Developing
mining for
a better
future
Annual Report and Financial Statements 2020
Corporate Governance
Applying the Code in 2020
Board leadership and
company purpose
Chairman’s introduction
Senior Independent
Director’s introduction
Group corporate governance overview
Board activities
Stakeholder engagement
Employee engagement
Division of responsibilities
Directors’ biographies
Board balance and skills
Roles in the boardroom
Executive Committee and
General Managers’ 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 Report
Implementation of the Directors’ and
CEO’s remuneration policy in 2021
Directors’ Report
Statement of Directors’
responsibilities
96
100
102
104
106
108
110
112
114
115
116
118
119
123
124
129
132
134
135
139
150
153
155
Contents
Strategic Report
Overview
Our purpose
Performance highlights
2020 highlights
At a glance
Letter from the Chairman
Letter from the Chief Executive Officer
Copper for a cleaner world
Copper and its uses
Copper: the metal for a better future
Business model
Creating value through
the mining lifecycle
Strategic framework
Key performance indicators
Risk management
Risk management framework
Principal risks
Key risks
Compliance and internal controls
Stakeholder review
Our approach to sustainability
Committed to positive impact
Our commitment to the
Sustainable Development Goals
Creating sustainable value for
our stakeholders
Our people
Safety and health
Communities
Environment
Taskforce on Climate-Related
Financial Disclosures
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: supplying metals for
a better future
Financial review
1
2
3
4
6
8
10
12
14
16
18
20
22
24
25
31
34
38
40
42
45
48
50
54
57
58
59
60
61
64
66
68
70
71
72
74
77
78
80
82
84
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
158
165
166
166
167
168
169
212
216
219
221
222
232
235
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
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.
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
antofagasta.co.uk
Antofagasta plc Annual Report 2020
1
Strategic Report
Performance highlights
An overview of performance
and key highlights from 2020
Safety
Safety
0
0
Fatalities
Fatalities
0.86
0.9
LTIFR1
LTIFR1
1.6
1.5
1.6
1.0
Copper production2
Copper production2
733.9k tonnes
733.9k tonnes
709.4
704.3
725.3
770.0
733.9
Net cash costs3
Net cash costs3
$1.14/lb
$1.14/lb
1.25
1.29
1.20
1.22
1.14
1.0
0.9
2
16
1
18
0
17
0
19
0
20
16
17
18
19
20
16
17
18
19
20
EBITDA3
EBITDA3
$2,739m
$2,739m
2,587
2,439
2,228
1,626
Earnings per share
Earnings per share4
Mineral resources5
Mineral resources4
$54.7¢/share
$54.7¢/share
19.2bn tonnes
19.2bn tonnes
2,739
76.1
18.7
18.7
18.8
19.1
19.2
51.5
50.9
54.7
34.7
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
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 216.
4. Underlying EPS from continuing operarations, excluding exceptional items. Reconciled to EPS from continuing and discontinued operation, including exceptional
items in the consolidated income statement on page 165.
5. 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 2020
antofagasta.co.uk
2020 highlights
Safety
Another year of record safety performance with
no fatal accidents and a LTIFR of 0.86.
Copper production
Copper production was 733,900 tonnes, reflecting
our resilience and flexibility in the face of the
year’s challenges.
Net cash costs
Net cash costs were $1.14/lb, 6.6% lower than last
year due to the weaker Chilean peso, lower input
costs and continued tight cost control, partially
offset by lower production.
EBITDA
EBITDA increased by 12.3% to $2,739 million
with an EBITDA margin of 53%, reflecting solid
copper production, a stronger copper price and
lower cash costs.
Earnings per share
Underlying EPS of 54.7 cents per share, 7.4% higher
than the previous year on higher EBITDA, partially
offset by higher depreciation and amortisation, and tax.
EPS including discontinued operations and exceptional
items of 51.3 cents per share, up 0.8%.
Dividend per share
Total dividend of 54.7 cents per share, equivalent
to a 100% payout ratio.
Projects
Los Pelambres Expansion, Zaldívar Chloride Leach
and Esperanza Sur pit growth projects delayed by
COVID-19, now due to start production in 2022.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
3
Strategic Report
At a glance
We are a Chile-based
copper mining group
Mining is our core business, representing over 97% of
our revenue and EBITDA. We operate four copper mines
in Chile, two of which produce significant volumes of
molybdenum and gold as 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
Cu
Cu
Au
Cu
Cu
Cu
Au
Mo
Ag
Mo
Ag
Antucoya
• 70% owned
• 19-year mine life
• Produces copper cathodes
Centinela
• 70% owned
• 47-year mine life
• Produces copper cathodes and copper
concentrates containing gold and silver
and a separate molybdenum concentrate
Zaldívar
• 50% owned (and operated)
• 10-year mine life
• Produces copper cathodes
Los Pelambres
• 60% owned
• 14-year mine life
• Produces copper concentrates containing
gold and silver and a separate
molybdenum concentrate
Transport
• Cargo transport system in the
Antofagasta region of Chile
• 900 km rail network
Group
9%
6%
$480m
$166m
36%
33%
$1,845m
$912m
4%
$96m
52%
61%
$2,655m
$1,663m
3%
$149m
$5,129m
2%
$61m
$2,739m
KEY
Cathodes
Concentrate
Road
Rail
4
Antofagasta plc Annual Report 2020
antofagasta.co.uk
C h i l e
Antucoya
Centinela
Zaldívar
Los Pelambres
Santiago
Copper production (tonnes) net cash costs1
2020
2021 forecast
Growth potential
79,300
$1.82/lb
75-80,000
$1.80/lb
Mine life extension
• Potential to process satellite
ore bodies
246,800
$1.27/lb
270-280,000
$1.15/lb
48,200
$1.80/lb
45-50,000
$1.75/lb
359,600
$0.81/lb
340-350,000
$1.05/lb
6.4m
tonnes
Centinela expansion
• Opening Esperanza Sur pit in
2022, which will increase annual
production by 10-15,000 tonnes
• Evaluating building a second
concentrator. Decision in
early 2022
Mine life extension
• Assessing viability of leaching
the primary sulphide ore body
• Chloride Leach project under
construction to increase annual
production by 10-15,000 tonnes
Los Pelambres Expansion
• Phase 1 will increase annual
production by 60,000 tonnes.
