Total comprehensive
income is attributed to non-controlling interests even if this results in
the non-controlling interests having a deficit balance.
Changes in the Group’s ownership interests in subsidiaries that do not
result in the Group losing control over the subsidiaries are accounted
for as equity transactions. The carrying amounts of the Group’s
interests and the non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests are adjusted
and the fair value of the consideration paid or received is recognised
directly in equity and attributed to owners of the Company.
1 BASIS OF PREPARATION CONTINUED
In respect of the presentation in the cash flow statement, repayments
of lease liabilities are separated into a principal portion (within financing
activities) and an interest portion (within operating activities). Until
2018 lease repayments were recognised within cash flows from
operating activities.
Accounting policy for leases
Until 2018 leases were classified as operating leases or finance leases.
Rental costs under operating leases were charged to the income
statement account in equal annual amounts over the term of the lease.
Assets under finance leases were recognised as assets of the Group at
inception of the lease at the lower of fair value or the present value of
the minimum lease payments, derived by discounting at the interest rate
implicit in the lease. The interest element was charged within financing
costs so as to produce a constant periodic rate of interest on the
remaining balance of the liability.
From 1 January 2019, leases are recognised as a right-of-use asset and
a corresponding liability at the date at which the leased asset is available
for use by the Group. Each lease payment is allocated between the
liability and finance cost. The finance cost is charged to profit or loss
over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period. The
right-of-use asset is depreciated over the shorter of the asset’s useful
life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
• fixed payments (including in-substance fixed payments), less any
lease incentives receivable
• variable lease payments that are based on an index or a rate
• amounts expected to be payable by the lessee under residual value
guarantees
• the exercise price of a purchase option if the lessee is reasonably
certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, the lessee’s incremental
borrowing rate is used, being the rate that the lessee would have to pay
to borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability
• any lease payments made at or before the commencement date less
any lease incentives received
• any initial direct costs, and
• restoration costs
The following accounting standards, amendments and interpretations
became effective in the current reporting period:
• Prepayment Features with Negative Compensation (Amendments
to IFRS 9)
• Long-term Interests in Associates and Joint Ventures (Amendments
to IAS 28)
• Annual Improvements to IFRS Standards 2015–2017 Cycle
• IFRIC 23, Uncertainty over Income Tax Treatments
• Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)
The application of these standards and interpretations effective for the
first time in the current year has had no significant impact on the
amounts reported in these financial statements.
154
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Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
When the Group loses control of a subsidiary, a gain or loss is
recognised in profit or loss and is calculated as the difference between
(i) the aggregate of the fair value of the consideration received and the
fair value of any retained interest and (ii) the previous carrying amount
of the assets (including goodwill), and liabilities of the subsidiary and any
non-controlling interests. When assets of the subsidiary are carried at
revalued amounts or fair values and the related cumulative gain or loss
has been recognised in other comprehensive income and accumulated
in equity, the amounts previously recognised in other comprehensive
income and accumulated in equity are accounted for as if the Group
had directly disposed of the relevant assets (ie reclassified to profit or
loss or transferred directly to retained earnings as specified by
applicable IFRSs). The fair value of any investment retained in the
former subsidiary at the date when control is lost is regarded as the
fair value on initial recognition for subsequent accounting under
IFRS 9 Financial Instruments: Recognition and Measurement or, when
applicable, the cost on initial recognition of an investment in an associate
or a joint venture.
Acquisitions and disposals are treated as explained in Note 2(G) relating
to business combinations and goodwill.
Investments in associates
C)
An associate is an entity over which the Group is in a position to
exercise significant influence, but not control or joint control, through
the power to participate in the financial and operating policy decisions
of that entity. The results and assets and liabilities of associates are
incorporated in these consolidated financial statements using the equity
method of accounting. This requires recording the investment initially at
cost to the Group and then, in subsequent periods, adjusting the
carrying amount of the investment to reflect the Group’s share of the
associate’s results less any impairment and any other changes to the
associate’s net assets such as dividends. When the Group loses control
of a former subsidiary but retains an investment in associate in that
entity the initial carrying value of the investment in associate is recorded
at its fair value at that point. When the Group’s share of losses of an
associate exceeds the Group’s interest in that associate the Group
discontinues recognising its share of further losses. Additional losses
are recognised only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate.
D) Joint arrangements
A joint arrangement is an arrangement of which two or more parties
have joint control. Joint arrangements are accounted depending on the
nature of the arrangement.
i) Joint ventures – are accounted for using the equity method in
accordance with IAS 28 Investment in Associates and Joint
Ventures as described in Note 2I.
ii) Joint operations – are accounted for recognising directly the assets,
obligations, revenues and expenses of the joint operator in the joint
arrangement. The assets, liabilities, revenues and expenses are
accounted for in accordance with the relevant IFRS.
When a Group entity transacts with its joint arrangements, profits and
losses resulting from the transactions with the joint arrangements are
recognised in the Group’s consolidated financial statements only to
the extent of interests in the joint arrangements that are not related to
the Group.
E) Currency translation
The functional currency for each entity in the Group is determined as
the currency of the primary economic environment in which it operates.
Transactions in currencies other than the functional currency of the
entity are translated at the exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in currencies
other than the functional currency are retranslated at year end
exchange rates. Gains and losses on retranslation are included in net
profit or loss for the period within other finance items.
The presentational currency of the Group and the functional currency
of the Company is the US dollar. On consolidation, income statement
items for entities with a functional currency other than the US dollar are
translated into US dollars at average rates of exchange. Balance sheet
items are translated at period-end exchange rates. Exchange
differences on translation of the net assets of such entities are taken
to equity and recorded in a separate currency translation reserve.
Cumulative translation differences arising after the transition date to
IFRS are recognised as income or as expenses in the income statement
in the period in which an operation is disposed of.
On consolidation, exchange gains and losses which arise on balances
between Group entities are taken to reserves where that balance is, in
substance, part of the net investment in a foreign operation, ie where
settlement is neither planned nor likely to occur in the foreseeable
future. All other exchange gains and losses on Group balances are dealt
with in the income statement.
Fair value adjustments and any goodwill arising on the acquisition of
a foreign entity are treated as assets of the foreign entity and translated
at the period-end rate.
F) Revenue recognition
Revenue represents the value of goods and services supplied to
third parties during the year. Revenue is measured at the fair value
of consideration received or receivable, and excludes any applicable
sales tax.
Revenue is recognised when the Group satisfies a performance
obligation by transferring a promised good or service (ie an asset)
to a customer. An asset is transferred when (or as) the customer
obtains control of that asset.
For the Group’s mining products the customer generally gains control
over the material when it has been loaded at the port of loading, and
so this is the point of revenue recognition. The Group sells a significant
proportion of its products on Cost, Insurance & Freight (CIF) Incoterms,
which means that the Group is responsible for shipping the product
to a destination port specified by the customer. The shipping service
represents a separate performance obligation, and is recognised
separately from the sale of the material when the shipping service
has been provided, along with the associated costs. Shipment revenue
is recognised at the contracted price as this reflects the stand alone
selling price.
Revenue from mining activities is recorded at the invoiced amounts
with an adjustment for provisional pricing at each reporting date, as
explained below. For copper and molybdenum concentrates, which are
sold to smelters and roasting plants for further processing, the invoiced
amount is the market value of the metal payable by the customer, net of
deductions for tolling charges. Revenue includes amounts from the sale
of by-products.
antofagasta.co.uk
antofagasta.co.uk
155
155
Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 PRINCIPAL ACCOUNTING POLICIES CONTINUED
Copper and molybdenum concentrate sale agreements and copper
cathode sale agreements generally provide for provisional pricing of
sales at the time of shipment, with final pricing based on the monthly
average London Metal Exchange (“LME”) copper price or the monthly
average market molybdenum price for specified future periods. This
normally ranges from one to four months after delivery to the customer.
For sales contracts, which contain provisional pricing mechanisms, the
total receivable balance is measured at fair value through profit or loss.
Gains and losses from the marking-to-market of open sales are
recognised through adjustments to other income as part of revenues
in the income statement and to trade receivables in the balance sheet.
The fair value calculations are based on forward prices at the period
end for copper concentrate and cathode sales, and period-end average
prices for molybdenum concentrate sales due to the absence of a
futures market.
For the Transport division, revenue in respect of its transportation
and ancillary services is recognised in line with the performance of
those services.
Interest income is accrued on a time basis, by reference to the principal
outstanding and the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying amount.
Dividend income from equity investments, associates and joint ventures
is recognised when the shareholders’ right to receive payment has
been established. For associates and joint ventures, it is recorded as
a decrease of the investment.
G) Business combinations and goodwill
Acquisitions of businesses are accounted for using the acquisition
method. The consideration transferred in a business combination is
measured at fair value, which is calculated as the sum of the
acquisition-date fair values of the assets transferred by the Group,
liabilities incurred by the Group to the former owners of the acquiree
and the equity interests issued by the Group in exchange for control of
the acquiree. The results of businesses acquired during the year are
brought into the consolidated financial statements from the effective
date of acquisition. The identifiable assets, liabilities and contingent
liabilities of a business, which can be measured reliably, are recorded
at their provisional fair values at the date of acquisition. Provisional
fair values are finalised within 12 months of the acquisition date.
Acquisition-related costs are expensed as incurred.
When the consideration transferred by the Group in a business
combination includes assets or liabilities resulting from a contingent
consideration arrangement, the contingent consideration is measured at
its acquisition-date fair value and included as part of the consideration
transferred in a business combination. Changes in the fair value
of the contingent consideration that qualify as measurement period
adjustments are adjusted retrospectively, with corresponding
adjustments against goodwill. Measurement period adjustments are
adjustments that arise from additional information obtained during the
“measurement period” (which cannot exceed one year from the
acquisition date) about facts and circumstances that existed at the
acquisition date.
The subsequent accounting for changes in the fair value of the
contingent consideration that do not qualify as “measurement period”
adjustments depends on how the contingent consideration is classified.
Contingent consideration that is classified as equity is not remeasured at
subsequent reporting dates and its subsequent settlement is accounted
for within equity. Contingent consideration that is classified as an asset
or a liability is remeasured at subsequent reporting dates in accordance
with IFRS 9.
156
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Antofagasta Annual Report 2019
When a business combination is achieved in stages, the Group’s
previously held equity interest in the acquiree is remeasured to fair
value at the acquisition date (ie the date when the Group obtains
control) and the resulting gain or loss, if any, is recognised in profit
or loss. Amounts arising from interests in the acquiree prior to the
acquisition date that have previously been recognised in other
comprehensive income are reclassified to profit or loss where such
treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the
end of the reporting period in which the combination occurs, the Group
reports provisional amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during the
measurement period (see above), or additional assets or liabilities are
recognised, to reflect new information obtained about facts and
circumstances which existed at the acquisition date that, if known,
would have affected the amounts recognised at that date.
Goodwill arising in a business combination is measured as the excess
of the sum of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the fair value of the acquirer’s
previously held equity interest in the acquiree (if any) over the net
identifiable assets acquired and liabilities assumed. Any goodwill on the
acquisition of subsidiaries is separately disclosed, while any goodwill
on the acquisition of associates and joint ventures is included within
investments in equity accounted entities. Internally generated goodwill
is not recognised. Where the fair values of the identifiable net assets
acquired exceed the sum of the consideration transferred, the surplus
is credited to the profit or loss in the period of acquisition as a bargain
purchase gain.
The Group sometimes enters into earn-in arrangements whereby the
Group acquires an interest in a project company in exchange for
funding exploration and evaluation expenditure up to a specified level
of expenditure or a specified stage in the life of the project. Funding is
usually conditional on the achievement of key milestones by the partner.
Typically there is no consideration transferred or funding liability on the
effective date of acquisition of the interest in the project company and
no goodwill is recognised on this type of transaction.
The results of businesses sold during the year are included in the
consolidated financial statements for the period up to the effective date
of disposal. Gains or losses on disposal are calculated as the difference
between the sales proceeds (net of expenses) and the net assets
attributable to the interest which has been sold. Where a disposal
represents a separate major line of business or geographical area of
operations, the net results attributable to the disposed entity are shown
separately in the income statement as a discontinued operation.
H) Exploration and evaluation expenditure
Exploration and evaluation costs, other than those incurred in acquiring
exploration licences, are expensed in the year in which they are
incurred. When a mining project is considered to be commercially viable
(normally when the project has completed a pre-feasibility study, and
the start of a feasibility study has been approved) all further directly
attributable pre-production expenditure is capitalised. Capitalisation of
pre-production expenditure ceases when commercial levels of
production are achieved.
Costs incurred in acquiring exploration and mining licences are
classified as intangible assets when construction of the related mining
operation has not yet commenced. When construction commences the
licences are transferred from intangible assets to the mining properties
category within property, plant and equipment.
Stripping costs
I)
Pre-stripping and operating stripping costs are incurred in the course
of the development and operation of open-pit mining operations.
Pre-stripping costs relate to the removal of waste material as part of
the initial development of an open-pit, in order to allow access to the
ore body. The capitalised costs are depreciated once production
commences on a unit of production basis, in proportion to the volume
of ore extracted in the year compared with total proven and probable
reserves for that pit at the beginning of the year.
related development expenditure is capitalised. This includes costs
incurred in preparing the site for mining operations, including pre-
stripping costs. Capitalisation ceases when the mine is capable of
commercial production, with the exception of development costs
which give rise to a future benefit.
Interest on borrowings related to construction or development of
projects is capitalised, until such time as the assets are substantially
ready for their intended use or sale which, in the case of mining
properties, is when they are capable of commercial production.
Operating stripping costs relate to the costs of extracting waste material
as part of the ongoing mining process. The ongoing mining and
development of the Group’s open-pit mines is generally performed via
a succession of individual phases. The costs of extracting material from
an open-pit mine are generally allocated between ore and waste
stripping in proportion to the tonnes of material extracted. The waste
stripping costs are generally absorbed into inventory and expensed as
that inventory is processed and sold. Where the stripping costs relate to
a significant stripping campaign which is expected to provide improved
access to an identifiable component of the ore body (typically an
individual phase within the overall mine plan), the costs of removing
waste in order to improve access to that part of the ore body will be
capitalised within property, plant and equipment. The capitalised costs
will then be amortised on a unit of production basis, in proportion to the
volume of ore extracted compared with the total ore contained in the
component of the pit to which the stripping campaign relates.
Intangible assets
J)
Intangible assets with finite useful lives that are acquired separately
are carried at cost less accumulated amortisation and accumulated
impairment losses. Exploration and mining licences are classified as
intangible assets when construction of the related mining operation has
not yet commenced. When construction commences the licences are
transferred from intangible assets to the mining properties category
within property, plant and equipment. Amortisation is recognised on a
straight-line basis over the estimated useful lives of the intangible
assets. The estimated useful life and amortisation method are reviewed
at the end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis.
Intangible assets acquired in a business combination and recognised
separately from goodwill are initially recognised at their fair value at
the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a
business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis
as intangible assets that are acquired separately.
An intangible asset is derecognised on disposal, or when no future
economic benefits are expected from use. Gains or losses arising
from derecognition of an intangible asset, measured as the difference
between the net disposal proceeds and the carrying amount of the
asset, are recognised in profit or loss when the asset is derecognised.
K) Property, plant and equipment
The costs of mining properties and leases, which include the costs of
acquiring and developing mining properties and mineral rights, are
capitalised as property, plant and equipment in the year in which they
are incurred, when a mining project is considered to be commercially
viable (normally when the project has completed a pre-feasibility study,
and the start of a feasibility study has been approved). The cost of
property, plant and equipment comprises the purchase price and any
costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner
intended. Once a project has been established as commercially viable,
L) Depreciation of property, plant and equipment
Depreciation of an asset begins when it is available for use, ie when it is
in the location and condition necessary for it to be capable of operating
in the manner intended.
Property, plant and equipment is depreciated over its useful life,
or over the remaining life of the operation if shorter, to residual value.
The major categories of property, plant and equipment are depreciated
as follows:
(i) Land – freehold land is not depreciated unless the value of the land
is considered to relate directly to a particular mining operation, in
which case the land is depreciated on a straight-line basis over the
expected mine life.
(ii) Mining properties – mining properties, including capitalised
financing costs, are depreciated on a unit of production basis, in
proportion to the volume of ore extracted in the year compared
with total proven and probable reserves at the beginning of
the year.
(iii) Buildings and infrastructure – straight-line basis over 10 to
25 years.
(iv) Railway track (including trackside equipment) – straight-line basis
over 20 to 25 years.
(v) Wagons and rolling stock – straight-line basis over 10 to
20 years.
(vi) Machinery, equipment and other assets – are depreciated on a
unit of production basis, in proportion to the volume of ore/material
processed or on a straight-line basis over 5 to 20 years.
(vii) Assets under construction – no depreciation until asset is
available for use.
(viii) Lease right-of-use assets – depreciated over the shorter of the
asset’s useful life and the lease term on a straight-line basis.
(ix) Stripping cost – The capitalised costs will then be amortised
on a unit of production basis, in proportion to the volume of ore
extracted compared with the total ore contained in the component
of the pit to which the stripping campaign relates (Note 2I).
Residual values and useful lives are reviewed, and adjusted if
appropriate, at least annually, and changes to residual values and useful
lives are accounted for prospectively.
M)
Impairment of property, plant and equipment and intangible
assets
Property, plant and equipment and finite life intangible assets are
reviewed for impairment if there is any indication that the carrying
amount may not be recoverable. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the
extent of the impairment (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the asset
belongs. Any intangible asset with an indefinite useful life is tested for
impairment annually and whenever there is an indication that the asset
may be impaired.
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Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
O) Taxation
Tax expense comprises the charges or credits for the year relating to
both current and deferred tax.
Current tax is based on taxable profit for the year. Taxable profit may
differ from net profit as reported in the income statement because it
excludes items of income or expense that are taxable and deductible in
different years and also excludes items that are not taxable or
deductible. The liability for current tax is calculated using tax rates for
each entity in the consolidated financial statements which have been
enacted or substantively enacted at the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
temporary differences (ie differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding
tax basis used in the computation of taxable profit). Deferred tax is
accounted for using the balance sheet liability method and is provided
on all temporary differences with certain limited exceptions as follows:
(i)
tax payable on undistributed earnings of subsidiaries, associates
and joint ventures is provided except where the Group is able to
control the remittance of profits and it is probable that there will
be no remittance of past profits earned in the foreseeable future;
(ii) deferred tax is not provided on the initial recognition of an asset
or liability in a transaction that does not affect accounting profit or
taxable profit and is not a business combination; nor is deferred tax
provided on subsequent changes in the carrying value of such
assets and liabilities, for example where they are depreciated; and
(iii)
the initial recognition of any goodwill.
Deferred tax assets are recognised only to the extent that it is probable
that they will be recovered through sufficient future taxable profit. The
carrying amount of deferred tax assets is reviewed at each balance
sheet date.
Deferred tax is calculated at the tax rates that are expected to apply in
the period when the liability is settled or the asset is realised. Deferred
tax is charged or credited in the income statement, except when it
relates to items charged or credited directly to equity, in which case the
deferred tax is also taken directly to equity.
P) Provisions
Provisions are recognised when the Group has a present obligation
(legal or constructive) as a result of a past event, it is probable that the
Group will be required to settle the obligation and a reliable estimate can
be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end of the
reporting period, taking into account the risks and uncertainties
surrounding the obligation. When a provision is measured using the
cash flows estimated to settle the present obligation, its carrying amount
is the present value of those cash flows (when the effect of the time
value of money is material).
When some or all of the economic benefits required to settle a provision
are expected to be recovered from a third party, a receivable is
recognised as an asset if it is virtually certain that reimbursement will be
received and the amount of the receivable can be measured reliably.
2 PRINCIPAL ACCOUNTING POLICIES CONTINUED
Recoverable amount is the higher of fair value less costs of disposal
and value in use. Fair value less costs of disposal reflects the net
amount the Group would receive from the sale of the asset in an orderly
transaction between market participants. For mining assets this would
generally be determined based on the present value of the estimated
future cash flows arising from the continued use, further development
or eventual disposal of the asset. The estimates used in determining
the present value of those cash flows are those that an independent
market participant would consider appropriate. Value in use reflects
the expected present value of the future cash flows which the Group
would generate through the operation of the asset in its current
condition, without taking into account potential enhancements or
further development of the asset. The fair value less costs of disposal
valuation will normally be higher than the value in use valuation, and
accordingly the Group typically applies this valuation estimate in its
impairment assessments.
If the recoverable amount of an asset or cash-generating unit is
estimated to be less than its carrying amount, the carrying amount is
reduced to the recoverable amount. An impairment charge is
recognised in the income statement immediately. Where an impairment
subsequently reverses, the carrying amount is increased to the revised
estimate of recoverable amount, but so that the increased carrying
amount does not exceed the carrying value that would have been
determined if no impairment had previously been recognised. A reversal
is recognised in the income statement immediately.
Inventory
N)
Inventory consists of raw materials and consumables, work-in-progress
and finished goods. Work-in-progress represents material that is in the
process of being converted into finished goods. The conversion process
for mining operations depends on the nature of the copper ore. For
sulphide ores, processing includes milling and concentrating and results
in the production of copper concentrate. For oxide ores, processing
includes leaching of stockpiles, solvent extraction and electrowinning
and results in the production of copper cathodes. Finished goods
consist of copper concentrate containing gold and silver at Los
Pelambres and Centinela and copper cathodes at Centinela and
Antucoya. Los Pelambres and Centinela also produce molybdenum
as a by-product.
Inventory is valued at the lower of cost, on a weighted average basis,
and net realisable value. Net realisable value represents estimated
selling price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution. Cost of finished goods
and work-in-progress is production cost and for raw materials and
consumables it is purchase price. Production cost includes:
• labour costs, raw material costs and other costs directly attributable
to the extraction and processing of ore;
• depreciation of plant, equipment and mining properties directly
involved in the production process; and
• an appropriate portion of production overheads.
Stockpiles represent ore that is extracted and is available for further
processing. Costs directly attributable to the extraction of ore are
generally allocated as part of production costs in proportion to the
tonnes of material extracted. Operating stripping costs are generally
absorbed into inventory, and therefore expensed as that inventory is
processed and sold. If ore is not expected to be processed within 12
months of the statement of financial position date it is included within
non-current assets. If there is significant uncertainty as to when any
stockpiled ore will be processed it is expensed as incurred.
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Q) Provisions for decommissioning and restoration costs
An obligation to incur decommissioning and restoration costs occurs
when environmental disturbance is caused by the development or
ongoing production of a mining property. Costs are estimated on the
basis of a formal closure plan and are subject to regular formal review.
Such costs arising from the installation of plant and other site
preparation work, discounted to their net present value, are provided
and capitalised at the start of each project, as soon as the obligation to
incur such costs arises. These decommissioning costs are charged
against profit or loss over the life of the mine, through depreciation
of the asset and unwinding or amortisation of the discount on the
provision. Depreciation is included in operating costs while the
unwinding of the discount is included within other finance expenses.
Changes in the measurement of a liability relating to the
decommissioning of plant or other site preparation work are added to,
or deducted from, the cost of the related asset in the current year.
The costs for restoration of site damage, which is created on an
ongoing basis during production, are provided for at their net present
values and charged against profit or loss as extraction progresses.
Changes in the measurement of a liability relating to site damage
created during production, which relate to changes in the estimate of
the closure costs, are charged against operating profit, and changes
relating to the discount rate and foreign exchange are recorded within
other finance expenses.
R) Share-based payments
For cash-settled share-based payments, a liability is recognised for
the goods or services acquired, measured initially at the fair value of the
liability. At the end of each reporting period until the liability is settled,
and at the date of settlement, the fair value of the liability is remeasured,
with any changes in fair value recognised in profit or loss for the year.
The Group currently does not have any equity settled share-based
payments to employees or third parties.
S) Post-employment benefits
The Group operates defined contribution schemes for a limited number
of employees. For such schemes, the amount charged to the income
statement is the contributions paid or payable in the year.
Employment terms may also provide for payment of a severance
indemnity when an employment contract comes to an end. This is
typically at the rate of one month for each year of service (subject in
most cases to a cap as to the number of qualifying years of service) and
based on final salary level. The severance indemnity obligation is treated
as an unfunded defined benefit plan, and the calculation is based on
valuations performed by an independent actuary using the projected
unit credit method, which are regularly updated.
The obligation recognised in the balance sheet represents the present
value of the severance indemnity obligation. Actuarial gains and losses
are immediately recognised in other comprehensive income.
T) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held on call
with banks, highly liquid investments that are readily convertible into
known amounts of cash and which are subject to insignificant risk of
changes in value, net of bank overdrafts which are repayable on
demand. Cash and cash equivalents normally have a maturity period of
90 days or less.
U) Liquid investments
Liquid investments represent highly liquid current asset investments
such as term deposits and managed funds invested in high quality fixed
income instruments. They do not meet the IAS 7 definition of cash and
cash equivalents, normally because even if readily accessible, the
underlying investments have an average maturity profile greater than
90 days from the date first entered into. These assets are designated
as fair value through profit or loss.
V) Leases
Until 2018 leases were classified as operating leases or finance leases.
Rental costs under operating leases were charged to the income
statement account in equal annual amounts over the term of the lease.
Assets under finance leases were recognised as assets of the Group at
inception of the lease at the lower of fair value or the present value of
the minimum lease payments derived by discounting at the interest rate
implicit in the lease. The interest element was charged within financing
costs so as to produce a constant periodic rate of interest on the
remaining balance of the liability.
From 1 January 2019, leases are recognised as a right-of-use asset and
a corresponding liability at the date at which the leased asset is available
for use by the Group. Each lease payment is allocated between the
liability and finance cost. The finance cost is charged to profit or loss
over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period. The
right-of-use asset is depreciated over the shorter of the asset’s useful
life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
• fixed payments (including in-substance fixed payments), less any
lease incentives receivable
• variable lease payments that are based on an index or a rate
• amounts expected to be payable by the lessee under residual value
guarantees
• the exercise price of a purchase option if the lessee is reasonably
certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, the lessee’s incremental
borrowing rate is used, being the rate that the lessee would have to pay
to borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability
• any lease payments made at or before the commencement date less
any lease incentives received
• any initial direct costs, and
• restoration costs,
The following accounting standards, amendments and interpretations
became effective in the current reporting period:
• Prepayment Features with Negative Compensation (Amendments
to IFRS 9)
• Long-term Interests in Associates and Joint Ventures (Amendments
to IAS 28)
• Annual Improvements to IFRS Standards 2015–2017 Cycle
• IFRIC 23, Uncertainty over Income Tax Treatments
• Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)
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Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(vi) Derivative financial instruments – As explained in Note 24(D),
the Group periodically uses derivative financial instruments to
reduce exposure to foreign exchange, interest rate and commodity
price movements. The Group does not use such derivative
instruments for trading purposes. The Group has applied the
hedge accounting provisions of IFRS 9 Financial Instruments. The
effective portion of changes in the fair value of derivative financial
instruments that are designated and qualify as hedges of future
cash flows have been recognised directly in equity, with such
amounts subsequently recognised in profit or loss in the period
when the hedged item affects profit or loss. Any ineffective portion
is recognised immediately in profit or loss. Realised gains and
losses on commodity derivatives recognised in profit or loss are
recorded within revenue. The time value element of changes in
the fair value of derivative options is recognised within other
comprehensive income.
Financial assets with embedded derivatives are considered in
their entirety when determining the appropriate classification and
measurement. The treatment of embedded derivatives arising from
provisionally priced commodity sales contracts is set out in further
detail in Note 2(F) relating to revenue. Derivatives embedded in
financial liabilities are treated as separate derivatives when their
risks and characteristics are not closely related to those of the host
contract and the host contract is not measured at fair value.
Changes in fair value are reported in profit or loss for the year.
(vii) Impairment of financial assets – The Group applies the forward-
looking expected credit loss model to its financial assets, other than
those measured at fair value through profit or loss. The Group
applies the IFRS 9 “simplified approach” to its trade receivables,
measuring the loss allowance at the lifetime expected credit loss.