Completion in early H2 2022
• Phase 2 will increase the
capacity of the desalination
plant and extend the
Life-of-Mine by 15 years
Haulage increase
• New contracts starting in 2021
733,900
$1.14/lb
730-760,000
$1.25/lb
1. Non-IFRS measure, refer to the alternative performance measure section on page 216.
2. Totals 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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
5
Strategic Report
Letter from the Chairman
A year of global
headwinds —
and tailwinds
A number of powerful tailwinds for copper as a
commodity, and for Antofagasta as a business,
also gathered significant momentum in 2020.
Notably, the world’s transition to a low-carbon
economy accelerated. As 2021 began, countries
accounting for 70% of the world economy had
committed to a net-zero target; a mere six
months earlier, only 53% of the global economy
had set targets. China and Japan, two of the
world’s largest markets for copper, were among
the countries that announced net-zero pledges
in 2020. The EU’s ‘Green New Deal’ and the
climate proposal of US president Joe Biden’s
heightened this ‘green wave’.
Each country’s approach differs in detail, yet
all share a common characteristic: they will be
copper-intensive. Generating renewable energy
requires four to twelve times more copper than
conventional power; electric vehicles require
four times more copper than ICE vehicles.
Therefore, the copper Antofagasta produces has
an important role to play in helping governments
meet their climate targets. Our responsibility is
to produce that copper sustainably, efficiently and
with respect for communities and the environment.
Both aspects — the importance of what we
produce, and how we produce it — are woven
into our purpose: ‘Developing Mining for a
Better Future.’
Last year, we took further steps to honour
that purpose. August 2020 saw the launch
of the Global Industry Standard on Tailings
Management, which is working to create the safe
management of tailings facilities, with the goal
of zero harm. Antofagasta set out plans for Los
Pelambres, Centinela and Zaldívar to comply with
the Standard by 2025. Centinela and Zaldívar
also committed to The Copper Mark in 2020,
a framework established to demonstrate the
industry’s responsible production practices and
contribution to the United Nations’ Sustainable
Development Goals.
Supporting Chile’s social and
economic recovery
The Chilean government’s response to COVID-19
avoided the severe health and economic crises
endured in some other countries. Appreciating
mining’s vital role to Chile’s economy — it
represents more than 10% of the country’s
GDP — the government allowed operations
to continue during the pandemic. Antofagasta
worked alongside the government to deliver
Jean-Paul Luksic
Chairman
Dear shareholders
It’s been said that adversity introduces us to
ourselves – that it not only tests, but also reveals,
who we are. Last year offered no shortage of
adversity and, as this Annual Report details,
Antofagasta’s employees responded in ways
that demonstrated our company’s purpose,
values, culture and resilience more powerfully
than words alone ever could.
Amid the most severe global health crisis of
our lifetimes, our employees developed new
ways of working efficiently whilst keeping their
colleagues, contractors and local communities
healthy and safe. Our operations have high
standards for safety, sustainability and efficiency,
and sustaining those despite COVID-19’s many
complications is a fantastic achievement, one
that enabled Antofagasta to meet its annual
production and cost targets while continuing
to improve its safety record and lower its
emissions. Even more, it allowed Antofagasta
— through increased donations and assistance
to employees and communities, employees’
salaries and bonuses, and taxes — to provide
ongoing support towards Chile’s social and
economic recovery.
So before reflecting on some of last year’s
key international and national developments,
or offering thoughts on the year ahead, I want
to express my pride in — and profound gratitude
to — our employees and contractors. Thanks
to their resilience and innovation, the past 12
months were defined not by the unprecedented
challenges Antofagasta faced, but our responses
to them.
A year of global headwinds — and tailwinds
Few years have generated such volatility
alongside so many health, operational and
financial challenges. The pandemic’s disruption
of global economic activity was historic, as were
its influences on commodities. In late April 2020,
as the price of oil futures went negative for the
first time in history, copper dipped to $2.09/lb,
its lowest level since 2016. The effect of these
headwinds on copper prices lessened as the year
wore on with copper ending the year at $3.51/lb,
a price not seen since 2013, but continued to
affect operational and financial conditions
across the industry.
6
Antofagasta plc Annual Report 2020
antofagasta.co.uk
“Amid the most severe global health crisis
of our lifetimes, our employees developed
new ways of working efficiently whilst
keeping their colleagues, contractors
and local communities healthy and safe.”
a co-ordinated response to the emergency
and, as the largest non-State company in
Chile’s mining sector, supported the country’s
economic recovery while also setting up a fund
for local communities.
As the pandemic unleashed new societal
challenges around the world, it exacerbated
long-standing ones. Many countries experienced
some blend of political and social unrest; Chile
was among them. The demonstrations and
violence which I described in my 2019 letter
thankfully lessened. But the issues underpinning
the unrest remain, as does the complex political
environment, and the pandemic has only
worsened the inequalities. In 2020, a referendum
was held, and a clear majority of Chileans voted
in favour of rewriting the country’s constitution.
Members of a Constitutional Assembly will
be elected in April and will present a new
constitution for a vote by the people at
a referendum in 2022.
What the text of the new constitution will be,
its impact on our operations, whether it will be
supported in the 2022 referendum, remains
uncertain, particularly is this year when there
are also presidential and parliamentary elections.
However, I still believe that, whatever the way
forward, it should include measures that
help the country reach higher standards of
economic equality, growth and development.
As this constitutional process and the elections
continue, our focus remains on being safe,
efficient and sustainable, managing costs and
delivering growth, and being the kind of business
that benefits the communities, cities and nation
where it operates.
Considered growth
The cyclical nature of copper has informed
Antofagasta’s pursuit of what we call ‘considered
growth’. That means building a business that
focuses on factors within our control and making
prudent operational and investment decisions
with a long-term view. That strength was on
display last year. As I mentioned earlier, in the
face of incredibly challenging circumstances,
the Company met its annual production and cost
targets — while continuing to improve its safety
record, seeing our second year without a fatality
and also lowering our greenhouse gas emissions.
Our Transport division similarly pursued
considered growth. It secured new contracts as
well as new locomotives that are more efficient
and have lower emissions. These will strengthen
its long-term business and returns.
To protect the health and safety of our people
and local communities, as well as manage costs
and risk during COVID-19, we temporarily
suspended the Los Pelambres Expansion project
in March and delayed the start of our other
growth projects. I am pleased to say that they
were all able to start again later in the year,
integrating our new COVID-19 health protocols
into their planning, and all are moving ahead on
updated schedules, although there has been
some increase in the project costs.
Governance update
In 2019, the Board adopted a new strategic
framework for the business’ long-term success.
That framework is built around five pillars
— growth, our people, the safety and
sustainability of our operations, innovation
and competitiveness — and its resilience
was revealed over the course of 2020.
The Board continues to focus on ESG matters,
such as climate change, and the Sustainability
and Stakeholder Management Committee, in
particular, considers in detail many of the key
issues that matter to our workforce (such as
safety and health), local communities, national
and local governments, regulators and other
stakeholders. All stakeholders’ views are
considered in the Board’s principal decisions
and examples of this are given in this report.
As I mentioned in last year’s letter, we welcomed
Tony Jensen as a new independent Non-Executive
Director to our Board in March and later in the
year he joined our Audit and Risk, Remuneration
and Talent Management, and Sustainability and
Stakeholder Management Committees.
Our efforts to improve diversity across all levels
of the Company, including the Board, continue.
We have had some success, increasing the
female proportion of our workforce to 14.7%,
but at the Board level it has been more difficult.
However, we continue our search for new
female members of the Board who have the
skills and experience that we need. Diversity
and inclusion are an area where we have
made progress, but have further to go.
We are committed to do so.
Due to COVID-19 restrictions in the UK, our 2020
AGM was held behind closed doors. This year
we are making arrangements for shareholders to
access the AGM remotely and to ask questions
during the meeting, while avoiding the need for
unnecessary travel. You will find additional
information in the Notice of Meeting.
Dividend
In 2020 we decided to cut the final 2019 dividend
and pay the minimum allowed under our dividend
policy. This year, following a year that was stronger
than we expected at the time we decided on the
cut, the Board has recommended a final dividend
that will make the total dividend for the year of
54.7 cents per share.
Outlook for 2021
At a time when new sources of copper supply
are of lower quality and discoveries are rare,
copper demand is undergoing a systemic
shift as the world addresses the transition to a
low-carbon economy. Also, the increasing pace
of COVID-19 vaccinations should bring greater
economic stability and a sustained global
recovery. This global growth, coupled with
green government stimulus spending, has
led some analysts to predict the beginning
of a prolonged upturn in the commodity cycle.
These favourable expectations are encouraging,
yet 2020 demonstrated just how quickly
conditions can change. At Antofagasta we
continue to focus on the areas within our control:
working to keep our people safe and healthy,
managing costs, strengthening our culture,
attracting diverse talent and executing on
the delivery of our near- and mid-term goals.
In this Annual Report, we report on the progress
we’ve made in those areas as well as telling
stories of leadership, resilience and creativity.
My pride in Antofagasta’s employees is matched
only by my gratitude. There have been many
memorable chapters in Antofagasta’s 132-year
history and in 2020, our people helped write
another one.
Jean-Paul Luksic
Chairman
antofagasta.co.uk
Antofagasta plc Annual Report 2020
7
Strategic Report
Letter from the Chief Executive Officer
A testing year that
proved our resilience
required some reduction in employees’
exposure in the field, but it also meant that
some supervision was moved off-site. So, the
significant drop in high-potential incidents tells us
that safety is firmly embedded in our day-to-day
practices, from our pits to our head office.
In other words, it demonstrates our safety
management system has continued to
mature and improve.
Another important example of our resilience
in the face of the pandemic was our financial
strength. This has long been one of the
Group’s distinctive attributes and, we believe,
a competitive advantage. Certainly, in this crisis,
it gave us the flexibility to weather the storm
without impairing our ability to operate and
continue to grow.
In 2020, we issued an inaugural bond, tapping
into the capital debt markets for the first time in
an exercise designed to diversify our funding
options. The placement was extremely
successful, showing that our name is well
regarded and we are well positioned in
the market.
Operating results
Despite the restrictions imposed by the
pandemic, our production levels were within
our guidance range for the year. In 2020,
we produced 733,900 tonnes of copper, down
by 4.7% from our record level in 2019, mainly
due to planned lower ore grades at Centinela.
Our net cash costs, at $1.14/lb, were 6.6% lower
than in 2019 and better than expected. This was
partly explained by temporary factors, including
a reduction in the cost of diesel and other
consumables as well as the depreciation of the
Chilean peso. However, through the renegotiation
of our power purchase agreements, we have
also achieved a structural reduction in our
energy costs.
Innovation projects, such as automation and the
use of artificial intelligence, are also beginning
to deliver permanent cost benefits and these
benefits have contributed to the continued
success of our Cost and Competitiveness
Programme, which was started in 2014 to
capture savings and improve operating productivity.