For other financial assets, where the credit risk has not increased
significantly since initial recognition, the loss allowance is
measured at the 12 month expected credit loss. If there has been a
significant increase in credit risk, the loss allowance is measured
at the lifetime expected credit loss. Increases or decrease to the
credit loss allowance are recognised immediately in profit or loss.
X) Exceptional items
Exceptional items are material items of income and expense which are
non-regular or non-operating and typically non-cash movements. Profit
excluding exceptional items is considered to be a useful performance
measure as it provides an indication of the underlying earnings of the
Group’s operations, excluding these one-off items.
Y) Rounding
All amounts disclosed in the financial statements and notes have been
rounded off to the nearest million dollars unless otherwise stated.
These policies have been consistently applied to all the years presented,
unless otherwise stated.
2 PRINCIPAL ACCOUNTING POLICIES CONTINUED
The application of these standards and interpretations, effective for
the first time in the current year, has had no significant impact on the
amounts reported in these financial statements.
W) Other financial instruments
Financial assets and financial liabilities are recognised on the Group’s
balance sheet when the Group becomes a party to the contractual
provisions of the instrument. Financial assets are derecognised when
the contractual rights to the cash flows from the financial asset expire
or the Group has transferred the asset to another party. Financial
liabilities are removed from the Group’s balance sheet when they are
extinguished – ie when the obligation specified in the contract has been
discharged, cancelled or expired.
(i)
Investments – Equity investments which are not subsidiaries,
associates or joint ventures are recognised at fair value. The
Group generally applies an irrevocable election for each equity
investment to designate them as Fair Value through Other
Comprehensive Income (FVOCI). Dividends from equity
investments are recognised in the income statement when the
right to receive payment is established.
(ii) Trade and other receivables – As explained above, for sales
contracts which contain provisional pricing mechanisms the total
receivable balance is measured at fair value through profit or loss.
Other receivable balances are recognised at amortised cost.
(iii) Trade and other payables – Trade and other payables are
generally not interest-bearing and are normally stated at their
nominal value.
(iv) Borrowings (loans and preference shares) – Interest-bearing
loans and bank overdrafts are initially recorded at the proceeds
received, net of direct issue costs. They are subsequently
measured at amortised cost using the effective interest method,
with interest expense recognised on an effective yield basis. The
effective interest method is a method of calculating the amortised
cost of a financial liability and of allocating interest expense over
the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments through the
expected life of the financial liability, or, where appropriate, a
shorter period. Finance charges, including premiums payable on
settlement or redemption and direct issue costs, are accounted for
on an accruals basis using the effective interest rate method.
Amounts are either recorded as financing costs in profit or loss or
capitalised in accordance with the accounting policy set out
in Note 2(K). Finance charges are added to the carrying amount of
the instrument to the extent that they are not settled in the period
in which they arise.
The Sterling-denominated preference shares issued by the
Company carry a fixed rate of return without the right to
participate in any surplus. They are accordingly classified within
borrowings and translated into US dollars at period-end rates
of exchange. Preference share dividends are included within
finance costs.
(v) Equity instruments – Equity instruments issued are recorded at
the proceeds received, net of direct issue costs. Equity instruments
of the Company comprise its Sterling-denominated issued ordinary
share capital and related share premium. As explained in Note
2(E), the presentational currency of the Group and the functional
currency of the Company is US dollars, and ordinary share capital
and share premium are translated into US dollars at historical
rates of exchange based on dates of issue.
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3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
Determining many of the amounts included in the financial statements
involves the use of judgement and/or estimation. These judgements and
estimates are based on management’s best knowledge of the relevant
facts and circumstances having regard to prior experience, but actual
results may differ from the amounts included in the financial statements.
Information about such judgements and estimates is included in the
principal accounting policies in Note 2 or the other notes to the financial
statements, and the key areas are set out below.
A) Judgements
The following are the critical judgements, apart from those involving
estimations (which are dealt with separately), that the Directors have
made in the process of applying the Group’s accounting policies and
that have the most significant effect on the amounts recognised in the
financial statements.
(i)
Capitalisation of property, plant and equipment of project costs
As explained in Note 2(K) the costs of developing mining properties
are capitalised as property, plant and equipment when the mining
project is considered to be commercially viable. Commercial
viability is normally considered to be demonstrable when the
project has completed a pre-feasibility study, and the start of a
feasibility study has been approved. Management reviews amounts
capitalised to ensure that the treatment of that expenditure as
capital rather than operating expenditure is reasonable, in
particular in respect of the commercial viability of the project.
As at 31 December 2019 $38.0 million of feasibility study costs
relating to projects which are still under evaluation and have not
yet received final Board approval were capitalised within property,
plant and equipment. Should the Group ultimately take the decision
to abandon any of these projects, and not continue with their
development, then it is likely that the corresponding element of
the capitalised feasibility study costs would need to be impaired.
The capitalisation of the construction and commissioning costs
for a new mining operation ceases, and depreciation commences,
when the operation is in the condition necessary for it to be
capable of operating in the manner intended (which is termed as
achieving commercial production).
The determination of the commercial production date requires
judgement which involves the consideration of a number of
relevant factors, including the successful completion of
commissioning tests and the processing and production levels
achieved compared with expected design capacity.
(ii) Deferred taxation
As explained in Note 2(O), deferred tax assets are recognised only
to the extent that it is probable that they will be recovered through
sufficient future taxable profits. Generally under Chilean tax law
most tax losses can be carried forward indefinitely, and so the
expiry of tax losses is not generally an issue. The key assumptions
to which the forecasts of the probable level of future taxable profits
are most sensitive are future commodity prices, production levels
and operating costs.
As set out in Note 27, the Group has recognised $8.2 million of
deferred tax assets as at 31 December 2019, with the majority of
these deferred tax assets relating to short-term timing differences
and provisions. The Group had unused tax losses of $435.7 million
available for offset against future profits. A deferred tax asset of
$5.2 million has been recognised in respect of $19.2 million of
these losses, with no deferred tax asset recognised in respect
of the remaining $416.5 million of tax losses. If the Group’s
assessment as to the recoverability of those tax losses were to
change, then potentially additional deferred tax assets of up to
$112.0 million could be recognised.
No deferred tax liability is recognised in respect of the
undistributed earnings of subsidiaries where it is not likely that
those profits will be distributed in the foreseeable future. When
determining whether it is likely that distributions will be made in the
foreseeable future, and what is the appropriate foreseeable future
period for this purpose, the Group considers factors such as the
predictability of the likely future Group dividends, taking into
account the Group’s dividend policy and the level of potential
volatility of the Group’s future earnings, as well as the current level
of distributable reserves at the Antofagasta plc entity level. As set
out in Note 27, at 31 December 2019 deferred withholding tax
liabilities of $36.6 million have been recognised, which relate to
undistributed earnings of subsidiaries where it is considered likely
that the corresponding profits will be distributed in the foreseeable
future. The value of the remaining undistributed earnings of
subsidiaries for which deferred tax liabilities have not been
recognised was $5.065 million.
B) Estimates
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are
addressed below.
(i) Non-financial assets impairment
As explained in Note 2(M), the Group reviews the carrying value
of its intangible assets and property, plant and equipment to
determine whether there is any indication that those assets are
impaired. In making assessments for impairment, assets that do
not generate independent cash flows are allocated to an
appropriate cash generating unit (“CGU”). The recoverable amount
of those assets, or CGU, is measured at the higher of their fair
value less costs of disposal and value in use.
Details of the valuations and sensitivities of the Group’s mining
operations are included in Note 4, including quantitative sensitivity
analyses.
Management necessarily applies its judgement in allocating assets
to CGUs, in estimating the probability, timing and value of
underlying cash flows and in selecting appropriate discount rates
to be applied within the fair value less costs of disposal calculation.
The key assumptions are set out in Note 2(M) and Note 4.
Subsequent changes to CGU allocation, licensing status, reserves
and resources, price assumptions or other estimates and
assumptions in the fair value less cost to dispose calculation could
impact the carrying value of the respective assets.
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Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(ii)
Inventory valuation
The valuation of work in progress inventories involves a number of
estimates, including the average ore grade, volume and density of
ore stockpiles, and the total recoveries and the speed of recovery
in respect of material on the leach piles. Evaluating the net
realisable value of the inventories also requires an estimate of the
likely future copper price for the periods when it is expected that
the inventories will be completed and sold. As set out in Note 19,
the value of work in progress inventories at 31 December 2019
was $484.7 million.
If the copper spot price at 31 December 2019 (used for forecasting
the likely sales price of short-term inventories) had been 5%
lower, this would have resulted in a net realisable value provision
and charge to the P&L of approximately $10 million.
(iii) Useful economic lives of property, plant and equipment and ore reserves
estimates
As explained in Note 2(L), mining properties, including capitalised
financing costs, are depreciated in proportion to the volume of ore
extracted in the year compared with total proven and probable
reserves at the beginning of the year.
There are numerous uncertainties inherent in estimating ore
reserves, and assumptions that were valid at the time of estimation
may change when new information becomes available. These
include assumptions as to grade estimates and cut-off grades,
recovery rates, commodity prices, exchange rates, production
costs, capital costs, processing and reclamation costs and discount
rates. The actual volume of ore extracted and any changes in these
assumptions could affect prospective depreciation rates and
carrying values.
The majority of other items of property, plant and equipment are
depreciated on a straight-line basis over their useful economic
lives. Management reviews the appropriateness of useful economic
lives at least annually and, again, any changes could affect
prospective depreciation rates and asset carrying values.
The total depreciation and amortisation charge for 2019 was
$914.3 million, and so as a very simplistic sensitivity, a 10%
adjustment and the useful economic lives of all of the Group’s
property, plant and equipment would result in an impact of
approximately $90 million on the annual depreciation charge.
(iv) Provisions for decommissioning and site restoration costs
As explained in Note 2(Q), provision is made, based on net present
values, for decommissioning and site rehabilitation costs as soon
as the obligation arises following the development or ongoing
production of a mining property. The provision is based on a
closure plan prepared with the assistance of external consultants.
Management uses its judgement and experience to provide for and
(in the case of capitalised decommissioning costs) amortise these
estimated costs over the life of the mine. The ultimate cost of
decommissioning and site rehabilitation is uncertain and cost
estimates can vary in response to many factors including changes
to relevant legal requirements, the emergence of new restoration
techniques or experience at other mine sites.
The expected timing and extent of expenditure can also change,
for example in response to changes in ore reserves or processing
levels. As a result, there could be significant adjustments to the
provisions established which would affect future financial results.
Details of the decommissioning and restoration provisions
are set out in Note 28. The total value of these provisions as
at 31 December 2019 was $413.2 million.
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Antofagasta Annual Report 2019
4 ASSET SENSITIVITIES
Other asset sensitivities
There were no indicators of potential impairment, or reversal of
previous impairments, for the Group’s operations at the 2019 year-end,
and accordingly no impairment reviews have been performed.
However, in order to provide an indication of the sensitivities of the
recoverable amount of the Group’s mining operations, a valuation and
sensitivity analysis has been performed.
The recoverable amount is the higher of fair value less costs of
disposal and value in use. Fair value less costs of disposal reflects the
net amount the Group would receive from the sale of the asset in an
orderly transaction between market participants. For mining assets this
would generally be determined based on the present value of the
estimated future cash flows arising from the continued use, further
development or eventual disposal of the asset. Value in use reflects the
expected present value of the future cash flows which the Group would
generate through the operation of the asset in its current condition,
without taking into account potential enhancements or further
development of the asset. The fair value less costs of disposal valuation
will normally be higher than the value in use valuation, and accordingly
the Group typically applies this valuation estimate in its impairment or
valuation assessments.
This valuation exercise demonstrated positive headroom for all of the
Group’s mining operations, with the recoverable amount of the assets
in excess of their carrying value.
The assumption to which the value of the assets is most sensitive
is the future copper price. The copper price forecasts (representing
the Group’s estimates of the assumptions that would be used by
independent market participants in valuing the assets) are based on
the forward curve for the short term and consensus analyst forecasts
including both investment banks and commodity consultants for the
longer term. A long-term copper price of $3.10/lb has been used in the
base valuations. As an additional down-side sensitivity, a valuation was
performed with a 5% reduction in the long-term copper price. Los
Pelambres, Centinela and Zaldívar still showed positive headroom in
this alternative down-side scenario. However the Antucoya valuation
indicated a potential deficit of $80 million. This was a simple sensitivity
exercise, looking at an illustrative change in the forecast long-term
copper price in isolation. In reality, a deterioration in the long-term
copper price environment is likely to result in corresponding
improvements in a range of input cost factors. In particular, given that
copper exports account for over 50% of Chile’s exports, movements in
the US dollar/Chilean peso exchange rate are highly correlated to the
copper price, and a decrease in the copper price is likely to result in a
weakening of the Chilean peso, with a resulting reduction in the Group’s
operating costs and capital expenditure. These likely cost reductions, as
well as potential operational changes which could be made in a weaker
copper price environment, could partly mitigate the impact of the lower
copper price modelled in these estimated potential sensitivities.
In addition to the future copper price, the valuations are sensitive to
the assumptions in respect of the discount rate used to determine the
present value of the future cash flows, future operating costs, sustaining
and development capital expenditure, and the US dollar/Chilean peso
exchange rate. In the case of Centinela, a significant element of the
valuation relates to the planned construction of the second
concentrator, and a substantial change in the plans for that development
could have a considerable impact on the valuation. A real post-tax
discount rate of 8% has been used in determining the present value
of the forecast future cash flow from the assets.
5 SEGMENT INFORMATION
The Group’s reportable segments are as follows:
• Los Pelambres
• Centinela
• Antucoya
• Zaldívar
• Exploration and evaluation
• Corporate and other items
• Transport division
For management purposes, the Group is organised into two business
divisions based on their products – Mining and Transport. The Mining
division is split further for management reporting purposes to show
results by mine and exploration activity. Los Pelambres produces
primarily copper concentrate, molybdenum, gold and silver as a by-
product. Centinela produces copper concentrate containing gold and
silver as a by-product, molybdenum concentrates and copper cathodes.
Antucoya and Zaldívar produce copper cathodes. The Transport division
provides rail cargo and road cargo transport together with a number of
ancillary services. All the operations are based in Chile. The Exploration
and evaluation segment incurs exploration and evaluation expenses.
“Corporate and other items” comprises costs incurred by the Company,
Antofagasta Minerals SA, the Group’s mining corporate centre and
other entities, that are not allocated to any individual business segment.
Consistent with its internal management reporting, the Group’s
corporate and other items are included within the Mining division.
The chief operating decision-maker monitors the operating results of
the business segments separately for the purpose of making decisions
about resources to be allocated and assesses performance. Segment
performance is evaluated based on the operating profit of each of
the segments.
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163
163
Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
5 SEGMENT INFORMATION CONTINUED
A) Segment revenues and results
For the year ended 31 December 2019
Los
Pelambres
$m
Centinela
$m
Antucoya
$m
Zaldívar
$m
Exploration
and
evaluation2
$m
Corporate
and other
items
$m
Mining
$m
Revenue
Operating cost excluding depreciation
Depreciation and amortisation
Loss on disposals
Operating profit/(loss)
Equity accounting results
Investment income
Interest expense
Other finance items
Profit/(loss) before tax
Tax
Profit/(loss) for the year from
continuing operations
Profit/(loss) for the year
Non-controlling interests
Profit/(losses) attributable to the
owners of the parent
EBITDA1
Additions to non-current assets
Capital expenditure
Segment assets and liabilities
2,363.9 2,007.9
(979.8) (1,048.4)
(532.2)
(258.5)
(1.5)
(10.5)
425.8
1,115.1
–
–
7.9
11.1
(36.5)
(7.7)
3.4
8.8
400.6
1,127.3
(88.5)
(341.4)
432.2
(345.9)
(92.2)
–
(5.9)
–
1.4
(42.7)
(0.5)
(47.7)
(0.2)
785.9
785.9
(309.0)
312.1
312.1
(69.4)
(47.9)
(47.9)
36.7
–
–
–
–
-
15.5
–
–
–
15.5
–
15.5
15.5
–
476.9
242.7
1,384.1
959.5
(11.2)
86.3
15.5
112.6
–
(111.1)
–
–
(111.1)
–
–
–
–
(111.1)
–
(111.1)
(111.1)
–
(111.1)
(111.1)
(7.9)
–
– 4,804.0
(70.8) (2,556.0)
(890.8)
(12.0)
(78.7) 1,345.2
13.0
46.6
(108.6)
13.5
(74.9) 1,309.7
(498.3)
(68.2)
(2.5)
26.2
(21.7)
1.8
Transport
division
$m
160.5
(105.7)
(23.5)
(0.7)
30.6
11.4
0.5
(2.5)
(0.5)
39.5
(7.8)
Total
$m
4,964.5
(2,661.7)
(914.3)
(12.7)
1,375.8
24.4
47.1
(111.1)
13.0
1,349.2
(506.1)
(143.1)
(143.1)
–
811.4
811.4
(341.7)
31.7
31.7
–
843.1
843.1
(341.7)
(143.1)
469.7
31.7
501.4
(73.3) 2,358.1
80.8
2,438.9
573.0
535.9
43.0
–
–
16.0
1,167.9
68.6
1,236.5
Segment assets
Deferred tax assets
Investment in associates and joint
venture
Segment liabilities
4,251.2 5,792.2
–
–
1,647.1
–
–
–
–
–
(1,696.7) (1,789.6)
–
(933.3)
961.8
–
–
–
–
–
1,543.3
5.5
13,233.8
5.5
343.6
2.7
13,577.4
8.2
–
961.8
(694.0) (5,113.6)
1,024.8
63.0
(95.8) (5,209.4)
1. EBITDA refers to Earnings Before Interest, Tax, Depreciation and Amortisation. EBITDA is calculated by adding back depreciation, amortisation, profit or loss on disposals and
impairment charges to operating profit. This comprises 100% of the EBITDA from the Group´s subsidiaries, and the Group´s proportional share of the EBITDA of its associates
and joint ventures (refer to the Alternative Performance Measures section on page 206).
2. Operating cash outflow in the Exploration and evaluation segment was $43.0 million.
164
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Antofagasta Annual Report 2019
For the year ended 31 December 2018
Revenue
Operating cost excluding depreciation
Depreciation and amortisation
Loss on disposals
Operating profit/(loss)
Equity accounting results
Investment income
Interest expense
Other finance items
Profit/(loss) before tax
Tax
Profit/(loss) for the year from
continuing operations
Profit for the year from discontinued
operations
Profit/(loss) for the year
Non-controlling interests
Profit/(losses) attributable to the
owners of
the parent
EBITDA1
Additions to non-current assets
Capital expenditure
Segment assets and liabilities
Segment assets
Deferred tax assets
Investment in associates and joint
venture
Segment liabilities
Los
Pelambres
$m
2,493.5
(1,065.9)
(243.3)
(10.5)
1,173.8
–
6.0
(5.8)
(13.2)
1,160.8
(371.8)
Centinela
$m
1,609.2
(964.2)
(415.4)
–
229.6
–
5.1
(35.5)
(7.8)
191.4
(18.7)
Antucoya
$m
Zaldívar
$m
Exploration
and
evaluation2
$m
Corporate
and other
items
$m
457.6
(316.0)
(78.7)
–
62.9
–
1.2
(49.6)
(3.1)
11.4
0.9
–
–
–
–
–
14.2
–
–
–
14.2
–
–
(97.6)
–
–
(97.6)
–
–
–
–
(97.6)
–
–
(61.4)
(7.2)
–
(68.6)
(2.9)
17.0
(20.5)
0.4
(74.6)
(20.1)
Mining
$m
4,560.3
(2,505.1)
(744.6)
(10.5)
1,300.1
11.3
29.3
(111.4)
(23.7)
1,205.6
(409.7)
Transport
division
$m
172.8
(109.2)
(15.9)
(2.8)
44.9
10.9
0.8
(2.1)
(7.4)
47.1
(14.0)
Total
$m
4,733.1
(2,614.3)
(760.5)
(13.3)
1,345.0
22.2
30.1
(113.5)
(31.1)
1,252.7
(423.7)
789.0
172.7
12.3
14.2
(97.6)
(94.7)
795.9
33.1
829.0
–
789.0
(315.5)
51.3
224.0
(35.8)
–
12.3
14.7
473.5
1,427.6
188.2
645.0
27.0
141.6
364.8
535.2
65.7
4,003.7
–
5,283.8
29.0
1,942.0
–
–
14.2
–
14.2
87.4
–
–
–
–
(1,218.0)
–
(1,746.1)
–
(948.8)
996.4
–
–
(97.6)
–
–
(94.7)
–
51.3
847.2
(336.6)
–
33.1
–
51.3
880.3
(336.6)
(97.6)
(97.6)
(94.7)
510.6
(64.6)
2,139.4
33.1
88.9
543.7
2,228.3
–
–
–
–
–
4.5
970.2
67.7
1,037.9
1,439.2
5.3
12,668.7
34.3
340.5
2.9
13,009.2
37.2
–
(632.2)
996.4
(4,545.1)
59.7
(119.3)
1,056.1
(4,664.4)
1. EBITDA refers to Earnings Before Interest, Tax, Depreciation and Amortisation. EBITDA is calculated by adding back depreciation, amortisation, profit or loss on disposals and
impairment charges to operating profit. This comprises 100% of the EBITDA from the Group´s subsidiaries, and the Group´s proportional share of the EBITDA of its associates
and joint ventures (refer to the Alternative Performance Measures section on page 206).
2. Operating cash outflow in the Exploration and evaluation segment was $81.0 million.
Notes to segment revenues and results
(i)
Inter-segment revenues are eliminated on consolidation. Revenue from the Transport division segment is stated after eliminating
inter-segmental sales to the Mining division of $5.3 million (year ended 31 December 2018 – $nil million).
(ii) Revenue includes provisionally priced sales of copper, gold and molybdenum concentrates and copper cathodes. Further details of such
adjustments are given in Note 6.
(iii) The copper and molybdenum concentrate sales are stated net of deductions for tolling charges. Tolling charges for copper and molybdenum
concentrates are detailed in Note 6.
(iv) The effects of tax and non-controlling interests on the expenses within the Exploration and evaluation segment are allocated to the mine that
the exploration work relates to.
(v) The assets of the Transport division segment include $56.9 million (31 December 2018 – $54.6 million) relating to the Group’s 40% interest
in Inversiones Hornitos SA (“Inversiones Hornitos”), which owns the 165MW Hornitos thermoelectric power plant in Mejillones in Chile’s
Antofagasta Region and $6.2 million (31 December 2018 – $5.1 million) relating to the Group’s 30% interest in Antofagasta Terminal
International SA (“ATI”), which operates a concession to manage installations in the port of Antofagasta. Further details of these investments
are set out in Note 17.
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165
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
5 SEGMENT INFORMATION CONTINUED
B) Entity-wide disclosures
Revenue by product1
Copper
– Los Pelambres
– Centinela concentrate
– Centinela cathodes
– Antucoya
Gold
– Los Pelambres
– Centinela
Molybdenum
– Los Pelambres
– Centinela
Silver
– Los Pelambres
– Centinela
Total
Transport division
Revenue by location of customer1
Europe
– United Kingdom
– Switzerland
– Spain
– Germany
– Rest of Europe
Latin America
– Chile
– Rest of Latin America
North America
– United States
Asia
– Japan
– China
– Singapore
– South Korea
– Hong Kong
– Rest of Asia
2019
$m
2018
$m
2,009.1
1,137.7
504.4
432.2
75.2
332.5
249.0
5.6
30.7
27.6
4,804.0
160.5
4,964.5
2019
$m
152.3
612.4
158.0
102.7
85.0
213.8
95.3
2,040.3
827.9
589.4
457.6
78.5
169.5
340.2
7.8
34.4
14.7
4,560.3
172.8
4,733.1
2018
$m
125.3
587.0
152.9
117.3
131.7
248.1
73.9
88.9
199.4
1,561.5
517.2
692.1
371.2
171.0
143.1
4,964.5
1,413.0
481.2
633.9
322.0
117.1
130.3
4,733.1
Information about major customers
In the year ended 31 December 2019 the Group’s mining revenue included $711.9 million related to one large customer that individually accounted
for more than 10% of the Group’s revenue (year ended 31 December 2018 – one large customer representing $678.1 million).
1. Figures include both revenue from the sale of products and the associated income from the provision of shipping services.
166
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Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
Non-current assets by location of assets
Chile
USA
Other
2019
$m
10,827.8
176.8
0.1
11,004.7
2018
$m
10,449.0
172.6
0.1
10,621.7
The above non-current assets disclosed by location of assets exclude financial instruments, equity investments and deferred tax assets.
6 REVENUE
Copper and molybdenum concentrate sale contracts and copper cathode sale contracts generally provide for provisional pricing of sales at the time
of shipment, with final pricing being based on the monthly average London Metal Exchange copper price or monthly average molybdenum price for
specified future periods. This normally ranges from one to four months after shipment to the customer. For sales contracts which contain
provisional pricing mechanisms the total receivable balance is measured at fair value through profit or loss. Gains and losses from the mark-to-
market of open sales are recognised through adjustments to revenue in the income statement and to trade receivables in the balance sheet. The
Group determines mark-to-market prices using forward prices at each period-end for copper concentrate and cathode sales, and period-end
month average prices for molybdenum concentrate sales due to the absence of a futures market in the market price references for that commodity
in the majority of the Group’s contracts.
An analysis of the Group’s revenue is as follows:
Revenue from contracts with customers
Sale of products
Rendering of transport services
Shipping services
Provisional pricing adjustments in respect of copper, gold and molybdenum
Total revenue
2019
$m
2018
$m
4,693.4
160.5
92.9
17.7
4,964.5
4,660.5
172.8
74.4
(174.6)
4,733.1
The categories of revenue which are principally affected by different economic factors are the individual product types. A summary of revenue by
product is set out in Note 5.
In addition to mark-to-market and final pricing adjustments, revenue also includes realised gains and losses relating to derivative commodity
instruments. Details of these realised gains or losses are shown in the tables that follow.
Copper and molybdenum concentrate sales are stated net of deductions for tolling charges, as shown in the tables that follow.