In 2020, our capital expenditure at $1.3 billion
was lower than originally expected because work
on key projects, such as the Los Pelambres
Iván Arriagada
Chief Executive Officer
Dear shareholders
I am particularly pleased to share with you
this report on our performance in 2020. It was
an extraordinarily challenging year on so many
levels as the COVID-19 pandemic forced us to
adapt how we live, work and interact with each
other. Yet, at Antofagasta, we can be proud of
our performance: while protecting and supporting
our people and communities, we not only
maintained operational continuity, but also
produced a strong set of results.
Thanks to our team at Antofagasta, our
consistent efforts to achieve our purpose and
the management processes we have built up
over the years, we had the resilience we needed
to respond to the crisis effectively. Our risk
management system played a crucial role,
placing us in a position to react promptly to
the unprecedented challenges, while our safety
and health management system served as the
backbone of our response to the pandemic’s
health challenges.
I was particularly inspired by our team’s capacity
to adapt. We had previously incorporated a
significant degree of flexibility into our work
schedules but the pandemic, by accelerating
a shift to remote working, showed us that we
can move more quickly than we had previously
thought possible.
Learning from this, we have been reflecting
on how we want to work in the future and have
decided to permanently implement a combination
of remote and in-person working for all
office-based employees. By increasing our
flexibility, we believe we can fulfil two purposes:
we will strengthen even further our resilience to
unexpected future events and, at the same time,
make it easier for employees to reconcile the
demands of work and life at home, alongside
their own professional aspirations.
On operational safety, I am pleased to report
that, by the end of 2020, we had completed
27 months with zero fatalities, a target that
is always our top priority. We also achieved
a 63% reduction in high-potential incidents,
a key indicator of the effectiveness of our safety
management system. Admittedly, remote working
8
Antofagasta plc Annual Report 2020
antofagasta.co.uk
“Our priority in 2020 was to protect
the health and safety of our employees,
contractors and nearby communities
while at the same time delivering solid
operating results.”
expansion, was temporarily halted for part of
the year to protect workers. As a result, there
will be some carry-over of expenditure into
2021 and 2022.
like the rest of the mining industry, a key focus
will be the replacement of diesel for transport
and haulage, and we are also considering how
best to report our Scope 3 emissions.
Communities
In response to the pandemic’s impact on the
communities near our operations, we quickly
established a $6 million fund to finance a
three-part plan to provide assistance and
support. The first part focused on communities’
immediate health needs and included the
provision of medical equipment and supplies as
well as home medical care for people in high-risk
categories. In parallel, we sought to alleviate the
pandemic’s social impact by providing basic
necessities such as food. The third part of the
plan looked beyond the immediate contingency
and sought to save businesses in the
communities that, albeit struggling in the
pandemic, were otherwise fundamentally sound.
The measures we implemented were defined
together with community leaders and the
authorities and, in this, we had the advantage
of a network of connections built up through our
regular social engagement programmes. Thanks
to the reach and level of trust we have developed
during our years working with the communities,
we were, in some cases, able to deliver
effective help more quickly than government-
related assistance.
Climate change
In October 2020, the Board approved a Climate
Change Strategy that will guide our approach to
this key issue over the coming years. In 2020,
we also moved forward on our transition to using
renewable energy. During the year, Zaldívar
became our first mine to use exclusively
renewable energy and the other mining
operations will follow with the last transitioning
in 2022. In addition, thanks to our decision to
expand the desalination plant currently being built
by Los Pelambres, we expect sea water, in either
raw or desalinated form, and recycled water to
account for some 90% of all our mines’ total
water consumption by 2025.
As we near completion of our 2018-2022 target
for reducing our greenhouse gas emissions by
300,000tCO2e, we plan to define a new target,
looking to see how best to link this into Chile’s
goal to achieve carbon neutrality by 2050. For us,
We remain committed to the full disclosure
of our impact on climate change. Following a
commitment we made in 2020, we are working
to produce a climate change report complying
with the requirements of the Task Force on
Climate-related Financial Disclosures (TCFD).
Innovation
In 2020, we made important progress on our
Roadmap for Innovation. Firstly, we are installing
an integrated remote operations management
centre for Centinela in the city of Antofagasta
and have committed to use autonomous trucks
at the mine’s new Esperanza Sur pit.
We are an industry leader in thickened tailings
but, in line with our purpose of developing mining
for a better future, we are keen to push the
envelope further in this field. Also, together with
other mining companies, we are sponsoring an
effort, spearheaded by the XPRIZE Foundation,
an international non-profit organisation, to
develop the technology for zero-tailings mining.
As a Group, we have developed a chloride
leaching process for primary sulphides. If
industrial-scale tests in 2021 are successful,
this will represent a major breakthrough,
significantly reducing the capital intensity
of sulphide processing.
Copper market
In 2020, the copper price showed significant
volatility. After dropping to a low in March,
it rose again in the second half. This reflected
a recovery in demand, led by China, and tight
supply, due to pandemic-related production
stoppages in other countries and delays in
the construction of new projects as well
as a reduction in the supply of scrap.
Given the economic stimulus plans being
implemented by governments around the world,
the year has started strongly and we expect the
copper price to show strength throughout 2021,
albeit with some volatility. This healthy price
trend is underpinned by the growing use of
copper for electromobility purposes and
generating renewable energy.
Our focus in 2021
We are assuming that COVID-19 health risks will
remain with us throughout 2021 and this is very
much at the forefront of our planning. As always,
operational safety and the good health of our
people will continue to be our top priority.
Another priority, as in 2020, will be the upskilling
of our workforce to match the new demands of
our digital transformation and other innovation
processes. As part of this, the Digital Academy
we launched in 2020 will continue to play a
central role.
Regarding production, 2021 will be a challenging
year as we seek to accomplish some critical
tie-ins between our projects and our operations
and we expect the Group’s production to reach
730,000-760,000 tonnes of copper. Meanwhile,
on costs, we anticipate that remote operation,
automation and other innovations will continue
to deliver savings and productivity gains,
counteracting the impact of grade decline.
Our purpose is to develop mining for a better
future, and by responsibly and sustainably
producing a critical metal that plays a significant
role in supporting the global transition to a
low-carbon economy, we will continue to create
value for our shareholders, other stakeholders
and society.
Iván Arriagada
Chief Executive Officer
antofagasta.co.uk
Antofagasta plc Annual Report 2020
9
Strategic Report
Copper for a
cleaner world
In 2015, representatives of 195 countries met
at the landmark United Nations Climate Change
Conference in Paris and agreed to reduce
greenhouse gas emissions to stop global
temperatures rising by more than 1.5-2°C
above pre-industrial levels. Copper has a
vital role to play in meeting these goals.
Among its many qualities, copper is surpassed only
by silver and gold in its ability to conduct electricity
and heat, meaning that its use can reduce energy
consumption and, therefore, CO2 emissions. This
makes it indisputably the metal of choice to achieve
the twin objectives of providing energy to
a growing world population and tackling
climate change.
It is no surprise, then, that demand growth for
copper is forecast to be driven by the transition
to renewable energy and the adoption of electric
vehicles, together with the longer-established
trends of urbanisation and industrialisation.
Energy efficiency
Energy efficiency alone could allow the world to
achieve more than 40% of the emissions cuts
needed to reach its climate goals without new
technology, according to the International Energy
Association (IEA). This would not only reduce
emissions but spur economic growth by freeing
up spending on energy for other uses, as well
as improving energy security by creating
more stable and resilient electric grids.
The U4E aims to achieve a
10%
decrease in global electricity
consumption by 2030 saving
$500bn
in power generation costs
Copper’s superior electrical and thermal
conductivity makes it key to attaining this
performance. The metal’s use in domestic and
industrial appliances, which consume almost half
of global electricity, significantly lowers energy
consumption by reducing losses in the transfer of
electrical energy and heat. This has the additional
benefit of lowering consumers’ electricity bills.
Minimum energy performance standards
(MEPS) are in place in developed regions to
ensure that new electrical appliances, such as
motors, refrigerators, transformers and air
conditioners operate efficiently. Some 70% of
copper is used in these end-use applications,
mainly in the form of winding wire – and tubing,
in the case of air conditioners.
The International Copper Association (ICA),
of which Antofagasta is a member, participates
in the United Nations-led United for Efficiency
(U4E) initiative to support developing and
emerging economies move to greater energy
efficiency. By 2030, U4E aims to achieve $500
billion of savings in power generation, a 10%
decrease in global electricity consumption and
a 1.25 billion tonne reduction in CO2 emissions
annually through energy efficiency measures.
Based on the activities of the Three Percent Club,
a public-private energy efficiency alliance, a study
commissioned by the ICA shows that if improved
energy efficiency achieved a reduction in global
energy consumption of 3% per annum, copper
demand would grow by over 17 million tonnes
over 10 years.
Transition to cleaner energy
The global energy sector’s transition from
fossil-based technologies to zero-carbon
technologies is now well under way, propelled
by society’s concern about the impact of
climate change and by the decarbonisation
policies adopted by many countries.
Copper demand will benefit from the
transformation as both renewable energy
producers and electric vehicles use significantly
more of the metal than their traditional
counterparts. If global leaders address
carbon neutrality more aggressively, the
need for copper will strengthen still further.
10
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Greening our cities
Copper’s outstanding attributes and ability to
conduct electricity and heat play an important
role in the development of cleaner, greener cities.
The use of copper to build, power, plumb, heat,
ventilate, cool and provide internet access to our
homes and offices will be boosted by increasing
pressure on the construction sector to use less
carbon-intensive materials as efforts to meet the
Paris Agreement goals gather pace. The world’s
buildings and their construction represent around
39% of total carbon dioxide emissions, according
to the United Nations’ 2019 Global Status Report
for Buildings and Construction. This represents
an important improvement opportunity.
In the first two decades of this century, rapid
economic growth and urbanisation in China
drove copper demand. In the coming years,
urbanisation and industrialisation in India and
Southeast Asia are expected to pick up the
baton as policy-driven copper consumption
growth in China slows.
Together with its contribution to renewable
energy and silent, clean electric cars, copper
plays an integral part in creating the smarter,
more sustainable cities of tomorrow.
Demand growth
for copper is
forecast to
be driven by
the transition
to renewable
energy and the
adoption of electric
vehicles, together
with the longer-
established trends
of urbanisation and
industrialisation.”
Based on current policy settings, the IEA
estimates that renewable energy will meet 90%
of the growth in electricity demand over the next
two decades, led by continued high levels of solar
and wind development. Over the same period,
the share of renewable energy in global power
generation is expected to grow from around
28% to 45% replacing coal’s dominant position.
Solar and wind technologies require four
to twelve times more copper per kilowatt of
generation capacity than conventional methods
of power generation, mainly because a larger
number of smaller units need to be connected
to the grid, but also due to the increased
copper content of the electrical components.
The sector uses copper 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
turbines and the cell ribbons and cabling of solar
photovoltaic systems.
Meanwhile, battery electric and plug-in hybrid
vehicles are expected to account for 19% of the
automobile market in 2030 and 72% in 2040,
amid a declining auto market that will peak in
2031, according to research commissioned by
the ICA. This will lead to not only less polluted,
but also quieter, cities. Electric vehicles use
on average approximately four times as much
copper as conventionally powered vehicles,
owing to its use in batteries, high-voltage
wiring, windings and rotors.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
11
Strategic Report
Copper and
its uses
Copper has been a building block of civilisation
for thousands of years and its prominence will
grow in the future.
Copper’s unique combination of properties has
made it central to the development of mankind.