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167
Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6 REVENUE CONTINUED
For the year ended 31 December 20191
Provisionally invoiced gross sales
Effects of pricing adjustments to
previous year invoices
Reversal of mark-to-market adjustments at the
end of the previous year
Settlement of sales invoiced in the previous year
Total effect of adjustments to previous year
invoices in the current year
Effects of pricing adjustments to
current year invoices
Settlement of sales invoiced in the current year
Mark-to-market adjustments at the end of the
current year
Total effect of adjustments to
current year invoices
Total pricing adjustments
Realised losses on commodity derivatives
Revenue before deducting tolling charges
Tolling charges
Revenue net of tolling charges
For the year ended 31 December 20181
Provisionally invoiced gross sales
Effects of pricing adjustments to
previous year invoices
Reversal of mark-to-market adjustments at the
end of the previous year
Settlement of sales invoiced in the previous year
Total effect of adjustments to previous year
invoices in the current year
Effects of pricing adjustments to
current year invoices
Settlement of sales invoiced in the current year
Mark-to-market adjustments at the end of the
current year
Total effect of adjustments to
current year invoices
Total pricing adjustments
Realised losses on commodity derivatives
Revenue before deducting tolling charges
Tolling charges
Revenue net of tolling charges
Los Pelambres
Copper
concentrate
$m
Centinela
Copper
concentrate
$m
Centinela
Copper
cathodes
$m
Antucoya
Copper
cathodes
$m
Los Pelambres
Gold in
concentrate
$m
Centinela
Gold in
concentrate
$m
Los Pelambres
Molybdenum
concentrate
$m
Centinela
Molybdenum
concentrate
$m
2,144.9
1,222.3
506.1
434.8
76.2
325.3
298.1
7.4
23.6
0.3
9.5
9.9
0.7
(1.0)
0.7
(0.9)
23.9
19.4
(0.3)
(0.2)
(41.3)
(14.6)
(1.8)
(2.9)
29.1
(12.2)
15.2
0.6
0.4
(1.4)
0.4
(2.5)
11.7
–
2,156.6
(147.5)
2,009.1
20.0
–
1,242.3
(104.6)
1,137.7
(1.7)
–
504.4
–
504.4
(2.7)
0.1
432.2
–
432.2
–
(1.3)
(1.3)
0.5
–
0.5
(0.8)
–
75.4
(0.2)
75.2
(0.7)
1.4
(0.7)
(8.4)
0.7
(9.1)
–
–
–
6.4
1.2
7.6
8.3
–
333.6
(1.1)
332.5
(7.0)
(0.8)
(0.4)
(7.4)
(16.5)
–
281.6
(32.6)
249.0
–
(0.8)
(0.8)
–
6.6
(1.0)
5.6
Los Pelambres
Copper
concentrate
$m
Centinela
Copper
concentrate
$m
Centinela
Copper
cathodes
$m
Antucoya
Copper
cathodes
$m
Los Pelambres
Gold in
concentrate
$m
Centinela
Gold in
concentrate
$m
Los Pelambres
Molybdenum
concentrate
$m
Centinela
Molybdenum
concentrate
$m
2,325.7
957.3
599.1
465.0
79.6
171.1
358.6
8.0
(54.1)
14.2
(20.0)
8.8
(39.9)
(11.2)
(59.8)
(23.6)
(83.4)
(123.3)
–
2,202.4
(162.1)
2,040.3
(26.3)
(9.5)
(35.8)
(47.0)
–
910.3
(82.4)
827.9
(1.7)
0.6
(1.1)
(7.9)
(0.7)
(8.6)
(9.7)
–
589.4
–
589.4
(2.7)
1.6
(1.1)
(6.2)
(0.7)
(6.9)
(8.0)
0.6
457.6
–
457.6
–
0.4
0.4
(1.2)
–
(1.2)
(0.8)
–
78.8
(0.3)
78.5
(0.2)
(0.2)
(0.4)
(1.3)
0.7
(0.6)
(1.0)
–
170.1
(0.6)
169.5
(4.6)
18.9
14.3
0.2
0.7
0.9
15.2
–
373.8
(33.6)
340.2
–
–
–
0.6
–
0.6
8.6
–
8.6
(0.8)
7.8
1. Figures include both revenue from the sale of products and the associated income from the provision of shipping services.
168
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Antofagasta Annual Report 2019
(I) Copper concentrate
The typical period for which sales of copper concentrate remain open until settlement occurs is a range of approximately three to four months from
shipment date.
Sales provisionally priced at the balance sheet date
Average mark-to-market price
Average provisional invoice price
2019
2018
Tonnes
$/lb
$/lb
158,600
2.81
2.68
177,400
2.71
2.79
(II) Copper cathodes
The typical period for which sales of copper cathodes remain open until settlement occurs is approximately one month from shipment date.
Sales provisionally priced at the balance sheet date
Average mark-to-market price
Average provisional invoice price
Tonnes
$/lb
$/lb
2019
12,000
2.80
2.77
2018
14,300
2.70
2.75
(III) Gold in concentrate
The typical period for which sales of gold in concentrate remain open until settlement occurs is approximately one month from shipment date.
Sales provisionally priced at the balance sheet date
Average mark-to-market price
Average provisional invoice price
Ounces
$/oz
$/oz
2019
21,200
1,542
1,485
2018
22,100
1,284
1,253
(IV) Molybdenum concentrate
The typical period for which sales of molybdenum remain open until settlement occurs is approximately two months from shipment date.
Sales provisionally priced at the balance sheet date
Average mark-to-market price
Average provisional invoice price
Tonnes
$/lb
$/lb
2019
1,900
9.2
9.3
2018
3,600
12.1
12.1
As detailed above, the effects of gains and losses from the marking-to-market of open sales are recognised through adjustments to revenue in the
income statement and to trade debtors in the balance sheet. The effect of mark-to-market adjustments on the balance sheet at the end of each
period are as follows:
Los Pelambres – copper concentrate
Los Pelambres – molybdenum concentrate
Centinela – copper concentrate
Centinela – gold in concentrate
Centinela – copper cathodes
Antucoya – copper cathodes
Effect on debtors of year end
mark-to-market adjustments
2019
$m
29.1
(0.4)
15.2
1.2
0.4
0.4
45.9
2018
$m
(23.6)
0.7
(9.5)
0.7
(0.7)
(0.7)
(33.1)
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169
Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
7 PROFIT BEFORE TAX
Operating profit from subsidiaries and total profit from operations and associates and joint ventures is derived from Group revenue by deducting
operating costs as follows:
Group revenue
Cost of sales
Gross profit
Administrative and distribution expenses
Other operating income
Other operating expenses
Operating profit from subsidiaries
Net share of results from associates and joint ventures
Total profit from operations, associates and joint ventures
2019
$m
4,964.5
(2,963.6)
2,000.9
(445.9)
31.2
(210.4)
1,375.8
24.4
1,400.2
2018
$m
4,733.1
(2,807.7)
1,925.4
(422.7)
26.9
(184.6)
1,345.0
22.2
1,367.2
Other operating expenses comprise $111.0 million of exploration and evaluation expenditure (2018 – $97.6 million), $24.8 million in respect of the
employee severance provision (2018 – $18.7 million) and $74.5 million of other expenses (2018 – $53.5 million). A credit of $2.8 million related to
the closure provision cost is shown as part of other income (2018 – $14.8 million charge included within other expenses).
Profit before tax is stated after crediting/(charging):
Foreign exchange gains/(losses)
– included in net finance costs
– included in income tax expense
Depreciation of property, plant and equipment
– owned assets
– assets held under finance leases
– leased assets
Loss on disposal of property, plant and equipment
Cost of inventories recognised as expense
Employee benefit expense
Decommissioning and restoration
Severance charges
Exploration and evaluation expense
Auditors´ remuneration
A more detailed analysis of auditors´ remuneration on a worldwide basis is provided below:
Group
Fees payable to the Company´s auditor and its associates for the audit of parent company and consolidated
financial statements
Fees payable to the Company´s auditor and its associates for other services:
– The audit of the Company’s subsidiaries
– Audit-related assurance services
– Tax advisory services
– Other assurance services
– Corporate finance services not covered above
– Other non-audit services
2019
$m
35.8
0.7
(828.0)
–
(86.3)
(12.7)
(1,970.1)
(439.8)
2.8
(24.8)
(111.1)
(1.5)
2018
$m
(18.2)
(0.7)
(731.5)
(29.0)
–
(13.3)
(1,955.2)
(447.8)
(14.8)
(18.7)
(97.6)
(1.7)
2019
$000
2018
$000
944
1,020
288
219
–
19
–
20
1,490
374
252
76
–
–
12
1,734
Details of the Company’s policy on the use of auditors for non-audit services, the reason why the auditor was used rather than another supplier and
how the auditor’s independence and objectivity was safeguarded are set out in the Audit and Risk Committee report on page 109. No services were
provided pursuant to contingent fee arrangements.
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Antofagasta Annual Report 2019
EMPLOYEES
8
A) Average monthly number of employees
Los Pelambres
Centinela
Michilla
Antucoya
Exploration and evaluation
Corporate and other employees
– Chile
– United Kingdom
– Other
Mining and Corporate
Transport division
2019
Number
926
2,057
2
787
62
469
4
4
4,311
1,408
5,719
2018
Number
907
2,047
4
786
56
433
4
3
4,240
1,371
5,611
(i)
(ii)
The average number of employees for the year includes all the employees of subsidiaries. The average number of employees does not include contractors who are not
directly employed by the Group.
The average number of employees does not include employees from associates and joint ventures.
(iii) The average number of employees includes Non-Executive Directors.
B) Aggregated remuneration
The aggregated remuneration of the employees included in the table above was as follows:
Wages and salaries
Social security costs
2019
$m
(416.1)
(23.7)
(439.8)
2018
$m
(423.0)
(24.8)
(447.8)
C) Key management personnel
In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the Group, directly or indirectly, including any Directors (Executive and Non-Executive) of the Company. Key management personnel
who are not Directors have been treated as responsible senior management at the Corporate Centre and those responsible for the running of the
key business divisions of the Group.
Compensation for key management personnel (including Directors) was as follows:
Salaries and short-term employee benefits
2019
$m
(16.1)
(16.1)
2018
$m
(18.4)
(18.4)
Disclosures on Directors’ remuneration required by Schedule 8 of the Large and Medium-sized Companies and Group (Financial Statement)
Regulations 2008 including those specified for audit by that Schedule are included in the Remuneration report on page 116.
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
9 NET FINANCE EXPENSE
Investment income
Interest income
Fair value through profit or loss
Interest expense
Interest expense
Other finance items
Unwinding of discount on provisions
Preference dividends
Effects of changes in foreign exchange rates
Net finance expense
2019
$m
9.8
37.3
47.1
(111.1)
(111.1)
(22.7)
(0.1)
35.8
13.0
(51.0)
2018
$m
9.9
20.2
30.1
(113.6)
(113.6)
(12.7)
(0.1)
(18.2)
(31.0)
(114.5)
During 2019, amounts capitalised and consequently not included within the above table were as follows: $3.0 million at Centinela (year ended
31 December 2018 – $4.5 million) and $6.0 million at Los Pelambres (year ended 31 December 2018 – $0.9 million).
The fair value through profit or loss line represents the fair value gains relating to liquid investments.
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Antofagasta Annual Report 2019
INCOME TAX EXPENSE
10
The tax charge for the year comprised the following:
Current tax charge/credit
– Corporate tax (principally first category tax in Chile)
– Mining tax (royalty)
– Withholding tax
– Exchange losses on corporate tax balances
Deferred tax charge
– Corporate tax (principally first category tax in Chile)
– Mining tax (royalty)
– Withholding tax
Total tax charge
2019
$m
2018
$m
(255.5)
(67.2)
(32.4)
0.7
(354.4)
(125.1)
0.6
(27.2)
(151.7)
(506.1)
(321.2)
(78.1)
(4.5)
(0.7)
(404.5)
(14.6)
(4.6)
–
(19.2)
(423.7)
The rate of first category (ie corporate) tax in Chile is 27.0% (2018 – 27.0%).
In addition to first category tax and the mining tax, the Group incurs withholding taxes on any remittance of profits from Chile. Withholding tax is
levied on remittances of profits from Chile at 35% less first category (ie corporation) tax already paid in respect of the profits to which the
remittances relate.
The Group’s mining operations are also subject to a mining tax (royalty). Production from Los Pelambres, Antucoya, Encuentro (oxides), the Tesoro
North East pit and the Run-of-Mine processing at Centinela Cathodes is subject to a rate of between 5–14%, depending on the level of operating
profit margin. Production from Centinela Concentrates and the Tesoro Central and Mirador pits is subject to a rate of 5% of taxable operating profit.
Profit before tax
Tax at the Chilean corporate tax rate of 27%
Mining tax (royalty)
Deduction of mining tax (royalty) as an allowable expense in determination of first
category tax
Items not deductible from first category tax
Adjustment in respect of prior years
Withholding tax
Tax effect of share of profit of associates and joint ventures
Unrecognised tax losses
Net other items
Tax expense and effective tax rate for the year
$m
1,349.2
(364.3)
(66.6)
19.1
(11.9)
4.3
(59.3)
4.7
(33.0)
0.9
(506.1)
2019
%
27.0
4.9
(1.4)
0.9
(0.3)
4.4
(0.3)
2.4
(0.1)
37.5
$m
1,252.7
(338.2)
(82.5)
21.1
(10.8)
2.6
(4.5)
3.0
(13.8)
(0.6)
(423.7)
2018
%
–
27.0
6.5
(1.7)
0.9
(0.2)
0.4
(0.2)
1.1
–
33.8
The effective tax rate varied from the statutory rate principally due to the mining tax (net impact of $47.5 million/3.5%), the withholding tax relating
to the remittance of profits from Chile (impact of $59.3 million/4.4%), unrecognised tax losses (impact of $33.0 million/2.5%) and items not
deductible for Chilean corporate tax purposes, principally the funding of expenses outside of Chile (impact of $11.9 million/0.9%), partly offset by
adjustments in respect of prior years (impact of $4.3 million/0.3%) and the impact of the recognition of the Group’s share of profit from associates
and joint ventures, which are included in the Group’s profit before tax net of their respective tax charges (impact of $4.7 million/0.4%).
The main factors which could impact the sustainability of the Group’s existing effective tax rate are:
• the level of future distributions made by the Group’s Chilean subsidiaries out of Chile, which could result in increased withholding tax charges,
• the impact of expenses which are not deductible for Chilean first category tax. Some of these expenses are relatively fixed costs, and so the
relative impact of these expenses on the Group’s effective tax rate will vary depending on the Group’s total profit before tax in a particular year.
There are no significant tax uncertainties which would require critical judgements, estimates or potential provisions other than deferred tax
estimates as explained in Note 3 A (ii).
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11 DISCONTINUED OPERATIONS
On 11 September 2018 the Group completed the disposal of Centinela Transmisión, which holds the electricity transmission line supplying Centinela
and other external parties, for a cash consideration of $117 million. The net results of Centinela Transmisión for the comparative 2018 year are
shown in the income statement on the line “Profit for the period from discontinued operations”.
Proceeds on disposal, cash and cash equivalent
Assets of disposal group classified as held for sale
Property, plant and equipment
Cash and cash equivalents
Deferred tax assets
Trade and other receivables
Trade and other payables
Current tax liabilities
Deferred tax assets
Total carrying amount disposed (Net asset)
Transaction cost
Profit on disposal of discontinued operations (Before tax)
2019
$m
–
–
–
–
–
–
–
–
–
–
–
2018
$m
117.2
33.9
13.2
0.3
3.7
(2.4)
(1.1)
(7.4)
40.2
(1.0)
76.0
The net results of Centinela Transmisión are shown as a discontinued operation in the income statement. The net results reflect the following
elements:
Revenue
Total operating costs
Net finance income
Profit after tax of discontinued operations
Tax
Profit from the year from discontinued operations
Profit on disposal of discontinued operations
Attributable tax expenses
Net profit attributable to discontinued operations
Cash and cash equivalents received as consideration for disposal
Net cash disposed of
Net cash inflow arising on disposal
–
–
–
–
–
–
–
–
–
–
–
–
4.8
(1.6)
(0.3)
2.9
(0.8)
2.1
76.0
(26.8)
51.3
117.2
(13.2)
104.0
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Antofagasta Annual Report 2019
12 EARNINGS PER SHARE
Profit for the year attributable to equity holders of the Company
Ordinary shares in issue throughout each year
Basic earnings per share
From continuing operations
From discontinued operations
Total continuing and discontinued operations
2019
$m
501.4
2019
Number
2018
$m
543.7
2018
Number
985,856,695 985,856,695
2019
cents
50.9
–
50.9
2018
cents
51.5
3.6
55.1
Basic earnings per share are calculated as profit after tax and non-controlling interests, based on 985,856,695 (2018 – 985,856,695) ordinary
shares.
There was no potential dilution of earnings per share in either year set out above, and therefore diluted earnings per share did not differ from basic
earnings per share as disclosed above.
Reconciliation of basic earnings per share from continuing operations:
Profit for the year attributable to equity holders of the Company
Less: profit for discontinued operations attributable to equity holders of the Company
Profit from continuing operations
Ordinary shares
Basic earnings per share from continuing operations
2019
2018
$m
$m
$m
543.7
501.4
(35.9)
–
507.8
501.4
Number 985,856,695 985,856,695
51.5
50.9
cents
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175
175
Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13 DIVIDENDS
Amounts recognised as distributions to equity holders in the year:
Final dividend paid in June (proposed in relation to the previous year)
– ordinary
Interim dividend paid in October
– ordinary
2019
$m
2018
$m
2019
cents
per share
2018
cents
per share
364.8
399.9
37.0
40.6
105.7
470.5
67.0
466.9
10.7
47.7
6.8
47.4
The proposed final dividend for each year, which is subject to approval by shareholders at the Annual General Meeting and has therefore not been
included as a liability in these financial statements, is as follows:
Final dividend proposed in relation to the year
– ordinary
2019
$m
2018
$m
2019
cents
per share
2018
cents
per share
230.7
230.7
364.8
364.8
23.4
23.4
37.0
37.0
This gives total dividends proposed in relation to 2019 (including the interim dividend) of 34.1 cents per share or $336.2 million (2018 – 43.8 cents
per share or $431.8 million).
In accordance with IAS 32, preference dividends have been included within interest expense (see Note 9) and amounted to $0.1 million
(2018 – $0.1 million).
Further details of the currency election timing and process (including the default currency of payment) are available on the Antofagasta plc website
(www.antofagasta.co.uk) or from the Company’s registrar, Computershare Investor Services PLC on +44 370 702 0159.
Further details relating to dividends for each year are given in the Directors’ Report on page 138.
14
INTANGIBLE ASSETS
Cost
At 1 January 2018
Additions
Disposals
Foreign currency exchange difference
At 31 December 2018
Additions
Disposals
Foreign currency exchange difference
At 31 December 2019
$m
150.1
–
–
–
150.1
–
–
–
150.1
The $150.1 million intangible asset reflects the value of Twin Metals’ mining licences assets included within the corporate segment. The mining
licences will be amortised once production commences.
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Antofagasta Annual Report 2019
15 PROPERTY, PLANT AND EQUIPMENT
Land
$m
Mining
properties
$m
Stripping
cost
$m
Buildings and
infrastructure
$m
Railway
track
$m
Wagons
and rolling
stock
$m
Machinery,
equipment
and others
$m
Assets under
construction
$m
Right-of-
use assets
$m
Cost
At 1 January 2018
Additions
Additions – capitalised depreciation
Adjustment to capitalised decommissioning
provisions
Capitalisation of interest
Capitalisation of critical spare parts
Reclassifications
Asset disposals
Assets transferred to disposal group classified
as held for sale
54.9
0.9
–
642.2
20.1
–
1,071.7
351.3
48.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,905.1
5.8
–
(24.0)
–
–
434.2
–
–
At 31 December 2018
55.8
662.3
1,471.4
5,321.1
Adoption of new accounting standards
Finance lease transferred
At 1 January 2019
Additions
Additions – capitalised depreciation
Adjustment to capitalised decommissioning
provisions
Capitalisation of interest
Capitalisation of critical spare parts
Reclassifications
Asset disposals
–
–
55.8
4.8
–
–
–
–
–
–
–
–
662.3
–
–
–
–
–
5.2
–
–
–
1,471.4
346.5
62.6
–
–
–
–
–
–
–
5,321.1
0.5
–
24.8
–
–
121.2
(2.8)
At 31 December 2019
60.6
667.5
1,880.5
5,464.8
6,518.7
92.6
–
1,419.4
518.8
–
76.3
–
–
–
–
–
8.2
(0.4)
–
84.1
–
–
84.1
–
–
–
–
–
15.6
–
99.7
(27.8)
(2.9)
–
–
–
0.2
–
120.5
–
–
–
–
–
29.5
(3.9)
–
5.4
11.1
501.2
(5.6)
–
–
146.1
7,123.4
–
–
146.1
–
–
–
–
–
64.7
(7.2)
–
(277.9)
6,845.5
–
–
–
8.9
11.5
197.5
(4.4)
(78.4)
(7.5)
–
(3,076.2)
(235.1)
(86.4)
–
–
1.6
–
(48.4)
(4.9)
2.7
0.1
Total
$m
14,808.8
989.5
48.4
(24.0)
5.4
11.1
–
(18.5)
(1.3)
15,819.4
131.4
–
15,950.8
1,174.4
62.6
24.8
8.9
11.5
(3.9)
(27.5)
–
–
–
–
–
–
–
–
–
–
131.4
277.9
409.3
45.2
–
–
–
–
(23.0)
(0.9)
–
–
–
(973.1)
(8.6)
(1.3)
955.2
–
–
955.2
777.4
–
–
–
–
(385.1)
(12.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(99.9)
(99.9)
(81.4)
–
–
9.5
0.9
(5,744.5)
(761.1)
(86.4)
(48.4)
–
4.5
0.6
(6,635.3)
–
(6,635.3)
(914.3)
(49.7)
(62.6)
3.4
13.6
203.6
7,059.0
1,335.3
430.6
17,201.6
Accumulated depreciation and impairment
At 1 January 2018
Charge for the year
Depreciation capitalised in inventories
Depreciation capitalised in property, plant and
equipment
Reclassification
Asset disposals
Assets transferred to disposal group classified
as held for sale
At 31 December 2018
Finance lease transferred
At 1 January 2019
Charge for the year
Depreciation capitalised in inventories
Depreciation capitalised in property, plant and
equipment
Reclassification
Asset disposals
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(442.0)
(48.3)
–
(204.9)
(237.0)
–
(1,915.2)
(230.3)
–
–
–
–
–
–
–
–
–
–
4.9
–
0.5
(490.3)
(441.9)
(2,140.1)
(30.5)
(84.3)
(3,448.2)
–
(490.3)
(40.0)
–
–
(441.9)
(262.2)
–
–
–
–
–
–
–
–
(2,140.1)
(245.9)
–
–
0.6
2.2
–
(30.5)
(3.5)
–
–
–
–
–
(84.3)
(13.7)
–
–
–
6.8
99.9
(3,348.3)
(267.6)
(49.7)
(62.6)
(6.7)
3.7
–
(530.3)
(704.1)
(2,383.2)
(34.0)
(91.2)
(3,731.2)
–
(170.9)
(7,644.9)
60.6
55.8
137.2
172.0
1,176.4
1,029.5
3,081.6
3,181.0
65.7
53.6
112.4
3,327.8
1,335.3
259.7
9,556.7
61.8
3,675.2
955.2
–
9,184.1
The Group has no pledged assets (2018 – $1,650.0 million) as security against bank loans provided to the Group.
At 31 December 2019 the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to
$863.3 million (2018 – $561.4 million) of which $780.4 million was related to Los Pelambres and $77.1 million to Centinela.
Compensation from insurance companies related to property, plant and equipment included in the consolidated income statement was nil in 2019
(2018 – $1.0 million).
The average interest rate for the amounts capitalised was 3.5% (2018 – 2.9%).
At 31 December 2019, assets capitalised relating to the decommissioning provision were $140.1 million (2018 – $115.3 million).
Depreciation capitalised in property, plant and equipment of $62.6 million related to the depreciation of assets used in mine development (operating
stripping) at Centinela, Los Pelambres and Antucoya (2018 – $48.4 million).
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177
177
Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
INVESTMENTS IN SUBSIDIARIES
16
The subsidiaries of the Group, the percentage of equity owned and the main country of operation are set out below. These interests are
consolidated within these financial statements.
Direct subsidiaries of the Parent Company
Antofagasta Railway Company plc
Andes Trust Limited (The)
Chilean Northern Mines Limited
Andes Re Limited
Indirect subsidiaries of the Parent Company
Minera Los Pelambres SCM
Minera Centinela SCM
Minera Antucoya SCM
Antofagasta Minerals SA
Alfa Estates Limited
Energía Andina Geothermal SpA
Los Pelambres Transmisión
Northern Minerals Investment (Jersey) Limited
Northern Metals (UK) Limited
Northern Minerals Holding Co
Duluth Metals Limited
Twin Metals (UK) Limited
Twin Metals (USA) Inc
Twin Metals Minnesota LLC
Franconia Minerals (US) LLC
Duluth Metals Holdings (USA) Inc
Duluth Exploration (USA) Inc
DMC LLC (Minnesota)
DMC (USA) LLC (Delaware)
DMC (USA) Corporation
Antofagasta Investment Company Limited
Minprop Limited
Antomin 2 Limited
Antomin Investors Limited
Antofagasta Minerals Australia Pty Limited
Minera Anaconda Peru
Los Pelambres Holding Company Limited
Los Pelambres Investment Company Limited
Lamborn Land Co
Anaconda South America Inc
El Tesoro (SPV Bermuda) Limited
Morrisville Holdings Co
Antofagasta Minerals Canada
Antofagasta Minerals (Shanghai) Co. Limited
Andes Investments Company (Jersey) Limited
Bolivian Rail Investors Co Inc
Blue Ocean Overseas Inc
Inversiones Ferrobol Limitada
Inversiones Los Pelambres Chile Limitada
Equatorial Resources SpA
Minera Santa Margarita de Astillas SCM
Country of
incorporation
UK
UK
UK
Bermuda
Chile
Chile
Chile
Chile
Jersey
Chile
Chile
Jersey
UK
USA
Canada
UK
USA
USA
USA
USA
USA
USA
USA
USA
UK
Jersey
BVI
BVI
Australia
Peru
UK
UK
USA
USA
Bermuda
BVI
Canada
China
Jersey
USA
BVI
Bolivia
Chile
Chile
Chile
178
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Antofagasta Annual Report 2019
Country of operations
Registered office
Nature of business
Economic interest
Chile
UK
Chile
Bermuda
Chile
Chile
Chile
Chile
Jersey
Chile
Chile
Jersey
UK
USA
Canada
UK
USA
USA
USA
USA
USA
USA
USA
USA
UK
Jersey
BVI
BVI
Australia
Peru
UK
UK
USA
USA
Bermuda
BVI
Canada
China
Jersey
USA
BVI
Bolivia
Chile
Chile
Chile
1
1
1
4
2
2
2
2
3
2
2
3
1
5
7
1
6
6
6
13
14
13
13
13
1
3
8
8
9
10
1
1
5
15
4
8
9
16
3
5
8
11
2
2
2
Railway
Investment
Investment
Insurance
Mining
Mining
Mining
Mining
Investment
Energy
Energy
Investment
Investment
Investment
Investment
Investment
Investment
Mining
Mining
Investment
Investment
Investment
Investment
Investment
Investment
Mining
Mining
Mining
Mining
Mining
Investment
Investment
Investment
Investment
Investment
Investment
Agency
Agency
Investment
Investment
Investment
Investment
Investment
Investment
Mining
100%
100%
100%
100%
60%
70%
70%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
82.0%
Minera Penacho Blanco SA
Michilla Costa SpA
Pampa Fenix SA
Minera Mulpun Limitada
Fundación Minera Los Pelambres
Inversiones Punta de Rieles Limitada
Ferrocarril Antofagasta a Bolivia
(Permanent Establishment)
Inversiones Chilean Northern Mines Limitada
The Andes Trust Chile SA
Forestal SA
Servicios de Transportes Integrados Limitada
Inversiones Train Limitada
Servicios Logisticos Capricornio Limitada
Embarcadores Limitada
FCAB Ingenieria y Servicios Limitada
Emisa Antofagasta SA
Registered offices:
Country of
incorporation
Country of operations
Registered office
Nature of business
Economic interest
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
Chile
2
2
2
2
2
12
12
12
12
12
12
12
12
12
12
12
Mining
Logistics
Investment
Mining
Community
development
Investment
Railway
Investment
Investment
Forestry
Road transport
Investment
Transport
Transport
Transport
Transport
66.6%
99.9%
90.0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Cleveland House, 33 King Street, London, SW1Y 6RJ, UK
1
2 Avenida Apoquindo N° 4001, Piso 18, Las Condes, Santiago, Chile
22 Grenville Street, St Helier, Jersey, JE4 8PX3, Channel Islands
3
Crawford House, 50 Cedar Avenue, Hamilton HM 11, Bermuda
4
1209 Orange Street, Wilmington, DE 19801, USA
5
6040 Earle Brown Drive, 480 Brooklyn Center, MN 55430, USA
6
161 Bay Street, Suite 4320, Toronto, Ontario, M5J 2S1, Canada
7
PO Box 958, Road Town, Tortola VG1110, British Virgin Islands
8
Riparian Plaza, Level 28, 71 Eagle Street, Brisbane, Qld 4001, Australia
9
10 Avenida Paseo de la Republica Nº 3245 Piso 3, Lima, Peru
11 Avenida 16 de Julio N° 1440, piso 19 oficina 1905, La Paz, Bolivia
12 Simon Bolivar 255, Antofagasta, Chile
13 6041 Earle Brown Drive, 480 Brooklyn Center, MN 55430, USA
14
15 2711 Centerville Road, Suite 400, Wilmington, DE 19808, USA
16 Unit 3309, IFC 2, 8 Century Avenue, Shanghai, China
1010 Dale Street N, St Paul, MN 55117-5603, USA
With the exception of the Antofagasta Railway Company plc, all of the above Group companies have only one class of ordinary share capital in issue.