In antiquity, its malleability and flexibility allowed it
to be hammered and shaped into tools, weapons
and receptacles as well as attractive ornaments
and jewellery. For thousands of years its
durability, resistance to corrosion and attractive
colour rendered it a key architectural material
used in cladding, roofing or domes and spires.
Since the end of the 19th century, its exceptional
ability to conduct electricity and heat has made
it a vital component of economic development.
Today copper forms the backbone of the
modern world.
Its high conductivity ensures the efficient,
reliable and safe generation, transmission and
distribution of electricity. It powers our electronic
devices, from mobile telephones and laptops to
televisions and domestic appliances, ensuring
that they are energy efficient. It provides
reliable and economical electricity, heating and
air conditioning in our homes and offices and
is used in data transmission to meet society’s
demand for high-speed internet services and
data storage. Furthermore, its use in industrial
machinery promotes clean, economic development.
Copper’s outstanding electric and thermal
properties decrease load loss and keep the
power grid working at full capacity as well
as reducing the greenhouse gas emissions
that cause climate change. Similarly, it is an
irreplaceable component for the energy-efficient
performance of the renewable energy systems,
electric vehicles and equipment that will
contribute to the quieter, less polluted
cities of the future.
Copper also exists naturally in the environment
and is essential for the health of animals and
plants. It helps farmers produce more and
grocers to keep food fresher for longer. Copper
micronutrients promote bone growth and the
operation of the immune and nervous systems
in animals, as well as photosynthesis and
transpiration in plants.
The construction sector, which uses copper
in the wiring, plumbing, heating and cooling,
lighting and roofing of buildings, accounts for
28% of total annual copper consumption. Rising
urbanisation and industrialisation will continue to
be a major stimulus for copper demand as the
number of people living in cities is expected to
grow to nearly 65% of the world population in
2040 compared to 56.2% in 2020.
As people move to cities, the middle class is
projected to rise from two billion people today
to five billion in 2030, and increased wealth will
drive consumption of copper-rich consumer
goods such as cars and electronic devices.
The trend to decarbonisation is expected to boost
copper demand via the electrical network sector,
which already accounts for 29% of total copper
use, as renewable energy becomes the dominant
source of global power generation over coming
decades. Copper used by the transport sector
will grow even faster, albeit from a smaller
market share of 11%, as electric vehicles, which
use four times as much copper as conventional
ones, become part of everyday life.
On the back of these trends, total copper
consumption, which includes primary production
from copper mines as well as secondary
production from “old” scrap recycled from
end-of-life or obsolete copper products, is
expected to grow by an average of 2% per year
over the next two decades from 28.4 million
tonnes in 2020 to 45.3 million tonnes in 2040.
Cu for copper
Copper is element No. 29 on
the periodic table. Its element
symbol Cu comes from the Latin
word cuprum. The origin of this name
is believed to come from aes cyprium,
or metal of Cyprus, where there was
extensive copper mining in the
Roman era. It was later
corrupted to cuprum.
12
Antofagasta plc Annual Report 2020
antofagasta.co.uk
67%
of copper produced since
1990 is estimated to still be
in productive use
Infinitely recyclable
Copper forms part of a circular economy
because it can be infinitely recycled without
losing any of its chemical or physical properties
in the process.
Typically the metal is in-use for some 40 years
and roughly 40% of “end-of-life” copper is
recycled. It is estimated that two thirds of the
550 million tonnes of copper produced since
1990 is still in productive use.
Copper scrap is divided into “new” (or ‘direct use’)
and “old” scrap. The former is left-over metal
discarded by the first users of copper, who
fabricate “semis” (products such as wire, rod, tube,
sheet, plate and castings), and by finished product
manufacturers. It can be directly melted down and
used in manufacturing and is not considered as
new supply of refined copper.
“Old” scrap comes from worn out, end-of-life
products such as wiring, motors, piping or circuit
boards that need to be shredded to extract the
copper, and requires reprocessing in smelters
and/or refineries depending on its level of purity.
This is considered a new source of supply. It is
often described as the “swing producer” because
scrap collection rates are more sensitive to
commodity prices than mined production and
it is the first source to stop production when
copper prices fall below certain levels.
Known as a “contact killer”, copper ions
puncture the microbe’s protective membrane
and destroy the nucleus and its DNA, thus
stopping the mutations that create drug-
resistant super bugs.
Copper and its alloys are increasingly
used in hospitals for touch surfaces such
as doors, bed rails, IV poles, light switches
and workstations, mostly to guard against
hospital-acquired infections. There is also
considerable potential for its use to prevent
infection in nursing homes, schools, public
transport and restaurants.
Copper’s antimicrobial properties are
retained when it is recycled.
Copper kills bugs
Copper’s antimicrobial properties have been
known since antiquity.
As far back as 1,600 BC, the Chinese used
copper coins as medication to treat heart and
stomach pain. The Egyptians sterilised water
in copper vessels. The Aztecs used copper
compounds to treat burns, headaches and
ear infections.
In 2008 the United States Environmental
Health Protection Agency (EPA) officially
recognised copper-bearing alloys, containing
at least 65% copper, as anti-bacterial health
materials. Today the EPA has pronounced
over 400 copper surfaces as capable of
killing germs.
A 2011 landmark study of intensive care
rooms at three US hospitals found that copper
reduced the presence of microbes by 83% and
the chance of acquiring a hospital infection
by 58%.
It has also been shown to be a match
for the highly infectious COVID-19 virus.
A 2020 study in the New England Journal of
Medicine showed that the virus only survived
for 4-8 hours on a copper surface, compared
to 48-72 on plastic and stainless steel ones.
Another study by the Faculty of Medicine
at Bern University found that textiles with
copper thread made by a Chilean startup,
The Copper Company, eliminated 85% of
COVID-19 bacteria in five minutes and
95% in two hours.