The Antofagasta Railway Company plc has ordinary and preference share capital in issue, with the ordinary share capital representing 76% of the
Company’s total share capital, and the preference share capital representing 24%. Antofagasta plc holds 100% of both the ordinary and preference
shares.
The proportion of voting rights is proportional to the economic interest for the companies listed above.
antofagasta.co.uk
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179
Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
17
INVESTMENT IN ASSOCIATES AND JOINT VENTURES
Balance at the beginning of the year
Obligations on behalf of JV and associates
Capital contribution
Share of net profit/(loss) before tax
Share of tax
Share of income/(loss) from JV and associates
Dividends received
Other comprehensive income
Balance at the end of the year
Obligations on behalf of JV and associates
Share of income/(loss) after tax
Net share of results from associates and joint ventures
Balance at the beginning of the year
Obligations on behalf of JV and associates
Capital contribution
Disposal
Losses in fair value of cash flow hedges deferred in
reserves of associates
Derecognition of investment in associate upon
reclassification to subsidiary
Share of net profit/(loss) before tax
Share of tax
Share of income/(loss) from JV and associates
Dividends received
Balance at the end of the year
Obligations on behalf of JV and associates
Share of income/(loss) after tax
Profit on disposal
Purchase price adjustment
Net share of results from associates and joint
ventures
Inversiones
Hornitos
2019
$m
54.6
–
–
13.8
(3.5)
10.3
(8.0)
–
56.9
–
10.3
10.3
ATI
2019
$m
5.1
–
–
1.5
(0.4)
1.1
–
(0.1)
6.1
–
1.1
1.1
Minera
Zaldívar
2019
$m
996.4
–
–
23.8
(8.2)
15.6
(50.0)
(0.2)
961.8
–
Tethyan
Copper
2019
$m
–
(1.0)
1.8
(2.6)
–
(2.6)
–
–
–
(1.8)
Total
2019
$m
1,056.1
(1.0)
1.8
36.5
(12.1)
24.4
(58.0)
(0.3)
1,024.8
(1.8)
15.6
15.6
(2.6)
(2.6)
24.4
24.4
Inversiones
Hornitos
2018
$m
60.1
–
–
–
–
–
15.4
(4.3)
11.1
(16.6)
54.6
–
11.1
–
–
ATI
2018
$m
5.3
–
–
–
–
–
(0.2)
–
(0.2)
–
5.1
–
(0.2)
–
–
El Arrayan
2018
$m
22.0
–
–
(20.3)
Minera
Zaldívar
2018
$m
982.1
–
–
–
Energía
Andina
2018
$m
0.2
–
–
–
Tethyan
Copper
2018
$m
–
(2.0)
8.1
–
Total
2018
$m
1,069.7
(2.0)
8.1
(20.3)
–
–
–
(0.4)
(0.4)
–
(0.7)
(0.6)
(1.3)
–
–
–
(1.3)
5.8
–
–
26.3
(12.0)
14.3
–
996.4
–
14.3
–
(0.4)
(0.2)
–
–
–
–
–
–
–
–
–
–
–
(7.1)
–
(7.1)
–
–
(1.0)
(7.1)
–
–
(0.2)
33.7
(16.9)
16.8
(16.6)
1,056.1
(1.0)
16.8
5.8
(0.4)
(7.1)
22.2
11.1
(0.2)
4.5
13.9
The investments which are included in the $1,024.8 million balances at 31 December 2019 are set out below:
Investment in associates
(i) The Group’s 40% interest in Inversiones Hornitos SA, which owns the 165MW Hornitos thermoelectric power plant operating in Mejillones, in
Chile’s Antofagasta Region. The Group has a 7-year power purchase agreement with Inversiones Hornitos SA for the provision of up to
180MW of electricity for Centinela.
(ii) The Group’s 30% interest in ATI, which operates a concession to manage installations in the port of Antofagasta.
(iii) The Group´s former 30% interest in El Arrayan, which operates an 115MW wind-farm project. The Group has a 20-year power purchase
agreement with El Arrayan for the provision of up to 40MW of electricity for Los Pelambres. In August 2018, the Group disposed of its interest
in El Arrayan for cash consideration of $28.0 million, resulting in a profit on disposal of $5.8 million.
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Antofagasta Annual Report 2019
Investment in joint ventures
(iv) The Group’s 50% interest in Minera Zaldívar SpA (“Zaldívar”) which is a joint venture with Barrick Gold Corporation, is an open-pit, heap-leach
copper mine located in Northern Chile, which produces approximately 100,000 tonnes of copper cathodes annually.
(v) The Group’s 50% interest in Tethyan Copper Company Limited (“Tethyan”), which is a joint venture with Barrick Gold Corporation in respect of
the Reko Diq project in Pakistan. Tethyan has been pursuing arbitration claims against the Islamic Republic of Pakistan (“Pakistan”) following
the unlawful denial of a mining lease for the project in 2011. Details in respect of the arbitration are set out in Note 34.
As the net carrying value of the interest in Tethyan is negative it is included within non-current liabilities, as the Group is liable for its share of
the joint venture’s obligations.
(vi) During 2018 the Group acquired the remaining 49.9% interest in Energia Andina from Origin Geothermal Chile Limitada and accordingly
Energia Andina became a subsidiary of the Group during the year.
Summarised financial information for the associates is as follows:
Cash and cash equivalents
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
Profit/(loss) from continuing operations
Other comprehensive expense
Total comprehensive income
Cash and cash equivalents
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
Profit/(loss) from continuing operations
Total comprehensive income/(expense)
Inversiones
Hornitos
2019
$m
29.3
26.0
265.1
(43.8)
(153.9)
139.9
25.8
–
25.8
Inversiones
Hornitos
2018
$m
0.7
38.6
274.8
(31.2)
(156.6)
151.1
27.6
27.6
ATI
2019
$m
0.8
13.2
112.5
(18.3)
(90.0)
52.2
3.6
(0.3)
3.3
ATI
2018
$m
0.3
11.3
119.7
(34.2)
(82.2)
46.2
(0.5)
(0.5)
Total
2019
$m
30.1
39.2
377.6
(62.1)
(243.9)
192.1
29.4
(0.3)
29.1
Total
2018
$m
1.0
49.9
394.5
(65.4)
(238.8)
197.3
27.1
27.1
antofagasta.co.uk
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181
Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
INVESTMENT IN ASSOCIATES AND JOINT VENTURES CONTINUED
17
Summarised financial information for the joint ventures is as follows:
Cash and cash equivalents
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
Profit/(loss) after tax from continuing and discontinued operations
Other comprehensive expense
Total comprehensive income/(expense)
Cash and cash equivalents
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
Profit/(loss) after tax from continuing and discontinued operations
Total comprehensive income/(expense)
Minera
Zaldívar
2019
$m
138.7
631.3
1,846.8
(118.7)
(517.9)
687.6
53.0
(0.4)
52.6
Minera
Zaldívar
2018
$m
124.0
602.6
1,921.0
(102.5)
(547.6)
599.5
28.4
28.4
Tethyan
Copper
2019
$m
1.7
–
–
(5.1)
(0.1)
–
(5.1)
–
(5.1)
Tethyan
Copper
2018
$m
3.2
–
0.2
(5.1)
(0.1)
–
(14.1)
(14.1)
Total
2019
$m
140.4
631.3
1,846.8
(123.8)
(518.0)
687.6
47.9
(0.4)
47.5
Total
2018
$m
127.2
602.6
1,921.2
(107.6)
(547.7)
599.5
14.3
14.3
The above summarised financial information is based on the amounts included in the IFRS financial statements of the associate or joint venture
(ie 100% of the results or balances of the associate or joint venture, rather than the Group’s proportionate share), after the Group’s fair value
adjustments.
18 EQUITY INVESTMENTS
Balance at the beginning of the year
Movement in fair value
Foreign currency exchange differences
Balance at the end of the year
2019
$m
4.7
0.3
0.1
5.1
2018
$m
6.5
(1.3)
(0.5)
4.7
Equity investments represent those investments which are not subsidiaries, associates or joint ventures and are not held for trading purposes.
The fair value of all equity investments is based on quoted market prices.
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Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
19
INVENTORIES
Current
Raw materials and consumables
Work-in-progress
Finished goods
Non-current
Work-in-progress
Total
2019
$m
2018
$m
219.9
276.7
89.8
586.4
208.0
794.4
227.0
262.8
86.5
576.3
172.7
749.0
During 2019 a net realisable value (“NRV”) adjustment of $15.8 million has been recognised (2018 – $1.1 million). Non-current work-in-progress
represents inventory expected to be processed more than 12 months after the balance sheet date.
20 TRADE AND OTHER RECEIVABLES
Trade and other receivables do not generally carry any interest, are principally short term in nature and are normally stated at their nominal value
less any impairment.
Trade debtors
Other debtors
Due in one year
Due after one year
2019
$m
570.9
111.5
682.4
2018
$m
475.5
398.0
873.5
2019
$m
–
48.2
48.2
2018
$m
–
56.1
56.1
2019
$m
570.9
159.7
730.6
Total
2018
$m
475.5
454.1
929.6
The largest balances of trade receivables are held with equity participants in the key mining projects. Many other significant trade receivables are
secured by letters of credit or other forms of security. The average credit period given on sale of goods and rendering of service is 41 days (2018 –
36 days). There is no material element which is interest-bearing. Trade debtors include mark-to-market adjustments in respect of provisionally
priced sales of copper and molybdenum concentrates which remain open as to final pricing. Further details of such adjustments are given in Note 6.
Movements in the provision for doubtful debts were as follows:
Balance at the beginning of the year
Adoption of new accounting standards
Expected credit loss
Foreign currency exchange difference
Balance at the end of the year
The ageing analysis of the trade and other receivables balance is as follows:
2019
$m
(4.6)
–
1.6
(0.1)
(3.1)
2019
2018
Neither
past due
nor impaired
$m
724.1
907.4
Past due but not impaired
Up to
3 months
past due
$m
4.0
16.9
3-6 months
past due
$m
0.1
0.2
More than
6 months
past due
$m
2.4
5.1
2018
$m
(2.3)
(0.7)
(1.7)
0.1
(4.6)
Total
$m
730.6
929.6
With respect to the trade receivables that are neither past due nor impaired, there are no indications that the debtors will not meet their payment
obligations. The carrying value of the trade receivables recorded in the financial statements represents the Group’s maximum exposure to
credit risk.
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183
Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 CASH AND CASH EQUIVALENTS, AND LIQUID INVESTMENTS
The fair value of cash and cash equivalents, and liquid investments is not materially different from the carrying values presented. The credit risk on
cash and cash equivalents is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
Cash and cash equivalents, and liquid investments comprised:
Cash and cash equivalents
Liquid investments
At 31 December 2019 and 2018 there is no cash which is subject to restriction.
The denomination of cash, cash equivalents and liquid investments was as follows:
US dollars
Chilean pesos
Sterling
Other
The credit quality of cash, cash equivalents and liquid investments are as follows:
Current account bank deposits and cash at bank
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB-
Subtotal
Cash at bank1
Total cash, cash equivalents and liquid investments
1. Cash at bank is held with investment grade financial institutions.
2019
$m
653.7
1,539.7
2,193.4
2018
$m
1,034.4
863.2
1,897.6
2019
$m
2,145.7
45.7
0.3
1.7
2,193.4
2019
$m
1,602.5
6.0
4.8
36.7
125.7
369.7
–
–
–
2,145.4
48.0
2,193.4
2018
$m
1,861.9
29.3
1.2
5.2
1,897.6
2018
$m
1,326.8
22.8
9.7
19.5
15.6
128.8
29.0
4.6
7.0
1,563.8
333.8
1,897.6
There have been no impairments recognised in respect of cash or cash equivalents as at 31 December 2019 (31 December 2018 – nil).
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Antofagasta Annual Report 2019
22 BORROWINGS
A) Analysis by type of borrowing
Borrowings may be analysed by business segment and type as follows:
Los Pelambres
Senior loan
Short-term loan
–
Leases
–
Centinela
–
Senior loan
Subordinated debt
–
Short-term loan
–
Leases
–
Antucoya
–
Senior loan
Subordinated debt
–
Short-term loan
–
Leases
–
Corporate and other items
–
Senior loan
Leases
–
Transport division
–
Senior loan
Leases
–
Preference shares
–
Total
Notes
2019
$m
2018
$m
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(469.4)
–
(115.0)
(298.8)
(205.9)
(200.0)
(81.0)
(325.4)
(391.9)
(75.0)
(27.7)
(499.2)
(19.3)
–
(100.0)
(114.1)
(445.1)
(207.1)
(200.0)
–
(349.3)
(368.3)
(75.0)
(35.2)
(500.1)
(22.1)
(44.6)
(1.0)
(2.6)
(2,756.8)
(74.2)
(0.4)
(3.0)
(2,493.9)
(i)
(ii)
Senior loan at Los Pelambres represents a $1,300 million US dollar denominated syndicated loan divided in two tranches. The first tranche has a remaining duration of 6.1
years and has an interest rate of LIBOR six-month rate plus 1.2%. The second tranche has a remaining duration of 9.1 years and has an interest rate of LIBOR six-month rate
plus 0.85%. As at 31 December 2019 $482 million of the loan facility had been drawn-down, with the remaining $818 million of the total facility remaining undrawn and
available at that date. The loans are subject to financial covenants which require that specified net debt to EBITDA and EBITDA to finance expense ratios are maintained.
Leases at Los Pelambres are denominated in a mixture of US dollars and Chilean pesos, with a weighted average interest rate of 5.0% and a remaining duration of 4 years.
(iii) Senior loan at Centinela represents a US dollar denominated syndicated loan. This loan has a remaining duration of 0.6 years and has an interest rate of LIBOR six-month rate
plus 1.0%. The loan is subject to financial covenants which require that specified net debt to EBITDA and EBITDA to finance expense ratios are maintained. Subsequent to the
year-end in February 2020 the senior loan was repaid, and replaced with a new $500 million senior loan with a duration of 5 years and an interest rate of LIBOR six-month
rate plus 0.95%.
(iv) Subordinated debt at Centinela is US dollar denominated, provided to Centinela by Marubeni Corporation with a remaining duration of 1.1 years and a weighted average
interest rate of LIBOR six-month rate plus 4.5%. Subordinated debt provided by Group companies to Centinela has been eliminated on consolidation.
(v)
The short-term loan (PAE) at Centinela is US dollar denominated, comprising a working capital loan for a period of 1 year and with an interest rate of LIBOR six-month plus a
weighted average spread of 0.33%.
(vi) Leases at Centinela are mainly Chilean peso denominated, with a weighted average interest rate of 5.1% and a remaining duration of 4 years.
(vii) Antucoya repaid its previous senior loan during the year, and put in place a new senior loan. The senior loan at Antucoya represents a US dollar denominated syndicated loan.
This loan has a remaining duration of 4.9 years and has an interest rate of LIBOR six-month rate plus 1.3%. The loan is subject to financial covenants which require that
specified net debt to EBITDA and EBITDA to finance expense ratios are maintained.
(viii) Subordinated debt at Antucoya is US dollar denominated, provided to Antucoya by Marubeni Corporate with a remaining duration of 6.5 years and an interest rate of LIBOR
six-month rate plus 3.65%. Subordinated debt provided by Group companies to Antucoya has been eliminated on consolidation.
(ix) The short-duration loan at Antucoya is US dollar denominated, comprising a working capital loan for an average period of 1 year and has an interest rate of LIBOR six-month
rate plus a weighted average spread of 0.53%.
(x)
Leases at Antucoya are denominated in a mixture of US dollars and Chilean pesos, with a weighted average interest rate of 4.6% and a remaining duration of 4 years.
(xi) Senior loan at Corporate (Antofagasta plc) of $500.0 million has an interest rate of LIBOR six-month rate plus 1.5% and has a remaining duration of 1.1 years.
(xii) Leases at Corporate and other items are denominated in Unidades de Fomento (ie inflation-linked Chilean pesos) and have a remaining duration of 8.2 years and are at fixed
rates with an average interest rate of 5.3%.
(xiii) Long-term loans at the Transport division are US dollar denominated, with a remaining duration of 4 years and an interest rate of LIBOR six-month rate plus 1.06%.
(xiv) Leases at the Transport division are mainly in Unidades de Fomento (ie inflation-linked Chilean pesos), with a weighted average interest rate of 2.13% and a remaining
duration of 2 years.
(xv) The preference shares are Sterling-denominated and issued by Antofagasta plc. There were 2 million shares of £1 each, authorised, issued and fully paid at 31 December
2018. The preference shares are non-redeemable and are entitled to a fixed cumulative dividend of 5% per annum. On winding up they are entitled to repayment and any
arrears of dividend in priority to ordinary shareholders, but are not entitled to participate further in any surplus. Each preference share carries 100 votes in any general
meeting of the Company.
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Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22 BORROWINGS CONTINUED
B) Analysis of borrowings by currency
The exposure of the Group’s borrowings to currency risk is as follows:
At 31 December 2019
Corporate loans
Other loans (including short-term loans)
Leases
Preference shares
At 31 December 2018
Corporate loans
Other loans (including short-term loans)
Finance leases
Preference shares
C) Analysis of borrowings by type of interest rate
The exposure of the Group’s borrowings to interest rate risk is as follows:
At 31 December 2019
Corporate loans
Other loans (including short-term loans)
Leases
Preference shares
At 31 December 2018
Corporate loans
Other loans (including short-term loans)
Finance leases
Preference shares
Chilean
pesos
$m
–
–
(195.7)
–
(195.7)
Chilean
pesos
$m
–
–
(114.8)
–
(114.8)
Sterling
$m
US dollars
$m
–
–
–
(2.6)
(2.6)
(1,637.4)
(872.8)
(48.3)
–
(2,558.5)
Sterling
$m
–
–
–
(3.0)
(3.0)
US dollars
$m
(1,368.7)
(950.4)
(57.0)
–
(2,376.1)
Fixed
$m
–
–
(199.3)
(2.6)
(201.9)
Floating
$m
(1,637.4)
(872.8)
(44.7)
–
(2,554.9)
Fixed
$m
–
–
(103.1)
(3.0)
(106.1)
Floating
$m
(1,368.7)
(950.4)
(68.7)
–
(2,387.8)
2019
Total
$m
(1,637.4)
(872.8)
(244.0)
(2.6)
(2,756.8)
2018
Total
$m
(1,368.7)
(950.4)
(171.8)
(3.0)
(2,493.9)
2019
Total
$m
(1,637.4)
(872.8)
(244.0)
(2.6)
(2,756.8)
2018
Total
$m
(1,368.7)
(950.4)
(171.8)
(3.0)
(2,493.9)
The above floating rate corporate loans include the long-term loans at the Transport division segment, where the Group has used interest rate
swaps to swap the floating rate interest for fixed rate interest.
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D) Maturity profile
The maturity profile of the Group’s borrowings is as follows:
At 31 December 2019
Corporate loans
Other loans
Leases
Preference shares
At 31 December 2018
Corporate loans
Other loans
Finance leases
Preference shares
Within
1 year
$m
(373.4)
(275.0)
(75.6)
–
(724.0)
Within
1 year
$m
(232.2)
(375.0)
(38.8)
–
(646.0)
Between
1-2 years
$m
(135.1)
–
(59.7)
–
(194.8)
Between
1-2 years
$m
(225.5)
–
(26.3)
–
(251.8)
Between
2-5 years
$m
(1,128.9)
–
(92.9)
–
(1,221.8)
Between
2-5 years
$m
(833.9)
–
(94.4)
–
(928.3)
The amounts included above for finance leases are based on the present value of minimum lease payments.
The total minimum lease payments for these leases may be analysed as follows:
Within 1 year
Between 1 – 2 years
Between 2 – 5 years
After 5 years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
After
5 years
$m
–
(597.8)
(15.8)
(2.6)
(616.2)
After
5 years
$m
(77.1)
(575.4)
(12.3)
(3.0)
(667.8)
2019
$m
(82.4)
(68.4)
(99.6)
(16.7)
(267.1)
23.1
(244.0)
All leases are on a fixed payment basis and no arrangements have been entered into for contingent rental payments.
23 TRADE AND OTHER PAYABLES
Trade creditors
Other creditors and accruals
Due in one year
Due after one year
2019
$m
(513.5)
(237.1)
(750.6)
2018
$m
(463.7)
(144.6)
(608.3)
2019
$m
–
(8.2)
(8.2)
2018
$m
–
(7.7)
(7.7)
2019
$m
(513.5)
(245.3)
(758.8)
2019
Total
$m
(1,637.4)
(872.8)
(244.0)
(2.6)
(2,756.8)
2018
Total
$m
(1,368.7)
(950.4)
(171.8)
(3.0)
(2,493.9)
2018
$m
(44.3)
(32.4)
(103.5)
(13.6)
(193.8)
22.0
(171.8)
Total
2018
$m
(463.7)
(152.3)
(616.0)
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. Other creditors are mainly related to
property, plant and equipment payables, finance interest and employee retentions.
The average credit period taken for trade purchases is 26 days (2018 – 26 days).
At 31 December 2019, the other creditors and accruals include $6.8 million (2018 – $24.0 million) relating to prepayments. Prepayments are offset
against payables to the same suppliers.
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
A) Categories of financial instruments
The carrying value of financial assets and financial liabilities is shown below:
At fair value
through profit
and loss
At fair value
through other
comprehensive
income
Held at
amortised cost
–
(12.1)
(758.4)
(758.8)
(2,756.8)
(3,515.2)
(2,756.8)
(3,527.7)
2019
$m
Total
4.8
5.1
730.6
653.7
1,539.7
2,933.9
2018
$m
Total
0.8
4.7
929.6
1,034.4
863.2
2,832.7
–
–
159.3
653.7
–
813.0
–
–
19.4
1,034.4
–
1,453.8
–
–
(581.5)
(616.0)
(2,493.9)
(3,075.4)
(2,493.9)
(3,109.9)
4.8
–
571.3
–
1,539.7
2,115.8
(12.1)
(0.4)
–
(12.5)
–
5.1
–
–
–
5.1
–
–
–
–
0.8
–
510.2
–
863.2
1,374.2
–
(34.5)
–
(34.5)
–
4.7
–
–
–
4.7
–
–
–
–
At fair value
through profit
and loss
At fair value
through other
comprehensive
income
Held at
amortised cost
Financial assets
Derivative financial assets
Equity investments
Loans and receivables
Cash and cash equivalents
Liquid investments
Financial liabilities
Derivative financial liabilities
Trade and other payables
Borrowings and leases
Financial assets
Derivative financial assets
Equity investments
Loans and receivables
Cash and cash equivalents
Liquid investments
Financial liabilities
Derivative financial liabilities
Trade and other payables
Borrowings and leases
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B) Fair value of financial instruments
Financial assets
Derivative financial assets (a)
Equity investments (b)
Loans and receivables (c)
Liquid investment (d)
Financial liabilities
Derivative financial liabilities (a)
Trade and other payables
Financial assets
Derivative financial assets (a)
Equity investments (b)
Loans and receivables (c)
Liquid investment (d)
Financial liabilities
Derivative financial liabilities (a)
Trade and other payables
Level 1
$m
Level 2
$m
Level 3
$m
–
5.1
–
1,539.7
1,544.8
–
–
–
4.9
–
571.3
–
576.2
(12.1)
(0.4)
(12.5)
–
–
–
–
–
–
–
–
Level 1
$m
Level 2
$m
Level 3
$m
–
4.7
–
863.2
867.9
–
–
–
0.8
–
510.2
–
511.0
–
(34.5)
(34.5)
–
–
–
–
–
–
–
–
Total
2019
$m
4.9
5.1
571.3
1,539.7
2,121.0
(12.1)
(0.4)
(12.5)
Total
2018
$m
0.8
4.7
510.2
863.2
1,378.9
–
(34.5)
(34.5)
Recurring fair value measurements are those that are required in the balance sheet at the end of each reporting year.
a) Derivatives in designated hedge accounting relationships are valued using a discounted cash flow analysis valuation model, which includes observable credit spreads and using
the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. These are level 2 inputs as described
below. Hedging instruments at 31 December 2019 relate to foreign exchange forex options with a nominal value of $280 million.
b) Equity investments are investments in shares on active markets and are valued using unadjusted quoted market values of the shares at the financial reporting date. These are
level 1 inputs as described below.
c) Provisionally priced metal sales for the period are marked-to-market at the end of the period. Gains and losses from the marking-to-market of open sales are recognised through
adjustments to revenue in the income statement and trade receivables in the balance sheet. Forward prices at the end of the period are used for copper sales while period-end
average prices are used for molybdenum concentrate sales. These are level 2 inputs as described below.
d) Liquid investments are highly liquid current asset investments that are valued using market prices at the period end. These are level 1 inputs as described below.
The inputs to the valuation techniques described above are categorised into three levels, giving the highest priority to unadjusted quoted prices in active markets (level 1) and the
lowest priority to unobservable inputs (level 3 inputs):
– Level 1 fair value measurement inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
– Level 2 fair value measurement inputs are derived from inputs other than quoted market prices included in level 1 that are observable for the asset or liability, either directly or
indirectly.
– Level 3 fair value measurement inputs are unobservable inputs for the asset or liability.
The degree to which inputs into the valuation techniques used to measure the financial assets and liabilities are observable and the significance of these inputs in the valuation are
considered in determining whether any transfers between levels have occurred. In the year ended 31 December 2019, there were no transfers between levels in the hierarchy.
C) Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including commodity price risk, currency risk, interest rate risk and other
price risk), credit risk and liquidity risk. The Group periodically uses derivative financial instruments, to reduce its exposure to commodity price,
foreign exchange and interest rate movements. The Group does not use such derivative instruments for speculative trading purposes.
The Board of Directors is responsible for overseeing the Group’s risk management framework. The Audit and Risk Committee assists the Board
with its review of the effectiveness of the risk management process, and monitoring of key risks and mitigations. The Internal Audit department
undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit and
Risk Committee.
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
(I) Commodity price risk
The Group generally sells its copper and molybdenum concentrate and copper cathode output at prevailing market prices, subject to final pricing
adjustments which normally range from one to four months after delivery to the customer, and it is therefore exposed to changes in market prices
for copper and molybdenum both in respect of future sales and previous sales, which remain open as to final pricing. In 2019, sales of copper and
molybdenum concentrate and copper cathodes represented 90.5% of Group revenue and therefore revenues and earnings depend significantly on
LME and realised copper prices.
The Group periodically uses futures and min-max options to manage its exposure to copper prices. These instruments may give rise to accounting
volatility due to fluctuations in their fair value prior to the maturity of the instruments. Details of those copper and molybdenum concentrate sales
and copper cathode sales, which remain open as to final pricing, are given in Note 6. Details of commodity rate derivatives entered into by the
Group are given in Note 24(D).
Commodity price sensitivity
The sensitivity analysis below shows the impact of a movement in the copper price on the financial instruments held as at the reporting date. A
movement in the copper market price as at the reporting date will affect the final pricing adjustment to sales that remain open at that date, impacting
the trade receivables balance and consequently the income statement. A movement in the copper market price will also affect the valuation of
commodity derivatives, impacting the hedging reserve in equity if the fair value movement relates to an effective designated cash flow hedge, and
impacting the income statement if it does not. The calculation assumes that all other variables, such as currency rates, remain constant.
• If the copper market price as at the reporting date had increased by 10 c/lb, profit attributable to the owners of the parent would have increased
by $16.5 million (2018 – increase by $46.9 million).
• If the copper market price as at the reporting date had decreased by 10 c/lb, profit attributable to the owners of the parent would have decreased
by $16.5 million (2018 – decrease by $47.0 million). In addition, a movement in the average copper price during the year would impact revenue
and earnings. A 10 c/lb change in the average copper price during the year would have affected profit attributable to the owners of the parent by
$77.3 million (2018 – $80.0 million) and earnings per share by 7.8 cents (2018 – 8.1 cents), based on production volumes in 2019, without taking
into account the effects of provisional pricing and hedging activity. A $1 /lb change in the average molybdenum price for the year would have
affected profit attributable to the owners of the parent by $10.7 million (2018 – $12.0 million), and earnings per share by 1.0 cents (2018 – 1.2
cents), based on production volumes in 2019, and without taking into account the effects of provisional pricing. A $100 /oz change in the average
gold price for the year would have affected profit attributable to the owners of the parent by $14.5 million (2018 – $6.7 million), and earnings per
share by 1.5 cents (2018 – 0.7 cents), based on production volumes in 2019, and without taking into account the effects of provisional pricing.
(II) Currency risk
The Group is exposed to a variety of currencies. The US dollar, however, is the currency in which the majority of the Group’s sales are
denominated. Operating costs are influenced by the countries in which the Group’s operations are based (principally in Chile) as well as those
currencies in which the costs of imported goods and services are determined. After the US dollar, the Chilean peso is the most important currency
influencing costs and to a lesser extent sales.
Given the significance of the US dollar to the Group’s operations, this is the presentational currency of the Group for internal and external reporting.
The US dollar is also the currency for borrowing and holding surplus cash, although a portion of this may be held in other currencies, notably
Chilean pesos and Sterling, to meet short-term operating and capital commitments and dividend payments.
When considered appropriate, the Group uses forward exchange contracts and currency swaps to limit the effects of movements in exchange rates
in foreign currency denominated assets and liabilities. The Group may also use these instruments to reduce currency exposure on future
transactions and cash flows. Details of any exchange rate derivatives entered by the Group in the year are given in Note 24(D).
The currency exposure of the Group’s cash, cash equivalents and liquid investments is given in Note 21, and the currency exposure of the Group’s
borrowings is given in Note 22(B). The effects of exchange gains and losses included in the income statement are given in Note 9. Exchange
differences on translation of the net assets of entities with a functional currency other than the US dollar are taken to the currency translation
reserve and are disclosed in the consolidated statement of changes in equity on page 150.
Currency sensitivity
The sensitivity analysis below shows the impact of a movement in the US dollar/Chilean peso exchange rate on the financial instruments held as at
the reporting date.
The impact on profit or loss is as a result of the retranslation of monetary financial instruments (including cash, cash equivalents, liquid investments,
trade receivables, trade payables and borrowings). The impact on equity is as a result of changes in the fair value of derivative instruments which
are effective designated cash flow hedges, and changes in the fair value of equity investments. The calculation assumes that all other variables,
such as interest rates, remain constant.
If the US dollar had strengthened by 10% against the Chilean peso as at the reporting date, profit attributable to the owners of the parent would
have increased by $10.2 million (2018 – decrease of $5.8 million). If the US dollar had weakened by 10% against the Chilean peso as at the
reporting date, profit attributable to the owners of the parent would have decreased by $12.5 million (2018 – decreased of $7.2 million).
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Interest rate risk
(III)
The Group’s policy is generally to borrow and invest cash at floating rates. Fluctuations in interest rates may impact the Group’s net finance income
or cost, and to a lesser extent the value of financial assets and liabilities. The Group occasionally uses interest rate swaps and collars to manage
interest rate exposures on a portion of its existing borrowings. Details of any interest rate derivatives entered into by the Group are given in
Note 24(D).
The interest rate exposure of the Group’s borrowings is given in Note 22.
Interest rate sensitivity
The sensitivity analysis below shows the impact of a movement in interest rates in relation to the financial instruments held as at the reporting date.
The impact on profit or loss reflects the impact on annual interest expense in respect of the floating rate borrowings held as at the reporting date,
and the impact on annual interest income in respect of cash and cash equivalents held as at the reporting date. The impact on equity is as a result of
changes in the fair value of derivative instruments which are effective designated cash flow hedges. The calculation assumes that all other variables,
such as currency rates, remain constant.
If the interest rate increased by 1%, based on the financial instruments held as at the reporting date, profit attributable to the owners of the parent
would have decreased by $1.5 million (2018 – decrease of $2.1 million). This does not include the effect on the income statement of changes in the
fair value of the Group’s liquid investments relating to the underlying investments in fixed income instruments.
(IV) Other price risk
The Group is exposed to equity price risk on its equity investments.
Equity price sensitivity
The sensitivity analysis below shows the impact of a movement in the equity values of the equity investment financial assets held as at the
reporting date.
If the value of the equity investments had increased by 10% as at the reporting date, equity would have increased by $0.5 million
(2018 – increase of $0.5 million). There would have been no impact on the income statement.
(V) Cash flow risk
The Group’s future cash flows depend on a number of factors, including commodity prices, production and sales levels, operating costs, capital
expenditure levels, and financial income and costs. Its cash flows are therefore subject to the exchange, interest rate and commodity price risks
described above as well as operating factors and input costs. To reduce the risk of potential short-term disruptions to the supply of key inputs such
as electricity and sulphuric acid, the Group enters into medium and long-term supply contracts to help ensure continuity of supply. Long-term
electricity supply contracts are in place at each of the Group’s mines, in most cases linking the cost of electricity under the contract to the current
cost of electricity on the Chilean grid or the generation cost of the supplier. The Group seeks to lock in supply of sulphuric acid for future periods of
a year or longer, with contract prices agreed in the latter part of the year, to be applied to purchases of acid in the following year. Further
information on production and sales levels and operating costs are given in the Operating review on pages 52 to 63.
(VI) Credit risk
Credit risk arises from trade and other receivables, cash, cash equivalents, liquid investments and derivative financial instruments. The Group’s
credit risk is primarily to trade receivables. The credit risk on cash, cash equivalents and liquid investments and on derivative financial instruments is
limited as the counterparties are financial institutions with high credit ratings assigned by international credit agencies.
The largest balances of trade receivables are held with equity participants in the key mining projects. Many other significant trade receivables are
secured by letters of credit or other forms of security. All customers are subject to credit review procedures, including the use of external credit
ratings where available. Credit is provided only within set limits, which are regularly reviewed. The main customers are recurrent with a good credit
history during the years they have been customers.
Outstanding receivable balances are monitored on an ongoing basis.
The carrying value of financial assets recorded in the financial statements represents the maximum exposure to credit risk. The amounts presented
in the balance sheet are net of allowances for any doubtful receivables (Note 20).
The Group has recognised an expected credit loss provision for its employee receivables, with the main inputs into the provision calculation being
the average level of staff turnover and the average level of recovery of receivables from former employees. For the reasons set out above, the
expected credit loss risk for other trade and other receivable balances is considered to be immaterial to the Group.
(VII) Liquidity risk
The Group manages liquidity risk by maintaining adequate cash reserves and financing facilities, through the review of forecast and actual
cash flows.
The Group typically holds surplus cash in demand or term deposits or highly liquid investments, which typically can be accessed or liquidated within
24 hours.
The majority of borrowings comprise a short-term loan at Los Pelambres, Centinela and Antucoya, repayable over a period of up to one year,
project financing (senior debt) at Centinela, repayable over approximately one year, project financing (senior debt) at Antucoya repayable over
approximately 5.5 years, long-term subordinated debt at Antucoya repayable over approximately 6 years, and a corporate loan at Antofagasta plc
repayable over approximately 1.2 years. The loans are subject to financial covenants which require that specified net debt to EBITDA and EBITDA to
finance expense ratios are maintained.
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
At the end of 2019 the Group was in a net debt position (2018 – net debt position), as disclosed in Note 31(C). Details of cash, cash equivalents
and liquid investments are given in Note 21, while details of borrowings including the maturity profile are given in Note 22(D). Details of undrawn
committed borrowing facilities are also given in Note 22.
The following table analyses the maturity of the Group’s contractual commitments in respect of its financial liabilities and derivative financial
instruments. The table has been drawn up based on the undiscounted cash flows on the earliest date on which the Group can be required to pay.
The table includes both interest and principal cash flows.
At 31 December 2019
Corporate loans
Other loans (including short-term loans)
Finance leases
Preference shares*
Trade and other payables
Derivate financial instruments
At 31 December 2018
Corporate loans
Other loans (including short-term loans)
Finance leases
Preference shares*
Trade and other payables
Less than
6 months
$m
(206.6)
(391.9)
(37.2)
–
(772.6)
(6.3)
(1,414.6)
Less than
6 months
$m
(156.3)
(158.4)
(27.7)
–
(607.0)
(949.4)
Between
6 months
to 1 year
$m
(204.3)
(202.3)
(35.3)
–
–
–
(441.9)
Between
6 months
to 1 year
$m
(137.5)
(220.8)
(16.1)
–
(1.3)
(375.2)
Between
1-2 years
$m
(1,062.7)
(76.0)
(64.4)
(2.6)
(8.2)
(1.0)
(1,214.9)
Between
1-2 years
$m
(263.1)
–
(32.4)
(3.0)
(7.7)
(306.3)
After
2 years
$m
(234.3)
(205.9)
(100.4)
–
–
–
(540.6)
After
2 years
$m
(954.6)
(575.4)
(117.1)
–
–
(1,647.6)
2019
Total
$m
(1,707.9)
(876.1)
(237.3)
(2.6)
(780.8)
(7.3)
(3,612.0)
2018
Total
$m
(1,511.5)
(954.6)
(193.3)
(3.0)
(616.0)
(3,278.4)
* The preference shares pay an annual dividend of £100,000 in perpetuity, and accordingly it is not possible to determine total amounts payable for periods without a fixed
end date.
(VIII) Capital risk management
The Group’s objectives are to return capital to shareholders while leaving the Group with sufficient funds to progress its short, medium and long-
term growth plans as well as preserving the financial flexibility to take advantage of opportunities as they may arise. This policy remains unchanged.
The Group monitors capital on the basis of net cash (defined as cash, cash equivalents and liquid investments less borrowings) which was a net
debt of $563.4 million at 31 December 2019 (2018 – net debt $596.3 million), as well as gross cash (defined as cash, cash equivalents and liquid
investments) which was $2,193.4 million at 31 December 2019 (2018 – $1,897.6 million). The Group’s total cash is held in a combination of on
demand and term deposits and managed funds investing in high quality, fixed income instruments. Some of the managed funds have been
instructed to invest in instruments with average maturities greater than 90 days. These amounts are presented as liquid investments but are
included in net cash for monitoring and decision-making purposes. The Group has a risk averse investment strategy. The Group’s borrowings
are detailed in Note 22. Additional project finance or shareholder loans are taken out by the operating subsidiaries to fund projects on a case-by-
case basis.
Under the terms of the major borrowing facilities, the Group is required to comply with the following financial covenants:
1. Net Financial Debt / EBITDA
2. EBITDA / Interest Expense
3. Total Indebtedness / Tangible Net Worth
The Group has complied with these covenants throughout the reporting period.
D) Derivative financial instruments
The Group periodically uses derivative financial instruments, to reduce its exposure to commodity price, foreign exchange and interest rate
movements. The Group does not use such derivative instruments for speculative trading purposes.
The Group has applied the hedge accounting provisions of IFRS 9 “Financial Instruments”. Changes in the fair value of derivative financial
instruments that are designated and effective as hedges of future cash flows have been recognised directly in equity, with such amounts
subsequently recognised in the income statement in the period when the hedged item affects profit or loss. Any ineffective portion is recognised
immediately in the income statement. Realised gains and losses on commodity derivatives recognised in the income statement have been recorded
within revenue. The time value element of changes in the fair value of derivative options is recognised within other comprehensive income. Realised
gains and losses and changes in the fair value of exchange and interest derivatives are recognised within other finance items for those derivatives
where hedge accounting has not been applied. When hedge accounting has been applied the realised gains and losses on exchange and interest
derivatives are recognised within other finance items and interest expense respectively.
Hedges for future cash flows at the 2019 year-end relate to provisionally priced trade receivables and foreign exchange options, and are immaterial
to the Group.
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25 LONG-TERM INCENTIVE PLAN
The long-term incentive plan (the “Plan”) was introduced at the end of 2011. Awards granted pursuant to the Plan form part of the remuneration
of senior managers in the Group. Directors are not eligible to participate in the Plan.
Details of the Awards
Under the Plan, the Group may grant awards based on the price of ordinary shares in the Company and cannot grant awards over actual shares.
• Restricted Awards: These awards are conditional rights to receive cash payment by reference to a specified number of the Company’s ordinary
shares, subject to the relevant employee remaining employed by the Group when the Restricted Award vests; and
• Performance Awards: These awards are conditional rights to receive cash payment by reference to a specified number of the Company’s
ordinary shares subject to both the satisfaction of a performance condition and the relevant employee remaining employed by the Group when
the Performance Award vests.
When awards vest under the Plan, participants become entitled to receive a cash payment by reference to the number and portion of awards that
have vested and the market value of the Company’s ordinary shares on the date of vesting. There is no exercise price payable by participants in
respect of the awards.
Restricted Awards can only vest in full if participants remain employed by the Group for three years from the date that Restricted Awards are
granted. In ordinary circumstances, the first one-third of a Restricted Award will vest after one year, the second one-third will vest after two years
and the remaining one-third will vest after three years. There are no performance criteria attached to Restricted Awards. The fair value of
Restricted Awards granted under the Plan is recorded as a compensation expense over the vesting periods, with a corresponding liability
recognised for the fair value of the liability at the end of each period until settled.
Performance Awards only vest if certain performance criteria are met. The performance criteria reflect a number of factors including total
shareholder return, earnings levels, growth in the Group’s reserves and resources and project delivery targets. The fair value of Performance
Awards under the Plan is recorded as a compensation expense over the vesting period, with a corresponding liability at the end of each period
until settled.
Valuation process and accounting for the awards
The fair value of the awards is determined using a Monte Carlo simulation model. The inputs into the Monte Carlo simulation model are as follows:
Weighted average forecast share price at vesting date
Expected volatility
Expected life of awards
Expected dividend yields
Discount rate
2019
$11.2
38.50%
3 years
4.18%
1.71%
2018
$10.2
34.02%
3 years
4.38%
2.18%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous five years. The expected life of
awards used in the model has been adjusted based on management’s best estimate for the effects of non-transferability and compliance of the
objectives determined according to the characteristics of each plan.
The number of awards outstanding at the end of the year is as follows:
Outstanding at 1 January 2019
Granted during the year
Cancelled during the year
Payments during the year
Outstanding at 31 December 2019
Number of awards that have vested
Restricted
Awards
Performance
Awards
505,106
331,221
(50,121)
(237,663)
548,543
329,929
1,515,043
523,883
(113,803)
(521,206)
1,403.917
The Group has recorded a liability for $10.2 million at 31 December 2019, of which $6.5 million is due after more than one year (31 December 2018
– $9.1 million of which $4.1 million was due after more than one year) and total expenses of $7.7 million for the year (2018 – expense of
$3.9 million).
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26 POST-EMPLOYMENT BENEFIT OBLIGATIONS
A) Defined contribution schemes
The Group operates defined contribution schemes for a limited number of employees. The amount charged to the income statement in 2019 was
$0.1 million (2018 – $0.5 million), representing the amount paid in the year. There were no outstanding amounts which remain payable at the end
of either year.
B) Severance provisions
Employment terms at some of the Group’s operations provide for payment of a severance payment when an employment contract comes to an
end. This is typically at the rate of one month for each year of service (subject in most cases to a cap as to the number of qualifying years of
service) and based on final salary level. The severance payment obligation is treated as an unfunded defined benefit plan, and the obligation
recognised is based on valuations performed by an independent actuary using the projected unit credit method, which are regularly updated.
The obligation recognised in the balance sheet represents the present value of the severance payment obligation. Actuarial gains and losses are
immediately recognised in other comprehensive income.
The most recent valuation was carried out in 2019 by Ernst & Young, a qualified actuary in Santiago, Chile who is not connected with the Group.
The main assumptions used to determine the actuarial present value of benefit obligations were as follows:
2019
%
5.0%
1.5%
7.5%
2019
$m
(24.8)
(4.9)
7.8
(21.9)
2019
$m
(107.4)
(24.8)
(4.7)
(4.9)
15.3
7.8
(118.7)
2018
%
5.0%
1.5%
6.0%
2018
$m
(18.7)
(5.0)
13.0
(10.7)
2018
$m
(114.0)
(18.7)
3.9
(5.0)
13.4
13.0
(107.4)
Average nominal discount rate
Average rate of increase in salaries
Average staff turnover
Amounts included in the income statement in respect of severance provisions are as follows:
Current service cost (charge to operating profit)
Interest cost (charge to interest expenses)
Foreign exchange charge to other finance items
Total charge to income statement
Movements in the present value of severance provisions were as follows:
Balance at the beginning of the year
Current service cost
Actuarial gains
Interest cost
Paid in the year
Foreign currency exchange difference
Balance at the end of the year
Assumptions description
Discount rate
Nominal discount rate
Reference rate name
Governmental or corporate rate
Reference rating
Corresponds to an Issuance market (primary) or secondary market
Issuance currency associated to the reference rate
Date of determination of the reference interest rate
Source of the reference interest rate
31 December 2019
31 December 2018
4.01%
20–year Chilean Central
Bank Bonds
Governmental
AA–/AA+
Secondary
Chilean peso
15 November 2019
Bloomberg
4.99%
20–year Chilean Central
Bank Bonds
Governmental
AA–/AA+
Secondary
Chilean peso
14 November 2018
Bloomberg
The discount rate is the interest rate used to discount the estimated future severance payments to their present value. The table above shows the
principal instruments and assumptions utilised in determining the discount rate.
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Rate of increase in salaries
This represents the estimated average rates of future salary increases, reflecting likely future promotions and other changes. This has been based
on historical information for the Group for the period from 2015 to 2019.
Turnover rate
This represents the estimated average level of future employee turnover. This has been based on historical information for the Group for the period
from 2015 to 2019.
Sensitivity analysis
Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and staff turnover. The
sensitivity analysis below has been determined based on reasonably possible changes of the respective assumptions occurring at the end of the
reporting period, while holding all other assumptions constant.
• If the discount rate is 100 basis points higher the defined benefit obligation would decrease by $7.2 million. If the discount rate is 100 basis points
lower the defined benefit obligation would increase by $8.3 million.
• If the expected salary growth increases by 1% the defined benefit obligation would increase by $6.0 million. If the expected salary growth
decreases by 1% the defined benefit obligation would decrease by $5.7 million.
• If the staff turnover increases by 1% the defined benefit obligation would increase by less than $0.1 million. If the staff turnover decreases by 1%
the defined benefit obligation would increase by $2.0 million.
27 DEFERRED TAX AND LIABILITIES
At 1 January 2018
(Charge)/credit to income
Charge deferred in equity
Reclassification
At 1 January 2019
(Charge)/credit to income
Charge deferred in equity
Reclassifications
At 31 December 2019
Accelerated
capital allowances
$m
Temporary
differences
on provisions
$m
Withholding
tax
$m
Short-term
differences
$m
Mining tax
(royalty)
$m
Tax losses
$m
(987.3)
(70.0)
–
–
(1,057.3)
(87.2)
–
32.7
(1,111.8)
117.9
71.4
–
0.9
190.2
(34.8)
0.8
(36.2)
120.0
(11.3)
–
–
–
(11.3)
(27.2)
–
–
(38.5)
59.3
(15.6)
(2.1)
(1.6)
40.0
(4.6)
–
0.1
35.5
(104.3)
(4.6)
–
0.7
(108.2)
0.7
0.1
–
(107.4)
0.7
(0.4)
–
–
0.3
1.4
–
3.5
5.2
Total
$m
(925.0)
(19.2)
(2.1)
–
(946.3)
(151.7)
0.9
0.1
(1.097.0)
The charge to the income statement of $151.7 million (2018 – $19.2 million) includes a credit for foreign exchange differences of $0.1 million (2018 –
includes a credit of $0.1 million).
Certain deferred tax assets and liabilities have been offset. Deferred tax assets and liabilities are offset where the Group has a legally enforceable
right to do so. The following is the analysis of the deferred tax balance (after offset):
Deferred tax assets
Deferred tax liabilities
Net deferred tax balances
2019
$m
8.2
(1,105.2)
(1,097.0)
2018
$m
37.2
(983.5)
(946.3)
At 31 December 2019, the Group had unused tax losses of $435.7 million (2018 – $207.1 million) available for offset against future profits. A
deferred tax asset of $5.2 million has been recognised in respect of $19.2 million of these losses as at 31 December 2019 (31 December 2018 –
$0.3 million in respect of $1.1 million of the losses). No deferred tax asset has been recognised in respect of the remaining $416.5 million of tax
losses (2018 – $206.0 million of tax losses). These losses may be carried forward indefinitely.
At 31 December 2019 deferred withholding tax liabilities of $36.6 million have been recognised (31 December 2018 – $11.3 million) which relate
to undistributed earnings of subsidiaries where it is considered likely that the corresponding profits will be distributed in the foreseeable future.
The value of the remaining undistributed earnings of subsidiaries, for which deferred tax liabilities have not been recognised, because the Group is
in a position to control the timing of the distributions and it is likely that distributions will not be made in the foreseeable future, was $5,065 million
(31 December 2018 – $5,080 million).
Temporary differences arising in connection with interests in associates are insignificant.
The deferred tax balance of $1,097.0 million (2018 – $946.3 million) includes $1,039.0 million (2018 – $967.1 million) due in more than one year.
All amounts are shown as non-current on the face of the balance sheet as required by IAS 12 Income Taxes.
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28 DECOMMISSIONING AND RESTORATION PROVISIONS
Balance at the beginning of the year
Charge to operating profit in the year
Unwind of discount to net interest in the year
Capitalised adjustment to provision
Utilised in year
Foreign currency exchange difference
Balance at the end of the year
Short-term provisions
Long-term provisions
Total
2019
$m
(409.8)
2.8
(17.8)
(24.8)
30.9
5.5
(413.2)
(22.0)
(391.2)
(413.2)
2018
$m
(433.0)
(14.8)
(7.6)
24.0
21.6
–
(409.8)
(30.9)
(378.9)
(409.8)
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 to regular independent formal review. It is estimated that the provision will be utilised from 2020 until 2064 based on current mine plans.
The Los Pelambres, Centinela and Zaldívar balances have been updated to reflect the new plans approved by Sernageomin during the year.
There have been a number of changes and updates to the closure provision balances, but the net impact of these is not significant.
29 SHARE CAPITAL AND OTHER RESERVES
(I) Share capital
The ordinary share capital of the Company is as follows:
Authorised
Ordinary shares of 5p each
Issued and fully paid
Ordinary shares of 5p each
2019
Number
2018
Number
2019
$m
2018
$m
1,300,000,000
1,300,000,000
118.9
118.9
2019
Number
2018
Number
2019
$m
2018
$m
985,856,695
985,856,695
89.8
89.8
The Company has one class of ordinary shares which carry no right to fixed income. Each ordinary share carries one vote at any general meeting.
There were no changes in the authorised or issued share capital of the Company in either 2018 or 2019. Details of the Company’s preference share
capital, which is included within borrowings in accordance with IAS 32 Financial Instruments, are given in Note 22A(xiv).
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(II) Other reserves and retained earnings
Details of the share premium account, hedging, fair value and translation reserves and retained earnings for both 2019 and 2018 are included within
the consolidated statement of changes in equity on page 150.
Hedging reserves1
At 31 December 2018/2017
Adoption of new accounting standards
At 1 January
Parent and subsidiaries’ net cash flow hedge fair value (losses)/gains
Parent and subsidiaries’ net cash flow hedge loses transferred to the income statement
Tax on the above
At 31 December
Equity investment revaluation reserve2
At 1 January
Gains/(losses) on equity investment
At 31 December
Foreign currency translation reserves3
At 1 January
At 31 December
Total other reserves per balance sheet
Retained earnings
At 1 January
Adoption of new accounting standards
Parent and subsidiaries’ profit for the period
Equity accounted units’ profit after tax for the period
Actuarial (losses)/gains 4
Transfer to non-controlling interest 5
Total comprehensive income for the year
Dividends paid
At 31 December
2019
$m
(1.1)
–
(1.1)
(4.5)
(0.6)
1.2
(5.0)
(11.1)
0.3
(10.8)
(2.3)
(2.3)
(18.1)
7,084.9
–
477.0
24.4
(3.2)
–
7,583.1
(470.3)
7,112.8
2018
$m
(0.4)
(5.8)
(6.2)
5.5
(0.4)
–
(1.1)
(9.8)
(1.3)
(11.1)
(2.3)
(2.3)
(14.5)
7,041.9
1.1
521.5
22.2
3.3
(38.2)
7,551.8
(466.9)
7,084.9
1. The hedging reserve records gains or losses on cash flow hedges that are recognised initially in equity (through other comprehensive income), as described in Note 24.
2. The equity investments revaluation reserves record fair value gains or losses relating to equity investments, as described in Note 18.
3. Exchange differences arising on the translation of the Group’s net investment in foreign-controlled companies are taken to the foreign currency translation reserve.
The cumulative differences relating to an investment are transferred to the income statement when the investment is disposed of.
4. Actuarial gains or losses relating to long–term employee benefits, as described in Note 26.
5. Mainly reflects an increase in the net assets attributable to NCIs as a result of the Centinela and Encuentro merger.
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30 NON-CONTROLLING INTERESTS
The non-controlling interests of the Group during 2019 and 2018 are as follows:
Los Pelambres
Centinela
Antucoya
Total
Non-controlling
interest
%
40.0
30.0
30.0
Country
Chile
Chile
Chile
At
1 January 2019
$m
1,105.9
1,034.4
(61.6)
2,078.7
Share of
profit/(losses)
for the financial
year
$m
309.0
69.4
(36.7)
341.7
Share of
dividends
$m
(400.0)
–
–
(400.0)
Hedging and
actuarial
gains/(losses)
$m
At
31 December
2019
$m
(2.5)
(0.6)
–
(3.1)
1,012.4
1,103.2
(98.3)
2,017.3
Non-controlling
interest
%
40.0
30.0
30.0
Country
Chile
Chile
Chile
At
1 January 2018
$m
Adoption of new
accounting
standards
$m
Share of
profit/(losses)
for the financial
year
$m
Share of
dividends
$m
Transfer from
retained earnings
$m
Hedging and
actuarial
gains/(losses)
$m
At
31 December
2018
$m
925.1
942.3
(44.2)
1,823.2
–
0.9
(2.9)
(2.0)
315.4
35.9
(14.7)
336.6
(120.0)
–
–
(120.0)
(13.7)
53.2
(1.3)
38.2
(0.9)
2.1
1.5
2.7
1,105.9
1,034.4
(61.6)
2,078.7
Los Pelambres
Centinela
Antucoya
Total
The proportion of the voting rights is proportional with the economic interest for each of the companies listed above.
Summarised financial position and cash flow information for the years ended 2019 and 2018 is set out below:
Non-controlling interest (%)
Cash and cash equivalents
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Accumulated non-controlling interest
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Non-controlling interest (%)
Cash and cash equivalents
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Accumulated non-controlling interest
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Los Pelambres
2019
$m
40.0%
405.5
847.4
3,403.8
(372.7)
(1,324.0)
1,426.6
(490.9)
(669.1)
Los Pelambres
2018
$m
40.0%
459.9
460.3
3,478.8
(379.3)
(1,254.7)
940.2
(345.4)
(368.7)
Centinela
2019
$m
30.0%
491.6
1,188.6
4,603.6
(820.1)
(969.5)
1,157.7
(510.4)
(231.0)
Centinela
2018
$m
30.0%
179.7
1,282.6
5,452.6
(955.0)
(2,610.5)
207.5
(399.8)
(150.0)
Antucoya
2019
$m
30.0%
113.4
288.3
1,358.8
(212.4)
(720.9)
73.8
(49.5)
(37.0)
Antucoya
2018
$m
30.0%
148.3
467.4
1,857.0
(459.0)
(2,220.1)
80.8
(42.1)
(45.2)
Notes to the summarised financial position and cash flow
(i) The amounts disclosed for each subsidiary are based on the amounts included in the consolidated financial statements (100% of the results and
balances of the subsidiary rather than the non-controlling interest proportionate share) before inter-company eliminations.