Total copper consumption1 by industry sector
Every year, one-sixth of total refined copper
is provided by “old” scrap and almost one
third of global copper demand is met
by recycled metal, including “new”
scrap. Policy-led decisions to boost
the circular economy, in particular
in Europe, may lead to an
increase in its share.
2020
11%
29%
21%
28.4mt
Total
consumption
11%
28%
Source: Wood Mackenzie
1. Including direct use scrap
2040
Industrial
machinery
9%
Consumer
& general
18%
Transport
19%
45.3mt
Total
consumption
Construction
26%
Electrical
network
28%
antofagasta.co.uk
Antofagasta plc Annual Report 2020
13
Strategic Report
Copper:
the metal for
a better future
Many of the world’s largest copper deposits
are found in Chile due to the volcanic activity
that created the Andes mountain chain.
Where it comes from
Copper occurs naturally in a variety of forms in
the earth’s crust. Over 150 copper minerals have
been identified, of which perhaps a dozen are
economically feasible to mine and process into
copper metal. Copper minerals are found in
various types of ore deposits, the two most
common being porphyry copper deposits and
sediment-hosted deposits, and these are the
source of around 60% and 20% respectively
of the world’s current copper production.
According to the United States Geological
Service (USGS), there are 870 million tonnes
of copper reserves in the world, which in
other words are copper deposits that have
been discovered, evaluated and assessed to
be economically profitable to mine. Almost a
quarter of these reserves are in Chile, which
is the world’s largest copper producer.
Copper resources, which include reserves
as well as potentially profitable identified deposits
are estimated at 2.1 billion tonnes. In practice,
many of these resources may never become
economically viable reserves or may do so only
after decades and/or as a result of high copper
prices. It takes time and high-risk investment
to conduct the detailed exploration, and
metallurgical processing, mining, political,
infrastructure, environmental, social and other
studies required to ascertain a project’s feasibility
– and many, when assessed in greater detail,
will not meet the required criteria.
Relative scarcity
It is increasingly hard to find high-quality
copper projects in areas of low jurisdictional
risk that can offer strong financial returns for
a combination of reasons.
First, the easier, higher-return deposits
have already been developed and undeveloped
deposits tend to be remoter, smaller, deeper,
more complex to process and have lower
copper grades. Increasingly, new projects
are discovered in countries that do not
have a mining tradition.
Average copper grade (world)
%
1.0
0.8
0.6
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
Source: Wood Mackenzie
14
Antofagasta plc Annual Report 2020
antofagasta.co.uk
870
million tonnes
25%of these reserves are in Chile
of copper reserves in the world. Almost
Established mines also become less productive
over time as mining plans initially target the ore
that is easiest to access and promises the best
returns. Over time, average grades decline, ore
haulage distances grow and the rock becomes
harder to crush and treat. This impacts
production and increases mining costs.
Second, environmental standards are rising in
most countries, with a particular focus on water
efficiencies and use, the safety of tailings storage
facilities and community relations. These trends
are necessary to ensure sustainable development
but lead to longer environmental approval
processes and increased costs.
Third, exploration budgets are a fraction of what
they were a decade ago. Nor has spending on
exploration during that period led to a notable
increase in discoveries. The copper resource base
grew by an average 0.33% a year in the first two
decades of this century compared to 1.2% from
1961 to 2000. This is due to both a decline in
the number of discoveries (two in the decade
to 2019 compared to 94 in the previous one)
and the smaller average size of the discoveries.
The relative scarcity of copper puts pressure
on supply, a position that has become more
challenging over time.
Converting copper ores into metal
Copper ores are transformed into metal by concentration or leaching
technologies but a paradigm shift to treat primary sulphides may be on
the horizon.
It can easily take a decade, and often much longer, for a discovery to become
an operating mine. There are many stages in the assessment of a deposit,
during which greater certainty is developed about its composition and scale.
Mining and metallurgical treatment plans have to be evaluated and tested and
a detailed assessment of environmental, social, infrastructure and political
factors completed before a decision can be made to develop the deposit into
an operating mine. Most discoveries never make it beyond the early stages
of this process.
The optimal processing method for extracting copper depends on the deposit
type. Porphyry copper deposits, which account for some 60% of global copper
production and are commonly found in Chile, are typically divided into three
main ore types: copper oxides, secondary sulphides and primary sulphides.
Oxides are nearest the surface and are formed over millions of years from
primary sulphides weathered by the elements. Secondary sulphides, often
called supergene deposits, are enriched with higher concentrations of minerals
leached from the oxide ore body above. The primary sulphides (hypogene) at
the bottom are unaltered and usually have lower grades of copper than the
secondary sulphides.
Once a project is permitted and approved, it usually takes at least two years
for a mine to be built and start operation and permitting can take years
to complete.
Copper production
Copper is extracted from the ore and converted into pure metal, through two
processing routes: concentration and leaching. Concentration is the main route
to process both primary and secondary sulphides and accounts for 80% of
total refined copper production. Leaching, which is less capital intensive, came
into wide commercial use in the 1980s and, until recently, has only been viable
in treating oxides and sometimes secondary sulphides. By-products such as
gold, molybdenum and silver can be extracted using the concentrator route,
but not with leaching.
Concentration involves crushing and grinding mined ore into a fine powder
and then separating the copper from the unwanted waste material in a froth
flotation process in a concentrator plant. The resulting concentrate contains
25-35% of copper and is sent, often by sea, to smelters for further processing
and then to refineries for refining into pure copper. If by-products such as gold
and silver are present, they can be extracted from the copper concentrate,
but molybdenum is processed into a separate concentrate. Concentration is
capital intensive and benefits from economies of scale; it is often used for
lower-grade large sulphide deposits.
In the case of leaching, also known as hydrometallurgy, crushed ore is usually
piled up and leached with sulphuric acid to create a copper sulphate solution
called a pregnant leach solution (PLS). The copper is then extracted in a
solvent-extraction and electro winning (SX-EW) plant to produce copper
cathodes. However, as oxide deposits are near-surface and being depleted,
production from this process route accounts for a lower and lower percentage
of total copper production.