(ii) Summarised income statement information is shown in the segment information in Note 5.
(iii) There are some subsidiaries with a non-controlling interest portion not included in this note where those portions are not material to the Group.
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31 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
A) Reconciliation of profit before tax to cash flow from continuing operations
Profit before tax
Depreciation and amortisation
Net loss on disposals
Net share of results from associates and joint ventures
Net finance expense
(Increase)/decrease in inventories
Decrease/(increase) in debtors
Increase/(decrease) in creditors
Increase in provisions
Cash flow from continuing operations
B) Analysis of changes in net debt
2019
$m
1,349.2
914.3
12.6
51.1
(24.3)
(7.6)
211.5
88.0
(24.1)
2,570.7
2018
$m
1,252.7
760.5
13.3
(22.2)
114.5
(81.7)
(151.5)
(7.0)
(1.6)
1,877.0
Adoption of
new
accounting
standards
$m
At
1 January
2019
$m
Cash flow
$m
Fair
value
gains
$m
New
leases
$m
Amortisation
of finance
costs
$m
Capitalisation
of interest
$m
–
–
–
–
–
–
(131.7)
–
1,034.4
863.2
(375.0)
676.5
1,897.6
301.5
(607.2)
(1,711.9)
(38.8)
(133.0)
(3.0)
100.0
(253.3)
30.0
62.5
–
(131.7)
(2,493.9)
(60.8)
(131.7)
(596.3)
240.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(45.0)
–
(45.0)
(45.0)
–
–
–
–
(4.5)
–
–
–
(4.5)
(4.5)
–
–
–
–
(37.6)
–
–
–
(37.6)
(37.6)
Movement
between
maturity
categories
$m
–
–
–
(145.5)
145.5
(63.5)
63.5
–
–
–
Other
$m
Exchange
$m
At
31 December
2019
$m
–
–
–
4.3
–
(3.3)
3.5
0.1
4.6
4.6
(5.7)
–
653.7
1,539.7
(5.7)
2,193.4
–
–
–
11.8
0.3
(648.4)
(1,861.8)
(75.6)
(168.4)
(2.6)
12.1
(2,756.8)
6.4
(563.4)
Adoption of
new
accounting
standards
$m
At
1 January
2018
$m
Reclassification
to disposal
group
$m
Cash
flow
$m
–
–
1,083.6
(9.9)
1,168.7 (306.3)
(13.2)
–
Fair
value
gains
$m
–
0.8
–
2,252.3
(316.2)
(13.2)
0.8
–
(2.5)
(732.2) 247.0
66.8
(1,858.6)
–
–
–
(21.5)
–
(93.4)
(3.0)
33.3
–
(2.5)
(2,708.7) 347.1
–
–
–
–
–
–
–
–
–
–
–
–
(2.5)
(456.4)
30.9
(13.2)
0.8
New
leases
$m
Amortisation
of finance
costs
$m
Capitalisation
of interest
$m
Movement
between
maturity
categories
$m
Other
$m
Exchange
$m
–
–
–
–
–
–
(94.6)
–
(94.6)
(94.6)
–
–
–
–
(5.9)
–
–
–
(5.9)
(5.9)
–
–
–
–
(33.7)
–
–
–
(33.7)
(33.7)
–
–
–
(122.0)
122.0
(17.3)
17.3
–
–
–
–
–
–
–
–
–
(5.3)
–
(5.3)
(5.3)
(26.1)
–
(26.1)
–
–
–
9.7
–
9.7
At
31
December
2018
$m
1,034.4
863.2
1,897.6
(607.2)
(1,711.9)
(38.8)
(133.0)
(3.0)
(2,493.9)
(16.4)
(596.3)
Cash and cash equivalents
Liquid investments
Total cash and cash equivalents
and liquid investments
Borrowings due within one year
Borrowings due after one year
Leases due within one year
Leases due after one year
Preference shares
Total borrowings
Net (debt)/cash
Cash and cash equivalents
Liquid investments
Total cash and cash equivalents
and liquid investments
Borrowings due within one year
Borrowings due after one year
Finance leases due within one
year
Finance leases due after one
year
Preference shares
Total borrowings
Net (debt)/cash
C) Net debt
Cash, cash equivalents and liquid investments
Total borrowings
2019
$m
2,193.4
(2,756.8)
(563.4)
2018
$m
1,897.6
(2,493.9)
(596.3)
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
32 EXCHANGE RATES
Assets and liabilities denominated in foreign currencies are translated into US dollars and Sterling at the period-end rates of exchange.
Results denominated in foreign currencies have been translated into US dollars at the average rate for each period.
Year-end rates
Average rates
2019
2018
$1.2860=£1;
$1 = Ch$748.74
$1.2760=£1;
$1 = Ch$702.82
$1.2700=£1;
$1 = Ch$694.77
$1.2667=£1;
$1 = Ch$640.62
33 RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in
this note. Transactions between the Group and its associates and joint ventures are disclosed below.
The transactions which Group companies entered into with related parties who are not members of the Group are set out below. There are no
guarantees given or received and no provisions for doubtful debts related to the amount of outstanding balances.
A) Quiñenco SA
Quiñenco SA (“Quiñenco”) is a Chilean financial and industrial conglomerate, the shares of which are traded on the Santiago Stock Exchange, and in
which members of the Luksic family are interested. Two Directors of the Company, Jean-Paul Luksic and Andronico Luksic, are also directors of
Quiñenco.
The following transactions took place between the Group and the Quiñenco group of companies, all of which were on normal commercial terms at
market rates:
• the Group made purchases of fuel from ENEX SA, a subsidiary of Quiñenco, of $159.3 million (2018 – $221.6 million). The balance due to ENEX
SA at the end of the year was nil (2018 – nil);
• the Group earned interest income of $4.0 million (2018 – $2.8 million) during the year on deposits with Banco de Chile SA, a subsidiary of
Quiñenco. Deposit balances at the end of the year were $67.9 million (2018 – $47.0 million);
• the Group earned interest income of $0.2 million (2018 – $1.4 million) during the year on investments with BanChile Corredores de Bolsa SA,
a subsidiary of Quiñenco. Investment balances at the end of the year were $6.0 million (2018 – $6.5 million).
• the Group purchased shipping services from Hapag Lloyd, an associate of Quiñenco, of $1.0 million (2018 – nil). The balance due to Hapag Lloyd
at the end of the year was nil (2018 – nil).
B) Compañía de Inversiones Adriático SA
In 2019, the Group leased office space on normal commercial terms from Compañía de Inversiones Adriático SA, a company in which members
of the Luksic family are interested, at a cost of $0.6 million (2018 – $1.2 million).
C) Antomin 2 Limited and Antomin Investors Limited
The Group holds a 51% interest in Antomin 2 Limited (“Antomin 2”) and Antomin Investors Limited (“Antomin Investors”), which own a number
of copper exploration properties. The Group originally acquired its 51% interest in these properties for a nominal consideration from Mineralinvest
Establishment, which continues to hold the remaining 49% of Antomin 2 and Antomin Investors. Mineralinvest is owned by the E. Abaroa
Foundation, in which members of the Luksic family are interested. During the year ended 31 December 2019 the Group incurred $0.1 million
(year ended 31 December 2018 – $0.2 million) of exploration expense at these properties.
D) Tethyan Copper Company Limited
As explained in Note 17 the Group has a 50% interest in Tethyan Copper Company Limited (“Tethyan”), which is a joint venture with Barrick Gold
Corporation over Tethyan’s mineral interests in Pakistan. During 2019 the Group contributed $1.8 million (2018 – $8.1 million) to Tethyan.
E) Compañia Minera Zaldívar SpA
The Group has a 50% interest in Zaldívar (see Note 16), which is a joint venture with Barrick Gold Corporation. Antofagasta is the operator of
Zaldívar. The balance due from Zaldívar to Group companies at the end of the year was $6.0 million (2018 – $3.6 million). During 2019 the Group
has received dividends of $50.0 million from Minera Zaldívar (2018 – nil).
Inversiones Hornitos SA
F)
As explained in Note 17, the Group has a 40% interest in Inversiones Hornitos SA, which is accounted for as an associate. The Group paid $187.7
million (year ended 31 December 2018 – $162.2 million) to Inversiones Hornitos in relation to the energy supply contract at Centinela. During 2019
the Group received dividends from Inversiones Hornitos SA of $8.0 million (2018 – $16.6 million).
G) SLM Rio Turbio Comuna Paihuano
During 2019 the Group sold certain property rights which were assessed as having no commercial value to the Group to SLM Rio Turbio Comuna
Paihuano, a company controlled by Andronico Luksic, a Director of the Company, for a consideration of $30,000 reflecting the original cost and
related fees in respect of those property rights.
H) Directors and other key management personnel
Information relating to Directors’ remuneration and interests is given in the Remuneration Report on page 116. Information relating to the
remuneration of key management personnel including the Directors is given in Note 8.
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Antofagasta Annual Report 2019
34 TETHYAN ARBITRATION AWARD
On 12 July 2019 an international arbitration tribunal of the World Bank’s International Centre for Settlement of Investment Disputes (“ICSID”)
awarded $5.84 billion in damages to Tethyan Copper Company Pty Limited (“TCC”), the joint venture held equally by the Company and Barrick Gold
Corporation, in relation to the arbitration claims filed against the Islamic Republic of Pakistan (“Pakistan”) following the unlawful denial of a mining
lease for the Reko Diq project in Pakistan in 2011.
Damages include compensation of $4.087 billion by reference to the fair market value of the Reko Diq project at the time of the mining lease denial,
and interest until the date of the award of $1.753 billion. The Tribunal also awarded TCC just under $62 million in costs incurred in enforcing its
rights. Compound interest applies to the compensation and cost awards from 12 July 2019 at a rate of US Prime +1% per annum until the award
is paid.
On 8 November 2019, Pakistan applied to ICSID to annul the award and on 13 March 2020, ICSID appointed a committee to consider this application
which is expected to reach a conclusion in the next one to two years. TCC is currently stayed from taking action to collect the award. Whether this
stay remains in place will be an issue litigated before the ICSID appointed committee.
It is not expected that proceeds of the award will be recognised in Antofagasta’s financial statements until received.
35 ULTIMATE PARENT COMPANY
The immediate parent of the Group is Metalinvest Establishment, which is controlled by the E. Abaroa Foundation, in which members of the Luksic
family are interested.
Both Metalinvest Establishment and the E. Abaroa Foundation are domiciled in Liechtenstein. Information relating to the interest of Metalinvest
Establishment and the E. Abaroa Foundation is given in the Directors’ Report.
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
36 ANTOFAGASTA PLC – BALANCE SHEET OF THE PARENT COMPANY AND RELATED NOTES
The Balance Sheet of the Parent Company as at 31 December 2019 and 2018 is as follows:
Non-current assets
Investment in subsidiaries
Other receivables
Property, plant and equipment
Current assets
Other receivables
Liquid investments
Cash and cash equivalents
Total assets
Current liabilities
Amounts payable to subsidiaries
Other payables
Non-current liabilities
Medium and long-term borrowings
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
At 1 January
Profit for the year attributable to the owners
Other changes in retained earnings
Total equity
Note
36D
36D
36E
2019
$m
2018
$m
538.6
485.0
0.1
1,023.7
233.0
15.2
39.4
287.6
1,311.3
(315.6)
(9.8)
(325.4)
(499.2)
(499.2)
(824.6)
486.7
89.8
199.2
354.6
313.4
(470.3)
197.7
486.7
538.6
500.0
0.3
1,038.9
59.0
255.8
106.2
421.0
1,459.9
(306.8)
(9.4)
(316.2)
(500.1)
(500.1)
(816.3)
643.6
89.8
199.2
745.5
76.0
(466.9)
354.6
643.6
The financial statements on pages 202 to 205 were approved by the Board of Directors on 16 March 2020 and signed on its behalf by
Jean-Paul Luksic
Chairman
Ollie Oliveira
Senior Independent Director
Parent Company statement of changes in equity
At 1 January 2018
Comprehensive income for the year
Dividends
At 31 December 2018
Comprehensive income for the year
Dividends
At 31 December 2019
Share capital
$m
Share premium
$m
Retained earnings
$m
Total equity
$m
89.8
–
–
89.8
–
–
89.8
199.2
–
–
199.2
–
–
199.2
745.5
76.0
(466.9)
354.6
313.4
(470.3)
197.7
1,034.5
76.0
(466.9)
643.6
313.4
(470.3)
486.7
The ordinary shares rank after the preference shares in entitlement to dividend and on a winding-up. Each ordinary share carries one vote at any
general meeting.
Antofagasta plc is a company limited by shares, incorporated and domiciled in the United Kingdom at Cleveland House, 33 King Street, London.
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Antofagasta Annual Report 2019
36A Basis of preparation of the balance sheet and related notes of the Parent Company
The Antofagasta plc Parent Company balance sheet and related notes have been prepared in accordance with the Companies Act 2006 applicable
to companies using FRS 101, which applies the recognition and measurement bases of IFRS with reduced disclosure requirements. The financial
information has been prepared on an historical cost basis. The financial statements have been prepared on a going concern basis. The functional
currency of the Company and the presentational currency adopted is US dollars.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance with
FRS 101:
• Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and weighted-average exercise prices of share options
and how the fair value of goods or services received was determined)
• IFRS 7, ‘Financial Instruments: Disclosures’
• Paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques and inputs used for fair value measurement of
assets and liabilities)
• Paragraph 38 of IAS 1, ‘Presentation of financial statements’ comparative information requirements in respect of:
(i) paragraph 79(a)(iv) of IAS 1, ‘Presentation of financial statements’
(ii) paragraph 73(e) of IAS 16, ‘Property, plant and equipment’
(iii) paragraph 118(e) of IAS 38, ‘Intangible assets’ (reconciliations between the carrying amount at the beginning and end of the period)
• The following paragraphs of IAS 1, ‘Presentation of financial statements’:
– 10(d), (statement of cash flows)
– 10(f) (a statement of financial position as at the beginning of the preceding period when an entity applies an accounting policy retrospectively
or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements)
– 16 (statement of compliance with all IFRS)
– 38A (requirement for minimum of two primary statements, including cash flow statements)
– 38B-D (additional comparative information)
– 40A-D (requirements for a third statement of financial position)
– 111 (cash flow statement information), and
– 134-136 (capital management disclosures)
• IAS 7, ‘Statement of cash flows’
• Paragraphs 30 and 31 of IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the disclosure of information
when an entity has not applied a new IFRS that has been issued but is not yet effective)
• Paragraph 17 of IAS 24, ‘Related party disclosures’ (key management compensation)
• The requirements in IAS 24, ‘Related party disclosures’ to disclose related party transactions entered into between two or more members
of a group.
As permitted by section 408 of the Companies Act 2006, the profit and loss account of the Parent Company is not presented as part of these
financial statements. The profit after tax for the year of the Parent Company amounted to $313.4 million (2018 – $76.0 million).
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Financial Statements
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
36 ANTOFAGASTA PLC – BALANCE SHEET OF THE PARENT COMPANY AND RELATED NOTES CONTINUED
A summary of the principal accounting policies is set out below. These accounting policies have been applied consistently, other than where new
policies have been adopted.
36B Principal accounting policies of the Parent Company
A) Currency translation
The Company’s functional currency is the US dollar. Transactions in currencies other than the functional currency are translated at the exchange
rate ruling at the date of the transaction. Monetary assets and liabilities, including amounts due from or to subsidiaries, denominated in currencies
other than the functional currency are retranslated at year-end exchange rates. Gains and losses on retranslation are included in net profit or loss
for the year.
B) Revenue recognition
Dividends proposed by subsidiaries are recognised as income by the Company when they represent a present obligation of the subsidiaries, in the
period in which they are formally approved for payment.
Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.
C) Dividends payable
Dividends proposed are recognised when they represent a present obligation, in the period in which they are formally approved for payment.
Accordingly, an interim dividend is recognised when paid and a final dividend is recognised when approved by shareholders.
Investments in subsidiaries
D)
Investments in subsidiaries represent equity holdings in subsidiaries and long-term amounts owed by subsidiaries. Such investments are valued
at cost less any impairment provisions. Investments are reviewed for impairment if events or changes in circumstances indicate that the carrying
amount may not be recoverable. The recoverable amount of the investment is the higher of fair value less cost to disposal and value in use. As
explained in Note 36D, amounts owed by subsidiaries due in currencies other than the functional currency are translated at year-end rates of
exchange with any exchange differences taken to the profit and loss account.
Current asset investments and cash at bank and in hand
E)
Current asset investments comprise highly liquid investments that are readily convertible into known amounts of cash and which are subject to
insignificant risk of changes in value, typically maturing within 12 months.
Cash at bank and in hand comprise cash in hand and deposits repayable on demand.
F) Borrowings
Interest-bearing loans and bank overdrafts are initially recorded at the proceeds received, net of direct issue costs. They are subsequently
measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest
method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for
on an accruals basis using the effective interest rate method.
G) Borrowings – preference shares
The sterling-denominated preference shares issued by the Company carry a fixed rate of return without the right to participate in any surplus. They
are accordingly classified as borrowings and translated into US dollars at year-end rates of exchange. Preference share dividends are included
within finance costs.
Equity instruments – ordinary share capital and share premium
H)
Equity instruments issued are recorded at the proceeds received, net of direct issue costs. Equity instruments of the Company comprise its sterling-
denominated issued ordinary share capital and related share premium.
As explained above, the presentational and the functional currency of the Company is US dollars, and ordinary share capital and share premium are
translated into US dollars at historical rates of exchange based on dates of issue.
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36C Employee benefit expense
A) Average number of employees
The average monthly number of employees was 5 (2018 – 5), engaged in management and administrative activities.
B) Aggregate remuneration
The aggregate remuneration of the employees mentioned above was as follows:
Wages and salaries
Social security costs
Pension contributions
2019
$m
1.7
0.2
0.1
2.0
2018
$m
1.9
0.3
0.1
2.3
The above employee figures exclude Directors who receive Directors’ fees from Antofagasta plc. Details of fees payable to Directors are set out in
the Remuneration Report.
36D Subsidiaries
A)
Investment in subsidiaries
Shares in subsidiaries at cost
Amounts owed by subsidiaries due after more than one year
1 January 2019
31 December 2019
2019
$m
60.6
478.0
538.6
Loans
$m
478.0
478.0
2018
$m
60.6
478.0
538.6
Total
$m
538.6
538.6
Shares
$m
60.6
60.6
The above amount of $478.0 million (2018 – $478.0 million) in respect of amounts owed by subsidiaries due after more than one year relates to
long-term funding balances which form an integral part of the Company’s long-term investment in those subsidiary companies.
Trade and other receivables – amounts owed by subsidiaries due after one year
B)
At 31 December 2019, an amount of $499.2 million was owed to the Company by an indirect subsidiary, pursuant to a 10-year loan agreement.
There have been no impairments recognised in respect of subsidiary receivables as at 31 December 2019.
Trade and other receivables – amounts owed by subsidiaries due within one year
C)
At 31 December 2019, amounts owed by subsidiaries due within one year were $228.0 million (2018 – $52.6 million). There have been no
impairments recognised in respect of subsidiary receivables as at 31 December 2019.
36E Borrowings – preference shares
The authorised, issued and fully paid preference share capital of the Company comprised 2,000,000 5% cumulative preference shares of £1 each
at both 31 December 2019 and 31 December 2018. As explained in Note 22B, the preference shares are recorded in the balance sheet in US dollars
at period-end rates of exchange.
The preference shares are non-redeemable and are entitled to a fixed 5% cumulative dividend, payable in equal instalments in June and December
of each year. On a winding-up, the preference shares are entitled to repayment and any arrears of dividend in priority to ordinary shareholders, but
are not entitled to participate further in any surplus. Each preference share carries 100 votes (see Note 22A (xiv)) at any general meeting.
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Financial Statements
Other Information
ALTERNATIVE PERFORMANCE MEASURES
ALTERNATIVE PERFORMANCE MEASURES
This Annual Report includes a number of alternative performance measures, in addition to IFRS amounts. These measures are included because
they are considered to provide relevant and useful additional information to users of the financial statements. Set out below are definitions of these
alternative performance measures, explanations as to why they are considered to be relevant and useful, and reconciliations to the IFRS figures.
A) Underlying earnings per share
Underlying earnings per share is earnings per share from continuing operations, excluding exceptional items. This measure is reconciled to
earnings per share from continuing and discontinued operations (including exceptional items) on the face of the income statement. This measure is
considered to be useful as it provides an indication of the earnings generated by the ongoing businesses of the Group, excluding the impact of
exceptional items which are non-regular or non-operating in nature. There were no exceptional items in the year.
B) EBITDA
EBITDA refers to Earnings Before Interest, Tax, Depreciation and Amortisation. EBITDA is calculated by adding back depreciation, amortisation,
profit or loss on disposals and impairment charges to operating profit. This comprises 100% of the EBITDA from the Group´s subsidiaries, and the
Group´s proportional share of the EBITDA of its associates and joint ventures.
EBITDA is considered to provide a useful and comparable indication of the current operating earnings performance of the business, excluding the
impact of the historic cost of property, plant and equipment or the particular financing structure adopted by the business.
For the year ended 31 December 2019
Operating profit
Depreciation and
amortisation
(Loss)/gain on disposals
EBITDA from subsidiaries
Proportional share of the
EBITDA from associates
and JV
EBITDA
Los Pelambres
$m
Centinela
$m
Antucoya
$m
Zaldívar
$m
Exploration
and evaluation
$m
Corporate and
other items
$m
Mining
$m
Transport division
$m
Total
$m
1,115.1
425.8
(5.9)
258.5
10.5
1,384.1
532.2
1.5
959.5
92.2
-
86.3
–
–
–
–
(111.1)
(78.7)
1,345.2
30.6
1,375.8
–
–
(111.1)
7.9
–
(70.8)
890.8
12.0
2,248.0
23.5
0.7
54.8
914.3
12.7
2,302.8
–
1,384.1
–
959.5
–
86.3
112.6
112.6
–
(111.1)
(2.5)
(73.3)
110.1
2,358.1
26.0
80.8
136.1
2,438.9
For the year ended 31 December 2018
Operating profit
Depreciation and
amortisation
Gain on disposals
EBITDA from subsidiaries
Proportional share of the
EBITDA from associates
and JV
EBITDA
Los Pelambres
$m
Centinela
$m
Antucoya
$m
Zaldívar
$m
Exploration
and evaluation
$m
Corporate and
other items
$m
Mining
$m
Transport division
$m
Total
$m
1,173.8
229.6
62.9
243.3
10.5
1,427.6
415.4
–
645.0
78.7
–
141.6
–
–
–
–
(97.6)
(68.6)
1,300.1
44.9
1,345.0
–
–
(97.6)
7.2
–
(61.4)
744.6
10.5
2,055.2
15.9
2.8
63.6
760.5
13.3
2,118.8
–
1,427.6
–
645.0
–
141.6
87.4
87.4
–
(97.6)
(3.2)
(64.6)
84.2
2,139.4
25.3
88.9
109.5
2,228.3
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C) Cash costs
Cash costs are a measure of the cost of operating production expressed in terms of cents per pound of payable copper produced.
This is considered to be a useful and relevant measure as it is a standard industry measure applied by most major copper mining companies which
reflects the direct costs involved in producing each pound of copper. It therefore allows a straightforward comparison of the unit production cost of
different mines, and allows an assessment of the position of a mine on the industry cost curve. It also provides a simple indication of the profitability
of a mine when compared against the price of copper (per lb).
Reconciliation of cash costs excluding tolling charges and by-product revenue:
Total Group operating cost (Note 5)
Zaldívar operating costs
Less:
Depreciation and amortisation (Note 5)
Loss on disposal (Note 5)
Elimination of non-mining operations:
Corporate and other items – Total operating cost (Note 5)
Exploration and evaluation – Total operating cost (Note 5)
Transport division – Total operating cost (Note 5)
Closure provision and other expenses not included within cash costs
Inventory variation
Total cost relevant to the mining operations’ cash costs
2019
$m
2018
$m
3,588.7
224.3
(914.3)
(12.7)
(70.8)
(111.1)
(105.7)
(81.8)
3.0
2,519.6
3,388.1
202.3
(760.5)
(13.3)
(61.4)
(97.6)
(109.2)
(78.8)
(0.5)
2,469.1
Copper production volumes (tonnes)
769,970
725,300
Cash costs excluding tolling charges and by-product revenue ($/tonne)
3,272
3,404
Cash costs excluding tolling charges and by-product revenue ($/lb)
1.48
1.55
Reconciliation of cash costs before deducting by-product revenue:
Tolling charges – copper – Los Pelambres (Note 6)
Tolling charges – copper – Centinela (Note 6)
Tolling charges – copper – total
Copper production volumes (tonnes)
Tolling charges ($ / tonne)
Tolling charges ($ / lb)
Cash costs excluding tolling charges and by-product revenue ($/lb)
Tolling charges ($/lb)
Cash costs before deducting by-products revenue ($/lb)
147.5
104.6
252.1
162.1
82.4
244.5
769,970
725,300
327.4
0.17
1.48
0.17
1.65
337
0.17
1.55
0.17
1.72
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Other Information
Other Information continued
ALTERNATIVE PERFORMANCE MEASURES CONTINUED
Cash costs (continued)
Reconciliation of cash costs (net of by-product revenue):
Gold revenue – Los Pelambres (Note 5)
Gold revenue – Centinela (Note 5)
Molybdenum revenue – Los Pelambres (Note 5)
Molybdenum revenue - Centinela (Note 5)
Silver revenue – Los Pelambres (Note 5)
Silver revenue – Centinela (Note 5)
Total by-product revenue
2019
$m
75.2
332.5
248.9
5.7
30.7
27.6
720.6
2018
$m
78.6
169.4
340.2
7.8
34.4
14.7
645.1
Copper production volumes (tonnes)
769,970
725,300
By-product revenues ($/tonne)
By-product revenues ($/lb)
Cash costs before deducting by-product revenue ($/lb)
By-product revenue ($/lb)
Cash costs (net of by-product revenue) ($/lb)
935.9
0.43
1.65
(0.43)
1.22
889
0.43
1.72
(0.43)
1.29
The totals in the tables above may include some small apparent differences as the specific individual figures have not been rounded.
D) Attributable cash, cash equivalents and liquid investments, borrowings and net debt
Attributable cash, cash equivalents & liquid investments, borrowings and net debt reflects the proportion of those balances which are attributable to
the equity holders of the Company, after deducting the proportion attributable to the non-controlling interests in the Group’s subsidiaries.
This is considered to be a useful and relevant measure as the majority of the Group’s cash tends to be held at the corporate level and therefore
100% attributable to the equity holders of the Company, whereas the majority of the Group’s borrowings tends to be at the level of the individual
operations, and hence only a proportion is attributable to the equity holders of the Company.
Cash, cash equivalents and liquid investments:
Los Pelambres
Centinela
Antucoya
Corporate
Railway and other transport services
Total (Note 21)
Borrowings:
Los Pelambres (Note 22)
Centinela (Note 22)
Antucoya (Note 22)
Corporate (Note 22)
Railway and other transport services (Note 22)
Total
amount Attributable share
2019
Attributable
amount
Total
amount Attributable share
405.5
491.6
113.4
1,177.2
5.7
2,193.4
(584.4)
(785.7)
(820.0)
(521.1)
(45.6)
60%
70%
70%
100%
100%
60%
70%
70%
100%
100%
243.3
344.1
79.4
1,177.2
5.7
1,849.7
(350.6)
(550.0)
(574.0)
(521.1)
(45.6)
459.9
179.7
148.3
1,060.2
49.5
1,897.6
(214.1)
(852.2)
(827.8)
(525.2)
(74.6)
60%
70%
70%
100%
100%
60%
70%
70%
100%
100%
Total (Notes 22 and 31)
(2,756.8)
(2,041.3)
(2,493.9)
Net debt
(563.4)
(191.6)
(596.3)
2018
Attributable
amount
275.9
125.8
103.8
1,060.2
49.5
1,615.2
(128.5)
(596.5)
(579.5)
(525.2)
(74.6)
(1,904.3)
(289.0)
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Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
FIVE YEAR SUMMARY
Consolidated balance sheet1
Intangible asset
Property plant and equipment
Other non-current assets
Inventories
Investment in associates and joint ventures
Trade and other receivables
Derivative financial instruments
Equity investments
Deferred tax assets
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Share capital
Share premium
Reserves (retained earnings and hedging, translation and fair value
reserves)
Equity attributable to equity holders of the Company
Non-controlling interests
Consolidated income statement1
Group revenue
2019
$m
2018
$m
2017
$m
2016
$m
2015
$m
150.1
9,556.7
2.1
208.0
1,024.7
48.2
1.8
5.1
8.2
11,004.9
3,605.5
(1,526.9)
(3,682.5)
9,401.0
89.8
199.2
7,094.7
7,383.7
2,017.3
9,401.0
150.1
9,184.1
2.6
172.7
1,056.1
56.1
–
4.7
37.2
10,663.6
3,438.9
(1,307.1)
(3,357.3)
9,438.1
150.1
9,064.3
3.5
111.1
1,069.7
67.0
0.2
6.5
69.1
10,541.5
3,668.2
(1,562.1)
(3,506.0)
9,141.6
150.1
8,737.5
2.6
157.3
1,086.6
66.7
0.2
4.6
82.8
10,288.4
3,435.4
(1,554.0)
(3,660.1)
8,509.7
150.1
8,601.1
2.0
263.9
1,149.1
292.9
–
2.7
124.6
10,583.9
2,953.2
(1,438.6)
(3,581.7)
8,519.3
89.8
199.2
89.8
199.2
89.8
199.2
89.8
199.2
7,070.4
7,359.4
2,078.7
9,438.1
7,029.4
7,318.4
1,823.2
9,141.6
6,526.3
6,815.3
1,694.4
8,509.7
6,357.1
6,646.1
1,873.2
8,519.3
2019
$m
2018
$m
2017
$m
2016
$m
2015
$m
4,964.5
4,733.1
4,749.4
3,621.7
3,225.7
Total profit from operations and associates
1,400.2
1,367.2
1,900.8
355.7
283.2
Profit before tax
Income tax expense
Profit for the financial year from continuing operations
1,349.2
(506.1)
843.1
1,252.7
(423.7)
829.0
1,830.8
(633.6)
1,197.2
Profit for the financial year from discontinued operations
Profit for the year
–
843.1
51.3
880.3
0.5
1,197.7
Non-controlling interests
Net earnings (profit attributable to equity holders of the Company)
(341.7)
501.4
(336.6)
543.7
(447.1)
750.6
284.6
(108.6)
176.0
38.3
214.3
(56.3)
158.0
242.8
(154.4)
88.4
613.3
701.7
(93.5)
608.2
EBITDA
2,438.9
2,228.3
2,586.6
1,626.1
910.1
Earnings per share
Basic and diluted earnings per share
1. These numbers have been restated for prior years.
2019
cents
2018
cents
2017
cents
2016
cents
2015
cents
50.9
55.1
76.2
16.0
61.7
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Other Information
Other Information continued
FIVE YEAR SUMMARY CONTINUED
Dividends per share proposed in relation to the year
Ordinary dividends (interim and final)
2019
cents
2018
cents
43.8
43.8
2017
cents
50.9
50.9
2016
cents
2015
cents
18.4
18.4
3.1
3.1
Dividends per share paid in the year and deducted from equity
47.4
25.6
3.1
12.9
Consolidated cash flow statement
Cash flow from continuing operations
Interest paid
Income tax paid
Net cash from operating activities
2019
$m
2018
$m
2017
$m
2016
$m
2015
$m
2,570.7
(76.3)
(403.6)
2,090.8
1,877.0
(68.2)
(498.0)
1,310.8
2,495.0
(59.1)
(338.4)
(2,097.5)
1,457.3
(46.3)
(272.6)
1,138.4
858.3
(38.6)
(427.1)
392.6
Investing activities
Acquisition and disposal of subsidiaries, joint venture and associates
Dividends from associates
Equity investments, investing activities and recovery of VAT
Purchases and disposals of intangible assets, property, plant and equipment
Interest received
Net cash used in investing activities
–
58.0
(678.3)
(1,076.9)
41.0
(1,656.2)
145.2
16.6
284.2
(872.2)
26.4
(399.8)
3.1
81.8
115.9
(894.4)
14.3
(679.3)
30.0
10.2
(425.2)
(794.6)
14.4
(1,165.2)
(29.9)
12.1
414.8
(1,046.9)
11.0
(638.9)
Financing activities
Dividends paid to equity holders of the Company
Dividends paid to preference holders and non-controlling interests
New borrowings less repayment of borrowings and finance leases
Net cash used in financing activities
(470.3)
(400.1)
60.8
(809.6)
(466.9)
(120.1)
(347.1)
(934.1)
(252.3)
(320.1)
(487.0)
(1,059.4)
(30.6)
(260.0)
214.3
(76.3)
(127.2)
(80.0)
452.0
244.8
Net (decrease)/increase in cash and cash equivalents
(375.0)
(23.1)
358.8
(103.1)
(1.5)
Consolidated net cash
Cash, cash equivalents and liquid investments
Short-term borrowings
Medium and long-term borrowings
2019
$m
2018
$m
2017
$m
2016
$m
2015
$m
2,193.4
1,897.6
2,252.3
2,048.5
1,731.6
(723.9)
(2,032.9)
(2,756.8)
(646.0)
(1,847.9)
(2,493.9)
(753.6)
(1,955.1)
(2,708.7)
(836.8)
(2,283.4)
(3,120.2)
(758.9)
(1,996.2)
(2,755.1)
Net (debt)/cash at the year-end
(563.4)
(596.3)
(456.4)
(1,071.7)
(1,023.5)
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Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
PRODUCTION STATISTICS
Production and sales volumes, realised prices and cash costs by mine
Copper
Los Pelambres
Centinela
Antucoya
Zaldívar (attributable basis – 50%)
Group total
Group weighted average (net cash costs)
Group weighted average (excluding tolling charges and
before by-products)
Group weighted average (before by-product credits)
Cash costs at Los Pelambres comprises
Cash costs before by-product credits
By-product credits (principally molybdenum and gold)
Net cash costs
Cash cost at Centinela comprises
Cash costs before by-product credits
By-product credits (principally gold)
Net cash costs
LME average
Gold
Los Pelambres
Centinela Concentrates
Group total
Market average price
Molybdenum
Los Pelambres
Centinela
Group total/average realised price
Market average price
Production
2019
‘000
tonnes
2018
‘000
tonnes
363.4
276.6
71.9
58.1
770.0
357.8
248.0
72.2
47.3
725.3
2019
‘000
tonnes
356.1
287.8
71.6
56.7
772.2
Sales
2018
‘000
tonnes
358.9
240.9
71.3
46.5
717.6
Net cash costs
Realised prices
2019
‘000
$/lb
0.91
1.26
2.17
1.75
2018
‘000
$/lb
0.91
1.51
1.99
1.94
2019
‘000
$/lb
2.75
2.75
2.74
–
2018
‘000
$/lb
2.78
2.82
2.91
–
1.22
1.29
2.75
2.81
1.48
1.65
1.55
1.72
1.40
1.52
(0.49)
0.91
(0.61)
0.91
1.83
(0.58)
1.26
1.89
(0.38)
1.51
‘000
ounces
59.7
222.6
282.3
Production
‘000
ounces
63.2
146.9
210.1
‘000
ounces
52.6
236.2
288.8
Sales
‘000
ounces
62.6
135.5
198.1
2.72
2.96
Realised prices
$/oz
$/oz
1,434
1,412
1,416
1,394
1,260
1,255
1,256
1,270
‘000
tonnes
‘000
tonnes
‘000
tonnes
‘000
tonnes
$/lb
$/lb
11.2
0.4
11.6
13.3
0.3
13.6
11.8
0.3
12.1
13.6
0.4
14.0
10.8
11.1
10.8
11.4
12.5
10.6
12.4
11.9
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Other Information
Other Information continued
ORE RESERVES AND MINERAL RESOURCES ESTIMATES
At 31 December 2019
INTRODUCTION
The ore reserves and mineral resources estimates presented in this
report comply with the requirements of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves
2012 edition (the JORC Code) which has been used by the Group as
minimum standard for the preparation and disclosure of the information
contained herein. The definitions and categories of ore reserves and
mineral resources are set out below.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for
which tonnage, densities, shape, physical characteristics, grade and
mineral content can be estimated with a reasonable level of confidence.
It is based on exploration, sampling and testing information gathered
through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes. The locations are too widely
or inappropriately spaced to confirm geological and/or grade continuity
but are spaced closely enough for continuity to be assumed.
The information on ore reserves and mineral resources was prepared
by or under the supervision of Competent Persons as defined in the
JORC Code. The Competent Persons have sufficient experience
relevant to the style of mineralisation and type of deposit under
consideration and to the activity which they are undertaking. The
Competent Persons consent to the inclusion in this report of the matters
based on their information in the form and context in which it appears.
The Competent Person for Exploration Results and Mineral Resources
is Osvaldo Galvez (CP, Chile), Deputy Manager of Mineral Resource
Evaluation for Antofagasta Minerals S A. The Competent Person for
Ore Reserves is Murray Canfield (P.Eng. Ontario), Technical Manager
of Mining for Antofagasta Minerals S A.
The Group’s operations and projects are subject to a comprehensive
programme of audits aimed at providing assurance in respect of ore
reserves and mineral resources estimates. The audits are conducted by
suitably qualified Competent Persons from within an operation, another
operation of the Company or from independent consultants.
The ore reserves and mineral resources estimates are the total
reserves and resources, with the Group’s attributable share for each
mine shown in the ‘Attributable Tonnage’ column. The Group’s
economic interest in each mine is disclosed in the notes following the
estimates on pages 220 to 221. The totals in the table may include some
small apparent differences due to rounding.
DEFINITIONS AND CATEGORIES OF ORE RESERVES AND
MINERAL RESOURCES
A ‘Mineral Resource’ is a concentration or occurrence of material of
intrinsic economic interest in or on the Earth’s crust in such form,
quality and quantity that there are reasonable prospects for eventual
economic extraction. The location, quantity, grade, geological
characteristics and continuity of a Mineral Resource are known,
estimated or interpreted from specific geological evidence and
knowledge. Mineral Resources are sub-divided, in order of increasing
geological confidence, into Inferred, Indicated and Measured categories.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for
which tonnage, grade and mineral content can be estimated with a low
level of confidence. It is inferred from geological evidence and assumed
but not verified geological and/or grade continuity. It is based on
information gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes which may
be limited or of uncertain quality and reliability.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource
for which tonnage, densities, shape, physical characteristics, grade
and mineral content can be estimated with a high level of confidence.
It is based on detailed and reliable exploration, sampling and testing
information gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes. The locations
are spaced closely enough to confirm geological and grade continuity.
An ‘Ore Reserve’ is the economically mineable part of a Measured
and/or Indicated Mineral Resource. It includes diluting materials and
allowances for losses, which may occur when the material is mined.
Appropriate assessments and studies have been carried out, and
include consideration of and modification by realistically assumed
mining, metallurgical, economic, marketing, legal, environmental, social
and governmental factors. These assessments demonstrate at the time
of reporting that extraction could reasonably be justified. Ore Reserves
are sub-divided in order of increasing confidence into Probable Ore
Reserves and Proved Ore Reserves.
A ‘Probable Ore Reserve’ is the economically mineable part of an
Indicated, and in some circumstances, a Measured Mineral Resource. It
includes diluting materials and allowances for losses which may occur
when the material is mined. Appropriate assessments and studies have
been carried out, and include consideration of and modification by
realistically assumed mining, metallurgical, economic, marketing, legal,
environmental, social and governmental factors. These assessments
demonstrate at the time of reporting that extraction could reasonably
be justified.
A ‘Proved Ore Reserve’ is the economically mineable part of a
Measured Mineral Resource. It includes diluting materials and
allowances for losses which may occur when the material is mined.
Appropriate assessments and studies have been carried out, and
include consideration of and modification by realistically assumed
mining, metallurgical, economic, marketing, legal, environmental, social
and governmental factors. These assessments demonstrate at the time
of reporting that extraction could reasonably be justified.
212
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Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
ORE RESERVES ESTIMATES
Group Subsidiaries
Ore reserves
Los Pelambres (see note (a))
Sulphides
Proved
Probable
Total
Centinela (see note (b))
Centinela Cathodes
(oxides)
Proved
Probable
Sub-Total
Centinela Concentrates
(sulphides)
Proved
Probable
Sub-Total
Proved
Probable
Total
Antucoya (see note (c))
Proved
Probable
Total
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
694.7
377.3
1,072.0
732.7
399.5
1,132.2
0.60
0.58
0.60
0.61
0.59
0.60
0.020
0.018
0.020
0.020
0.018
0.019
0.05
0.05
0.05
0.05
0.04
0.05
416.8
226.4
643.2
439.6
239.7
679.3
119.8
205.7
325.5
134.3
191.8
326.0
540.5
1,288.8
1,829.4
660.3
1,494.5
2,154.9
565.9
1,279.2
1,845.2
700.2
1,471.0
2,171.2
292.5
394.5
687.0
346.6
294.1
640.7
0.54
0.33
0.41
0.46
0.40
0.42
0.48
0.39
0.41
0.39
0.28
0.33
0.52
0.32
0.40
0.48
0.40
0.42
0.49
0.39
0.42
0.36
0.31
0.34
–
–
–
–
–
–
–
–
–
–
–
–
83.9
144.0
227.9
94.0
134.2
228.2
0.012
0.012
0.012
0.012
0.012
0.012
0.18
0.12
0.14
0.19
0.12
0.14
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
378.4
902.2
1,280.6
462.2
1,046.2
1,508.4
396.2
895.5
1,291.6
490.1
1,029.7
1,519.8
204.8
276.1
480.9
242.6
205.9
448.5
–
–
–
–
–
–
Total Group Subsidiaries
3,913.9
3,944.1
0.45
0.46
– 2,632.5
2,647.6
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
Group Joint Venture
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Zaldívar (see note (k))
Proved
Probable
Total Group Joint Venture
430.8
137.7
568.5
252.8
214.7
467.5
0.43
0.42
0.43
0.46
0.47
0.46
Total Group Ore Reserves
4,482.4
4,411.6
0.45
0.46
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
215.4
68.8
284.2
126.4
107.4
233.7
– 2,916.8
2,881.4
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Other Information
Other Information continued
ORE RESERVES AND MINERAL RESOURCES ESTIMATES CONTINUED
At 31 December 2019
MINERAL RESOURCES ESTIMATES (INCLUDING ORE RESERVES)
Group Subsidiaries
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
Los Pelambres (see note (a))
Sulphides
Measured
Indicated
Measured + Indicated
Inferred
Total
Los Pelambres Total
Measured
Indicated
Measured + Indicated
Inferred
Total
Centinela (see note (b))
Centinela Cathodes
(oxides)
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Centinela Concentrates
(sulphides)
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Centinela Total
Measured
Indicated
Measured + Indicated
Inferred
Total
Antucoya (see note (c))
Oxides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Antucoya Total
Measured
Indicated
Measured + Indicated
Inferred
Total
1,200.8
1,156.9
2,069.5 2,093.6
3,294.4
3,226.4
2,819.0
2,835.1
6,113.4
6,061.5
1,200.8
1,156.9
2,069.5 2,093.6
3,294.4
3,226.4
2,819.0
2,835.1
6,113.4
6,061.5
180.4
311.7
492.1
27.0
519.2
217.4
305.8
523.2
28.6
551.8
923.0
956.1
2,100.4 2,032.7
3,023.4 2,988.8
973.2
1,168.2
4,191.6 3,962.0
1,173.5
1,103.4
2,412.1 2,338.6
3,512.1
3,515.5
1,001.8
1,195.3
4,513.9
4,710.8
441.3
393.8
835.1
365.7
1,200.8
441.3
393.8
835.1
365.7
1,200.8
407.1
418.9
825.9
427.8
1,253.7
407.1
418.9
825.9
427.8
1,253.7
0.58
0.52
0.54
0.46
0.50
0.58
0.52
0.54
0.46
0.50
0.50
0.33
0.39
0.33
0.39
0.49
0.38
0.41
0.31
0.38
0.49
0.37
0.41
0.31
0.38
0.33
0.31
0.32
0.28
0.31
0.33
0.31
0.32
0.28
0.31
0.58
0.52
0.54
0.46
0.50
0.58
0.52
0.54
0.46
0.50
0.50
0.33
0.40
0.36
0.40
0.49
0.38
0.42
0.32
0.39
0.49
0.37
0.41
0.32
0.39
0.34
0.30
0.32
0.27
0.30
0.34
0.30
0.32
0.27
0.30
0.020
0.016
0.017
0.016
0.017
0.020
0.016
0.017
0.016
0.017
–
–
–
–
–
0.020
0.016
0.017
0.016
0.017
0.020
0.016
0.017
0.016
0.017
–
–
–
–
–
0.013
0.012
0.013
0.011
0.012
0.013
0.012
0.013
0.011
0.012
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.05
0.05
0.05
0.06
0.05
0.05
0.05
0.05
0.06
0.05
–
–
–
–
–
0.19
0.12
0.14
0.09
0.13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
720.5
0.05
694.1
1,256.1
0.05
1,241.7
1,976.6
0.05
1,935.8
0.06
1,691.4
1,701.1
0.05 3,636.9 3,668.0
720.5
0.05
694.1
1,256.1
0.05
1,241.7
1,976.6
0.05
1,935.8
1,691.4
0.06
1,701.1
0.05 3,636.9 3,668.0
–
–
–
–
–
126.3
218.2
344.5
18.9
363.4
152.2
214.1
366.3
20.0
386.3
0.19
0.12
0.15
0.10
817.8
0.13 2,934.1
669.3
646.1
1,422.9
1,470.3
2,116.4 2,092.2
681.3
2,773.4
772.4
1,688.5
821.5
–
–
1,637.0
– 2,460.9 2,458.4
701.3
–
836.7
3,159.7
– 3,297.5
–
–
–
–
–
–
–
–
–
–
308.9
275.6
584.5
256.0
840.6
308.9
275.6
584.5
256.0
840.6
285.0
293.2
578.1
299.5
877.6
285.0
293.2
578.1
299.5
877.6
214
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Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
Group Subsidiaries
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
Polo Sur (see note (d))
Oxides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Sulphides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Polo Sur Total
Measured
Indicated
Measured + Indicated
Inferred
Total
Penacho Blanco (see note (e))
Oxides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Sulphides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Penacho Blanco Total
Measured
Indicated
Measured + Indicated
Inferred
Total
–
86.8
86.8
38.8
125.6
–
704.1
704.1
684.8
1,388.9
–
790.9
790.9
723.6
1,514.5
–
–
–
18.3
18.3
–
–
–
321.9
321.9
–
–
–
340.2
340.2
–
86.8
86.8
38.8
125.6
–
704.1
704.1
684.8
1,388.9
–
790.9
790.9
723.6
1,514.5
–
–
–
18.3
18.3
–
–
–
321.9
321.9
–
–
–
340.2
340.2
–
0.43
0.43
0.35
0.40
–
0.37
0.37
0.30
0.34
–
0.38
0.38
0.31
0.34
–
–
–
0.29
0.29
–
–
–
0.38
0.38
–
–
–
0.37
0.37
–
0.43
0.43
0.35
0.40
–
0.37
0.37
0.30
0.34
–
0.38
0.38
0.31
0.34
–
–
–
0.29
0.29
–
–
–
0.38
0.38
–
–
–
0.37
0.37
–
–
–
–
–
–
–
–
–
–
–
0.007
0.007
0.007
0.007
–
0.007
0.007
0.007
0.007
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.06
0.06
0.05
0.05
–
–
–
–
–
–
–
–
–
–
–
–
–
0.05
0.05
–
–
–
–
–
–
–
–
–
–
–
0.06
0.06
0.05
0.05
–
–
–
–
–
–
–
–
–
–
–
–
–
0.05
0.05
–
–
–
–
–
–
86.8
86.8
38.8
125.6
–
704.1
704.1
684.8
1,388.9
–
790.9
790.9
723.6
1,514.5
–
–
–
9.3
9.3
–
–
–
164.2
164.2
–
–
–
173.5
173.5
–
86.8
86.8
38.8
125.6
–
704.1
704.1
684.8
1,388.9
–
790.9
790.9
723.6
1,514.5
–
–
–
9.3
9.3
–
–
–
164.2
164.2
–
–
–
173.5
173.5
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Other Information continued
ORE RESERVES AND MINERAL RESOURCES ESTIMATES CONTINUED
At 31 December 2019
MINERAL RESOURCES ESTIMATES (INCLUDING ORE RESERVES) CONTINUED
Group Subsidiaries
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
Mirador (see note (f))
Oxides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Sulphides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Mirador Total
Measured
Indicated
Measured + Indicated
Inferred
Total
Los Volcanes (see note (g))
Oxides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Sulphides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Los Volcanes Total
Measured
Indicated
Measured + Indicated
Inferred
Total
1.2
15.4
16.6
6.1
22.7
30.6
14.0
44.6
1.2
45.7
31.8
29.4
61.2
7.3
68.5
–
–
–
30.8
30.8
3.3
24.1
27.4
8.5
35.9
31.2
16.8
48.0
2.5
50.5
34.5
40.9
75.5
11.0
86.4
–
–
–
30.8
30.8
–
–
–
1,873.4
1,873.4
–
–
–
1,904.2
1,904.2
–
–
–
1,873.4
1,873.4
–
–
–
1,904.2
1,904.2
0.23
0.27
0.27
0.26
0.26
0.35
0.28
0.33
0.26
0.32
0.34
0.27
0.31
0.26
0.30
–
–
–
0.31
0.31
–
–
–
0.50
0.50
–
–
–
0.50
0.50
0.47
0.32
0.34
0.26
0.32
0.35
0.28
0.32
0.26
0.32
0.36
0.30
0.33
0.26
0.32
–
–
–
0.31
0.31
–
–
–
0.50
0.50
–
–
–
0.50
0.50
–
–
–
–
–
–
–
–
–
–
0.006
0.008
0.007
0.009
0.007
0.006
0.008
0.007
0.008
0.007
–
–
–
–
–
–
–
–
–
–
–
–
–
0.011
0.011
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.011
0.011
–
–
–
–
–
–
–
–
–
–
0.13
0.08
0.11
0.05
0.11
–
–
–
–
–
–
–
–
–
–
–
–
–
0.03
0.03
–
–
–
–
–
–
–
–
–
–
0.13
0.08
0.11
0.06
0.11
–
–
–
–
–
–
–
–
–
–
–
–
–
0.03
0.03
–
–
–
–
–
0.9
12.0
12.9
4.8
17.7
30.6
14.0
44.6
1.2
45.7
31.5
26.0
57.5
5.9
63.5
–
–
–
15.7
15.7
–
–
–
955.4
955.4
–
–
–
971.1
971.1
2.6
18.8
21.4
6.6
28.0
31.2
16.8
48.0
2.5
50.5
33.8
35.6
69.4
9.1
78.5
–
–
–
15.7
15.7
–
–
–
955.4
955.4
–
–
–
971.1
971.1
216
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Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
Group Subsidiaries
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
Brujulina (see note (h))
Oxides
Measured
Indicated
Measured + Indicated
Inferred
Total
Brujulina Total
Measured
Indicated
Measured + Indicated
Inferred
Total
Sierra (see note (i))
Oxides
Measured
Indicated
Measured + Indicated
Inferred
Total
Sierra Total
Measured
Indicated
Measured + Indicated
Inferred
Total
–
–
–
87.2
87.2
–
–
–
87.2
87.2
–
–
–
52.0
52.0
–
–
–
52.0
52.0
–
–
–
87.2
87.2
–
–
–
87.2
87.2
–
–
–
52.0
52.0
–
–
–
52.0
52.0
–
–
–
0.49
0.49
–
–
–
0.49
0.49
–
–
–
0.69
0.69
–
–
–
0.69
0.69
–
–
–
0.49
0.49
–
–
–
0.49
0.49
–
–
–
0.69
0.69
–
–
–
0.69
0.69
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44.5
44.5
–
–
–
44.5
44.5
–
–
–
52.0
52.0
–
–
–
52.0
52.0
–
–
–
44.5
44.5
–
–
–
44.5
44.5
–
–
–
52.0
52.0
–
–
–
52.0
52.0
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217
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Other Information
Other Information continued
ORE RESERVES AND MINERAL RESOURCES ESTIMATES CONTINUED
At 31 December 2019
MINERAL RESOURCES ESTIMATES (INCLUDING ORE RESERVES) CONTINUED
Group Subsidiaries
2019
2018
2019
2018
2019
Twin Metals (see note (j))
Tonnage
(millions of tonnes)
Copper
(%)
Maturi
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Maturi South West
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Birch Lake
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Spruce Road
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Twin Metals Total
Measured
Indicated
Measured + Indicated
Inferred
Total
Group subsidiaries
Measured + Indicated
Inferred
Total Group Subsidiaries
291.4
818.3
1,109.7
534.1
1,643.8
291.4
818.3
1,109.7
534.1
1,643.8
–
93.1
93.1
29.3
122.4
–
90.4
90.4
217.0
307.4
–
–
–
435.5
435.5
–
93.1
93.1
29.3
122.4
–
90.4
90.4
217.0
307.4
–
–
–
435.5
435.5
291.4
1,001.8
1,293.2
1,215.9
2,509.1
291.4
1,001.8
1,293.2
1,215.9
2,509.1
9,791.9
9,722.2
8,726.4 8,582.7
18,374.6
18,448.7
0.63
0.57
0.59
0.50
0.56
–
0.48
0.48
0.43
0.47
–
0.52
0.52
0.46
0.48
–
–
–
0.43
0.43
0.63
0.56
0.57
0.47
0.52
0.46
0.43
0.45
0.63
0.57
0.59
0.50
0.56
–
0.48
0.48
0.43
0.47
–
0.52
0.52
0.46
0.48
–
–
–
0.43
0.43
0.63
0.56
0.57
0.47
0.52
0.47
0.43
0.45
0.20
0.18
0.19
0.16
0.18
–
0.17
0.17
0.15
0.17
–
0.16
0.16
0.15
0.15
–
–
–
0.16
0.16
0.20
0.18
0.18
0.16
0.17
–
–
–
Nickel
(%)
2018
0.20
0.18
0.19
0.16
0.18
–
0.17
0.17
0.15
0.17
–
0.16
0.16
0.15
0.15
–
–
–
0.16
0.16
0.20
0.18
0.18
0.16
0.17
–
–
–
TPM
(g/tonne Au+Pt+Pd)
Attributable Tonnage
(millions of tonnes)
2019
2018
2019
2018
0.57
0.57
0.57
0.57
0.57
–
0.31
0.31
0.26
0.30
–
0.87
0.87
0.64
0.70
–
–
–
–
–
–
–
–
–
–
–
–
–
0.57
0.57
0.57
0.57
0.57
–
0.31
0.31
0.26
0.30
–
0.87
0.87
0.64
0.70
–
–
–
–
–
224.6
771.6
996.1
483.2
1,479.3
224.6
771.6
996.1
483.2
1,479.3
–
65.2
65.2
20.5
85.7
–
63.3
63.3
151.9
215.2
–
–
–
304.8
304.8
–
65.2
65.2
20.5
85.7
–
63.3
63.3
151.9
215.2
–
–
–
304.8
304.8
224.6
900.0
1,124.6
960.4
224.6
–
900.0
–
1,124.6
–
–
960.4
– 2,085.0 2,085.0
– 6,954.2
6,998.1
– 5,724.8 5,626.4
– 12,679.0 12,624.5
218
218
Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
Group Joint Venture
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
Zaldívar (see note (k))
Oxides & Secondary
Sulphides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Primary Sulphides
Measured
Indicated
Measured + Indicated
Inferred
Sub-Total
Zaldívar Total
Measured
Indicated
Measured + Indicated
Inferred
Total Group Joint Venture
0.41
0.37
0.40
0.46
0.40
0.40
0.39
0.39
0.36
0.39
0.41
0.38
0.40
0.41
0.40
595.7
249.0
844.7
29.1
873.8
107.9
312.2
420.1
29.1
449.2
544.2
230.7
774.9
43.7
818.6
–
–
–
–
–
703.6
561.2
1,264.8
58.2
1,323.0
544.2
230.7
774.9
43.7
818.6
Tonnage
(millions of tonnes)
Total Group
2019
2018
2019
Measured + Indicated
Inferred
Total Group Mineral Resources
10,987.0 10,566.8
8,784.6 8,626.4
19,193.2
19,771.6
0.46
0.43
0.44
0.43
0.38
0.41
0.25
0.41
–
–
–
–
–
0.43
0.38
0.41
0.25
0.41
Copper
(%)
2018
0.46
0.43
0.45
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
297.9
124.5
422.3
14.5
436.9
54.0
156.1
210.1
14.5
224.6
351.8
280.6
632.4
29.1
661.5
272.1
115.4
387.4
21.9
409.3
–
–
–
–
–
272.1
115.4
387.4
21.9
409.3
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
2019
2018
2019
2018
2019
2018
–
–
–
–
–
–
–
–
–
7,385.6
– 7,586.6
– 5,753.9
5,648.3
– 13,340.5 13,033.8
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219
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Other Information
Other Information continued
ORE RESERVES AND MINERAL RESOURCES ESTIMATES CONTINUED
At 31 December 2019
NOTES TO ORE RESERVES AND MINERAL RESOURCES ESTIMATES
The ore reserves mentioned in this report were determined considering specific cut-off grades for each mine and using a long-term copper price
of $3.10/lb (unchanged from 2018), $9.50/lb molybdenum ($9.00 in 2018) and $1,300/oz gold (unchanged from 2018), unless otherwise noted.
These same values have been used for copper equivalent (CuEq) estimates, where appropriate.
In order to ensure that the stated resources represent mineralisation that has “reasonable prospects for eventual economic extraction” (JORC
Code) the resources are enclosed within pit shells that were optimised based on measured, indicated and inferred resources and considering a
copper price of $3.60/lb (unchanged from 2018). Mineralisation estimated outside these pit shells is not included in the resource figures.
Group policy on auditing of resource and reserve estimates is that prior to first publication, an independent external audit is done. External audits
are also done on resources and reserves for any material changes (incorporation of a significant amount of drillhole information, for instance) or
every three to five years, whichever comes first. All the resource models that support the reserve estimates and reserves have been audited as per
Group policy, with audits carried out during 2019 on the expanded Zaldívar resource model and reserves for the two oxide deposits acquired by
Centinela in 2018 (Mirador Phase 4 and Tesoro Sur). All resource and reserve estimates have been found to comply with the JORC Code (2012).
A) Los Pelambres
Los Pelambres is 60% owned by the Group. The cut-off grade applied to the determination of ore reserves is variable over 0.35% copper, while
the cut-off grade applied to mineral resources is 0.35% copper. Ore reserves have decreased 60 million tonnes due to depletion in the period
and reflects the remaining capacity of the existing tailing dams, limiting the amount of mineral resource that can be converted into ore reserves.
For 2019 the mineral resource model has been updated with 21 drill holes for a total of 3,440 metres. Mineral resources decreased overall by a
net 52 million tonnes, including depletion.
B) Centinela (concentrates and cathodes)
Centinela is 70% owned by the Group and consists of Centinela Concentrates (Esperanza + Esperanza Sur, mostly sulphide porphyry deposits)
and Centinela Cathodes (Tesoro Central and Tesoro Sur oxide deposits, including the oxide portion of the Mirador and Encuentro deposits).
The cut-off grade applied to the determination of ore reserves for Centinela Concentrates is 0.15% equivalent copper with 0.15% copper used as
a cut-off grade for mineral resources. The cut-off grades used for Centinela Cathodes is 0.20% copper for ore reserves and 0.15% copper for
mineral resources.
The Centinela Cathodes ore reserves have decreased marginally due to the incorporation of reserves for the Mirador Phase 4 and Tesoro Sur
deposits, following completion of external audits during the year, which has largely offset depletion. Centinela Cathodes ore reserves are made
up of 208 million tonnes at 0.49% copper of heap leach ore and 117 million tonnes at 0.27% copper of ROM ore. Centinela Cathodes mineral
resources decreased by a net 33 million tonnes, principally due to depletion, as well as refinements made to the Encuentro Oxides resource model.
Centinela Concentrates ore reserves have remained effectively unchanged, decreasing by a net 16 million tonnes, with depletion of 37 million tonnes
in Esperanza partially offset by a slight increase in Esperanza Sur ore reserves. Centinela Sulphides mineral resources increased by a net 230
million tonnes, mainly due to the decrease in processing costs (most relevantly energy) and the update of costs and metallurgical parameters for
Encuentro Sulphides.
C) Antucoya
Antucoya is 70% owned by the Group. The ore reserve cut-off grade is 0.16% copper, while the cut-off grade for mineral resources is 0.15%
copper. For 2019 the mineral resource model has been updated with 70 drill holes for a total of 13,400 metres. Ore reserves have increased by a
net 46 million tonnes, including a depletion of 30 million tonnes offset by an increase in resources converted to reserves. Mineral resources have
decreased by a net 53 million tonnes, due to depletion and the application of more conservative economic assumptions in pit optimisation.
D) Polo Sur
Polo Sur is 100% owned by the Group. The cut-off grade applied to the determination of mineral resources for both oxides and sulphides is 0.20%
copper. For 2019 the resource model has not been updated.
E) Penacho Blanco
Penacho Blanco is 51% owned by the Group. The cut-off grade applied to the determination of mineral resources for both oxides and sulphides is
0.20% copper. For 2019 the resource model has not been updated.
F) Mirador
Mirador is 100% owned by the Group. A portion of Mirador Oxides is subject to an agreement between the Group and Centinela, whereby Centinela
purchased the rights to mine the oxide ore reserves within an identified area. The mineral resources for Mirador Oxides subject to the agreement
with Centinela are included in the Centinela Cathodes section. The resources not subject to the agreement are reported in this section. The cut-off
grade applied to the determination of mineral resources for oxides is 0.15% copper and for sulphides is 0.20% copper. Mineral resources have
decreased by a net 18 million tonnes due to higher economic parameters.
220
220
Antofagasta plc Annual Report 2019
Antofagasta Annual Report 2019
G) Los Volcanes
Los Volcanes is 51% owned by the Group. The cut-off grade applied to the determination of ore reserves and mineral resources is 0.20% copper.
For 2019 the mineral resource model has not been updated.
H) Brujulina
Brujulina is 51% owned by the Group. The cut-off grade applied to the determination of mineral resources is 0.30% copper. For 2019 the mineral
resource model has not been updated.
I) Sierra
Sierra is 100% owned by the Group. The cut-off grade applied to the determination of mineral resources is 0.30% copper. For 2019 the mineral
resource model has not been updated.
J) Twin Metals Minnesota LLC
Twin Metals Minnesota LLC ("Twin Metals") is owned 100% by the Group.
Twin Metals has a 70% interest in the Birch Lake Joint Venture ("BLJV"), which holds the Birch Lake, Spruce Road and Maturi Southwest deposits,
as well as a portion of the main Maturi deposit. With these interests taken into consideration, Twin Metals owns 83.1% of the resource. For 2019 the
mineral resource model has not been updated.
The cut-off grade applied to the determination of mineral resources is 0.3% copper, which when combined with credits from nickel, platinum,
palladium and gold, is deemed appropriate for an underground operation. In the resource table ‘TPM’ (Total Precious Metals) refers to the sum of
platinum, palladium and gold values in grammes per tonne. The TPM value of 0.57 g/tonne for the Maturi resource estimate is made up of 0.15
g/tonne platinum, 0.34 g/tonne palladium and 0.08 g/tonne gold. The TPM value of 0.30 g/tonne for the Maturi Southwest resource estimate is
made up of 0.08 g/tonne platinum, 0.17 g/tonne palladium and 0.05 g/tonne gold. The TPM value of 0.70 g/tonne for the Birch Lake resource
estimate is made up of 0.19 g/tonne platinum, 0.41 g/tonne palladium and 0.10 g/tonne gold. The Spruce Road resource estimate does not include
TPM values as they were not assayed.
K) Zaldívar
Zaldivar is 50% owned by the Group. The cut-off grade applied to the determination of ore reserves for Heap Leach ore is 0.29% copper, while the
cut-off grade for mineral resources is 0.24% copper. In both cases, the cut-off grade for Dump Leach material is 0.10% copper. These values are
applied to the oxide and secondary sulphide mineral resources and ore reserves estimates. For 2019 the primary sulphide mineral resource has
been added to the table for the first time, after completion of a comprehensive drilling programme carried out in 2018 and 2019. The cut-off grade
applied to the primary sulphide portion of the mineral resources is 0.30% copper. The updated resource model incorporates 90 new drillholes for
a total of 27,200 metres, it has been independently audited and found to comply with the JORC Code (2012). The impact of this updated resource
model has been a net increase of 101 million tonnes of ore reserves and a total of 504 million tonnes of mineral resources (55 million tonnes of
oxides and secondary sulphides plus 449 million tonnes of primary sulphides, with 0.11 g/tonne gold and 0.007 % molybdenum).
The final pit phase in the southern portion of the orebody (Phase 13), which represents approximately 18% of current ore reserves, impacts a
portion of Minera Escondida mine property, as well as infrastructure owned by third parties (road, railway, powerline and pipelines). Mining of this
pit phase is subject to agreements or easements to access these areas and relocate this infrastructure.
L) Antomin 2 and Antomin Investors
The Group has an approximately 51% interest in two indirect subsidiaries, Antomin 2 Limited (“Antomin 2”) and Antomin Investors Limited
(“Antomin Investors”), which own a number of copper exploration properties in Chile’s Antofagasta Region and Coquimbo Region. These include,
among others, Penacho Blanco, Los Volcanes and Brujulina. The remaining approximately 49% of Antomin 2 and Antomin Investors is owned by
Mineralinvest Establishment (“Mineralinvest”), a company controlled by E. Abaroa Foundation, in which members of the Luksic family are interested.
Further details are set out in Note 33(c) to the financial statements.
antofagasta.co.uk
antofagasta.co.uk
221
221
Other Information
Glossary and definitions
Business, financial and accounting
AIFR
AMSA
Annual Report
Antucoya
ATI
Australian
dollars
Banco de Chile
Barrick Gold
Capex
Cash costs
CDP
Centinela
Centinela Mining
District
CGU
Chilean peso
Comex
Companies Act
2006
Company
Continental
water
Corporate
Governance
Code
All Injury Frequency Rate. The total number
of accidents during the year per million
hours worked.
Antofagasta Minerals S.A., a wholly-owned
subsidiary of the Group incorporated in Chile,
which acts as the corporate centre for the
Mining division.
The Annual Report and Financial Statements of
Antofagasta plc.
Minera Antucoya S.A., a 70%-owned subsidiary
incorporated in Chile.
Antofagasta Terminal Internacional S.A.,
a 30%-owned associate of the Group
incorporated in Chile that operates the
port in the city of Antofagasta.
Australian currency.
A commercial bank that is a subsidiary of
Quiñenco.
Barrick Gold Corporation, incorporated in
Canada and our joint venture partner in
Zaldívar and Tethyan.
Capital expenditure.
A measure of the cost of operating production
expressed in terms of US dollars per pound
of payable copper produced. Cash costs are
stated net of by-product credits and include
tolling charges for concentrates for Los
Pelambres and Centinela. Cash costs exclude
depreciation, financial income and expenses,
hedging gains and losses, exchange gains and
losses, and corporation tax.
Carbon Disclosure Project.
Minera Centinela S.A., a 70%-owned subsidiary
incorporated in Chile that holds the Centinela
Concentrates and Centinela Cathodes
operations.
Copper district located in the Antofagasta
Region of Chile, where Centinela is located.
Cash-Generating Unit.
Chilean currency.
A commodity exchange that trades metals such
as gold, silver, copper and aluminium.
Principal legislation for United Kingdom
company law.
Antofagasta plc.
Water that comes from the interior of land
masses including rain, snow, streams, rivers,
lakes and groundwater.
The UK Corporate Governance Code is a set
of principles of good corporate governance,
most of which have their own more detailed
provisions published by the Financial Reporting
Council, most recently updated in 2018 and
which applies to accounting periods beginning
on or after 1 January 2019.
222
Antofagasta plc Annual Report 2019
Directors
Duluth
EBITDA
EIA
El Arrayán
Encuentro
EPS
Esperanza Sur
EU
FCA
FCAB
FTSE100 Index
FTSE All-Share
Index
GAAP
GHG
Government
Group
Hedge
accounting
IAS
IASB
ICMM
IFRIC
IFRS
Inversiones
Hornitos
IVA
The Directors of the Company.
Duluth Metals Limited, a wholly-owned
subsidiary of Antofagasta plc acquired on
28 January 2015 through which the Group
holds the Twin Metals Project.
Earnings Before Interest, Tax, Depreciation and
Amortisation.
Environmental Impact Assessment.
Parque Eólico el Arrayán SpA, a 30%-owned
associate that operates a wind-power plant
providing up to 40MW of electricity to Los
Pelambres.
Copper oxide and sulphide prospect in the
Centinela Mining District.
Earnings per share.
Copper deposit in the Centinela Mining District.
European Union.
Financial Conduct Authority. UK regulatory
body.
Ferrocarril de Antofagasta a Bolivia, the
corporate name of our Transport division.
A share index of the 100 companies listed on
the London Stock Exchange with the highest
market capitalisation.
A market-capitalisation weighted index
representing the performance of all eligible
companies listed on the London Stock
Exchange’s main market.
Generally Accepted Accounting Practice or
Generally Accepted Accounting Principles, a
collection of commonly-followed accounting
rules and standards for financial reporting.
Greenhouse Gas.
The Government of the Republic of Chile.
Antofagasta plc and its subsidiary companies
and joint ventures.
Accounting treatment for derivative financial
instruments permitted under IAS 39 “Financial
Instruments: Recognition and Measurement“,
which recognises the offsetting effects on profit
or loss of changes in the fair values of a
hedging instrument and the hedged item.
International Accounting Standards.
International Accounting Standards Board.
International Council on Metals and Mining.
International Financial Reporting Interpretations
Committee.
International Financial Reporting Standards.
Inversiones Hornitos S.A., a 40%-owned
associate of the Group incorporated in
Chile, which owns the 150MW Hornitos
thermoelectric power plant in Mejillones
in Chile’s Antofagasta Region.
Impuesto al Valor Agregado, or Chilean Value
Added Tax (Chilean VAT).
Key
Management
Personnel
KPI
LIBOR
LME
Los Pelambres
LSE
LTIFR
LTIP
Marubeni
Michilla
PEP
Platts
PPA
Provisional
pricing
Quiñenco
Persons with authority and responsibility for
planning, directing and controlling the activities
of the Group.
Key performance indicator.
London Inter Bank Offered Rate.
London Metal Exchange.
Minera Los Pelambres S.A., a 60%-owned
subsidiary incorporated in Chile.
London Stock Exchange.
Lost Time Injury Frequency Rate. The number
of accidents with lost time during the year per
million hours worked.
Long Term Incentive Plan in which the Group’s
CEO, Executive Committee members and other
senior managers participate.
Marubeni Corporation, the Group’s 30%
minority partner in Centinela and Antucoya.
Minera Michilla S.A., a 99.9%-owned subsidiary
incorporated in Chile which was closed at the
end of 2015 and sold in November 2016.
Politically Exposed Person, an individual who
holds or has held a prominent public position in
a national or international organisation within
the last year.
A provider of energy and metals information
and source of benchmark price assessments.
Power Purchase Agreement.
A sales term in several copper and
molybdenum concentrate sale agreements
and cathodes sale agreements that provides
for provisional pricing of sales at the time of
shipment, with final pricing being based on the
monthly average LME copper price or monthly
average molybdenum price for specific future
periods, normally ranging from 30 to 180 days
after delivery to the customer. For the
purposes of IAS 39, the provisional sale is
considered to contain an embedded derivative
(ie the forward contract for which the
provisional sale is subsequently adjusted)
that is separated from the host contract (ie the
sale of metals contained in the concentrate or
cathode at the provisional invoice price
less tolling charges deducted).
Quiñenco S.A., a Chilean financial and industrial
group listed on the Santiago Stock Exchange
and controlled by a foundation in which
members of the Luksic family are interested.
Ramsar
Convention
Reko Diq
RCA
Realised prices
SERNAGEOMIN
SHFE
SONAMI
Sterling
SVS
SDGs
TCFD
Tesoro Central
and Tesoro
Noreste
Tethyan
TSR
Twin Metals
Minnesota
Project
UK
UKLA
US
US dollar
Zaldívar
International treaty for the conservation and
sustainable utilisation of wetlands.
A copper-gold deposit in Pakistan, previously
a subsidiary of Tethyan and now subject to
arbitration proceedings.
Resolucion de Calificación Ambiental,
Environmental Approval Resolution.
Effective sale price achieved comparing
revenues (grossed up for tolling charges
for concentrate) with sales volumes.
Servicio Nacional de Geología y Minería, a
government agency that provides geological
and technical advice and regulates the mining
industry in Chile.
Shanghai Futures Exchange.
Sociedad Nacional de Minería. Institution that
represents the mining industry in Chile, for
large, medium and small scale, metallic and
non-metallic mining companies.
Pounds sterling, UK currency.
Superintendencia de Valores y Seguros de
Chile, the Chilean securities regulator.
The United Nations’ Sustainable Development
Goals, which were adopted by all member
states in 2015.
Task Force on Climate-related Financial
Disclosures.
Copper oxide open pits forming part of the
Centinela operation.
Tethyan Copper Company Limited, a 50-50
joint venture with Barrick Gold incorporated in
Australia.
Total Shareholder Return, being the movement
in the Company’s share price plus reinvested
dividends.
A copper, nickel and platinum group metals
underground-mining project located in
Minnesota, US.
United Kingdom.
United Kingdom Listing Authority, part of
the FCA.
United States.
United States currency.
Compañía Minera Zaldívar SpA, a 50-50 joint
venture with Barrick Gold, which operates the
Zaldívar copper mine in Chile.
antofagasta.co.uk
223
Other Information
Glossary and definitions continued
Mining industry
Brownfield
project
By-products
(credits in
copper
concentrates)
A development or exploration project in the
vicinity of an existing operation.
Products obtained as a result of copper
processing. Los Pelambres and Centinela
Concentrates receive credit for the gold and
silver content in the copper concentrate sold.
Los Pelambres and Centinela also produce
molybdenum concentrate.
The product of a physical concentration
process, such as flotation or gravity
concentration, which involves separating
ore minerals from unwanted waste rock.
Concentrates require subsequent processing
(such as smelting or leaching) to break down
or dissolve the ore minerals and obtain the
desired elements, usually metals.
The proportion or quantity of copper contained
in a given quantity of ore or concentrate.
Refined copper produced by electrolytic refining
of impure copper by electrowinning.
The lowest grade of mineralised material
considered economic to process and used
in the calculation of ore reserves and
mineral resources.
A process of separation by which chemicals in
solution are added to finely crushed materials,
some of which are attracted to bubbles and
float, while others sink, which result in the
production of concentrate.
Highest-quality copper cathode, 99.99% pure.
The development or exploration of a new
project at a previously undeveloped site.
A process for the recovery of copper from ore,
generally oxides. The crushed material is laid
on a slightly sloping, impermeable pad and
leached by uniformly trickling (gravity fed)
chemical solution through the heaps to
collection ponds. The metal is then recovered
from the solution through the SX-EW process.
The Australasian Joint Ore Reserves Committee.
Thousand tonnes per day.
The remaining life of a mine expressed in
years, calculated by reference to scheduled
production rates (ie comparing the rate at
which ore is expected to be extracted from
the mine to current defined reserves).
Material of intrinsic economic interest occurring
in such form and quantity that there are
reasonable prospects for eventual economic
extraction. Mineral resources are stated
inclusive of ore reserves, as defined by JORC.
Megawatts (one million watts).
Gross cash costs less by-product credits.
Mine working or excavation that is open to
the surface.
Rock from which metal(s) or mineral(s) can be
economically and legally extracted.
Concentrate
Contained
copper
Copper cathode
Cut-off grade
Flotation
Grade A copper
cathode
Greenfield
project
Heap-leaching
or leaching
JORC
ktpd
Life-of-Mine
(“LOM”)
Mineral
resources
MW
Net cash cost
Open pit
Ore
224
Antofagasta plc Annual Report 2019
Ore grade
Ore reserves
Oxide and
sulphide ores
Payable copper
Porphyry
Run-of-Mine
(“ROM”)
Stockpile
SX-EW
Tailings dam or
tailings storage
facility (TSF)
TC/RCs
Tolling charges
Tonne
tpd
Underground
mine
The relative quantity, or percentage, of
metal content in an ore body or quantity
of processed ore.
Part of Mineral Resources for which
appropriate assessments have been carried out
to demonstrate that at a given date extraction
could be reasonably justified. These include
consideration of and modification by realistically
assumed mining, metallurgical, economic,
marketing, legal, environmental, social and
governmental factors.
Different kinds of ore containing copper.
Oxide ore occurs on the weathered surface
of ore-rich lodes and normally results in
the production of cathode copper through
a heap-leaching process. Sulphide ore is an
unweathered parent ore normally treated using
a flotation process to produce concentrate
which then requires smelting and refining
to produce cathode copper.
The proportion or quantity of contained
copper for which payment is received
after metallurgical deduction.
A large body of rock which contains
disseminated chalcopyrite and other sulphide
minerals. Such a deposit is mined in bulk on a
large scale, generally in open pits, for copper
and its by-products.
A process for the recovery of copper from ore,
typically used for low-grade ores. The mined,
uncrushed ore is leached with a chemical
solution. The metal is then recovered from
the solution through the SX-EW process.
Material extracted and piled for future use.
Solvent extraction and electrowinning.
A process for extracting metal from an ore
and producing pure metal. First the metal is
leached into solution, the resulting solution is
then purified in the solvent-extraction process
before being treated in an electrochemical
process (electrowinning) to recover
cathode copper.
Construction used to deposit the rock waste
which remains as a result of the concentrating
process after the recoverable minerals have
been extracted in concentrate form.
Treatment and refining charges, being terms
used to set the smelting and refining charge or
margin for processing copper concentrate and
normally set on either an annual or spot basis.
Charges or margins for converting concentrate
into finished metal. These include TC/RCs,
price participation and price sharing for
copper concentrate and roasting charges
for molybdenum concentrate.
Metric tonne.
Tonnes per day, normally with reference to the
quantity of ore processed over a given period
of time expressed as a daily average.
Natural or man-made excavation under the
surface of the ground.
Shareholder information
Currency abbreviations
US dollar
$
Thousand US dollars
$000
Million US dollars
$m
Pound sterling
£
Thousand pounds sterling
£000
Million pounds sterling
£m
Pence sterling
p
Canadian dollar
C$
Million Canadian dollars
C$m
Chilean peso
Ch$
Thousand Chilean pesos
Ch$000
Million Chilean pesos
Ch$m
Australian dollar
A$
Thousand Australian dollars
A$000
Million Australian dollars
A$m
Definitions and conversion of weights
and measures
lb
oz
1 troy ounce
’000 m3
1 kilogramme
1 tonne
’000 tonnes
1 kilometre
Pound
A troy ounce
31.1 grammes
Thousand cubic metres
2.2046 pounds
2,204.6 pounds or 1,000 kilogrammes
Thousand metric tonnes
0.6214 miles
Chemical symbols
Cu
Mo
Au
Ag
Copper
Molybdenum
Gold
Silver
Dividends
Details of dividends proposed in relation to the year are given in the
Directors’ Report on page 138, and in Note 13 to the
Financial Statements.
If approved at the Annual General Meeting, the final dividend of
23.4 cents will be paid on 22 May 2020 to ordinary shareholders
that are on the register at the close of business on 24 April 2020.
Shareholders can elect (on or before 27 April 2020) to receive this
final dividend in US dollars, Sterling or Euro, and the exchange rate,
which will be applied to final dividends to be paid in Sterling or Euro,
will be set as soon as reasonably practicable after that date, which is
currently anticipated to be on 30 April 2020.
Further details of the currency election timing and process (including
the default currency of payment) are available on the Antofagasta plc
website (www.antofagasta.co.uk) or from the Company’s registrar,
Computershare Investor Services PLC on +44 37 0702 0159.
Dividends are paid gross without deduction of United Kingdom
income tax. Antofagasta plc is a resident in the United Kingdom
for tax purposes.
Annual General Meeting
The Annual General Meeting will be held at Church House Conference
Centre, Dean’s Yard, Westminster, London SW1P 3NZ at 10.00 am on
Wednesday 20 May 2020. The formal notice of the Annual General
Meeting and resolutions to be proposed are set out in the Notice of
Annual General Meeting.
London Stock Exchange listing and
share price
The Company’s shares are listed on the London Stock Exchange.
Share capital
Details of the Company’s ordinary share capital are given in Note 29
to the Financial Statements.
antofagasta.co.uk
225
Other Information Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZY
United Kingdom
Tel: +44 370 702 0159
www.computershare.com
Website
Antofagasta plc’s annual and half-yearly financial reports, press
releases and other presentations are available on our website at
www.antofagasta.co.uk.
Registered office
Cleveland House
33 King Street
London
SW1Y 6RJ
United Kingdom
Tel: +44 20 7808 0988
Santiago office
Antofagasta Minerals SA
Av. Apoquindo 4001 – Piso 18
Las Condes
Santiago
Chile
Tel: +56 2 2798 7000
Registered number
1627889
Additional information can be found in the Shareholder Information
section of the Notice of Annual General Meeting and on our website.
Shareholder information continued
Shareholder calendar 2019
22 January 2020
17 March 2020
22 April 2020
23 April 2020
24 April 2020
27 April 2020
Q4 2019 Production Report
FY 2019 Results Announcement
Q1 2020 Production Report
2019 Final Dividend – Ex Dividend date
2019 Final Dividend – Record date
2019 Final Dividend – Final date for
receipt of Currency Elections
2019 Final Dividend –
Pound Sterling/Euro Rate set
Annual General Meeting
2019 Final Dividend – Payment date
Q2 2020 Production Report
HY 2020 Results Announcement
2020 Interim Dividend – Ex Dividend date
2020 Interim Dividend – Record date
2020 Interim Dividend – Final date for
receipt of Currency Elections
2020 Interim Dividend –
Pound Sterling/Euro Rate set
2020 Interim Dividend – Payment date
Q3 2020 Production Report
Q4 2020 Production Report
30 April 2020
20 May 2020
22 May 2020
22 July 2020
20 August 2020
3 September 2020
4 September 2020
7 September 2020
10 September 2020
2 October 2020
21 October 2020
20 January 2021
Dates are provisional and subject to change.
226
Antofagasta plc Annual Report 2019
Directors
Jean-Paul Luksic
Manuel Lino Silva De Sousa-Oliveira (Ollie Oliveira)
Ramón Jara
Juan Claro
Andrónico Luksic C
Vivianne Blanlot
Jorge Bande
Francisca Castro
Michael Anglin
Tony Jensen
Non-Executive
Chairman
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Company secretary
Julian Anderson
Auditor
PricewaterhouseCoopers LLP
Solicitors
Clifford Chance LLP
Financial advisers
Rothschild & Co
Stockbrokers
J.P. Morgan Cazenove
Citigroup Global Markets Limited
For up-to-date investor information including
our past financial results, visit:
+ Group website: www.antofagasta.co.uk
+ Investors: www.antofagasta.co.uk/investors
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Pureprint Ltd is FSC certified and ISO 14001 certified
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improving environmental performance is an important
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Antofagasta plc
Cleveland House
33 King Street
London
SW1Y 6RJ
United Kingdom
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