Since SX-EW technology was developed in the 1960s there have not been
any new commercially-proven copper processing innovations. But this may
change. New technology appears to be able to leach copper economically from
previously unresponsive primary sulphides and recover it using a variant of
the SX-EW process route. A promising example is our Cuprochlor-T® process
which is currently in the industrial-scale testing stage at Centinela (see page 68
for more information).
Confirmation of this technology would be a milestone in the treatment of
primary sulphides, which account for an estimated 70% of the world’s copper
production. It would allow for less capital-intensive processing, maybe even
using disused oxide SX-EW plants. This would represent a paradigm shift
for the copper mining industry.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
15
Strategic Report
Business model
Creating value through
the mining lifecycle
Exploration
Chile
International
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.
3-5 years
+ See page 77 for
more information
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.
As part of our commitment
to mitigating and adapting
to climate change, all of our
mining operations will use 100%
renewable energy from 2022
and approximately 90% of mining
division’s water will be either
sea or recycled water by 2025.
+ See page 52 for
more information
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
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.
5 years
+ See pages 74-76 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 74-76 for
more information
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 21-year-old
Los Pelambres mine is
its fourth.
16
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Extraction
Los Pelambres
Centinela
Antucoya
Zaldívar
Antofagasta’s four operations
in Chile are Los Pelambres,
Centinela, Antucoya and Zaldívar.
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 66-71 for
more information
Core operations
Processing
Antofagasta mines both copper
sulphide and copper oxide ores,
which require different
processing routes:
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 66-71 for
more information
Marketing
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 82 for
more information
Mine closure
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 51 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 playing a vital role
in the world’s major challenges
such as sustainable urban
development, the availability of
clean energy and electromobility
and green technologies.
Our 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 12-13 for
more information
antofagasta.co.uk
Antofagasta plc Annual Report 2020
17
Strategic Report
Strategic framework
Our strategic
framework
We are committed to our Purpose of
Developing Mining for a Better Future.
This is what drives and motivates us.
Our Purpose 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
PURPOSE
CULTURE
ORGANISATION
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.
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.
The way we work and manage our risks is anchored in
our shared values: Responsibility, Respect, Commitment
to sustainability, Excellence in our daily performance,
Forward-thinking and Innovation as a permanent practice,
and the Board embraces its important role in setting
the tone for the Group’s culture and promoting our
shared values.
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.
This is achieved by standardising and strengthening our
production processes, improving collaboration between key
areas, defining clear roles and responsibilities and seeking to
reduce variability and deviation from our production plans.
18
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Strategy
People
Safety and Sustainability
Our strategy is built around five key
pillars, each of which has defined
long-term objectives with short- and
medium-term goals. These pillars are:
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.
People
Safety and Sustainability
Competitiveness
Growth
Innovation
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.
+ See pages 42-44 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.
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.
In line with this, we manage natural resources
efficiently and are constantly seeking ways to
reduce water consumption, find energy from
cleaner sources and protect biodiversity, while
always collaborating with local communities.
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.
+ See pages 45-47 for more information
Competitiveness
Growth
Innovation
Our key focus as regards
competitiveness is to achieve
productivity gains through cost control
and streamlining our processes.
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 Cost and
Competitiveness Programme (CCP)
has also produced significant savings.
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).
+ See pages 80-81 for more information
+ See pages 74-76 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.
+ See pages 80-81 for more information
antofagasta.co.uk
Antofagasta plc Annual Report 2020
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:
Financial KPIs
EBITDA1
$2,739m
2,587
2,439
2,228
1,626
Earnings per share2
$54.7¢/share
2,739
76.1
Net debt1
$82m
1,072
51.5
50.9
54.7
34.7
596
563
456
16
17
18
19
20
16
17
18
19
20
16
17
18
19
82
20
Why it is important
This is a measure of our underlying profitability.
Performance in 2020
EBITDA was 12.3% higher than the previous year
on higher realised copper and gold prices, and
lower unit costs, partially offset by lower
copper production.
Why it is important
This is a measure of the profit attributable
to shareholders.
Performance in 2020
Underlying earnings per share from continuing
operations of 54.7 cents per share, a 7.5%
increase on 2019, on higher EBITDA, partially
offset by increased net finance expenses.
Why it is important
This measure reflects our financial liquidity.
Performance in 2020
Net debt remained low and decreased by 85.4%
in 2020 to $82 million.
+ See page 84 for more information
+ See page 91 for more information
+ See page 93 for more information
Remuneration performance criteria. See page 145 for more information
1. Non-IFRS measures, refer to the alternative performance measures section on page 216.
2. Underlying EPS from continuing operations, excluding exceptional items. Reconciled to EPS from continuing and discontinued operation, including exceptional items in
the consolidated income statement on page 165.
3. 100% of Los Pelambres, Centinela and Antucoya, and 50% of Zaldívar’s production.
4. Mineral resources (including ore reserves) relating to the Group’s subsidiaries on a 100% basis and Zaldívar on a 50% basis.
5. The Lost Time Injury Frequency Rate is the number of accidents with lost time during the year per million hours worked.
6. Mining division only.
7. Tonnes of CO2 equivalent per tonne of copper produced.
20
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Operating KPIs
Copper production3
733.9k tonnes
709.4
704.3
725.3
770.0
733.9
Net cash costs1
$1.14/lb
1.20
1.25
1.29
1.22
1.14
Mineral resources4
19.2bn tonnes
18.7
18.7
18.8
19.1
19.2
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Why it is important
Copper is our main product and largest source
of revenue.
Why it is important
This is a key indicator of operating efficiency
and profitability.
Why it is important
The Group’s mineral resources base supports its
strong organic growth pipeline.
Performance in 2020
Copper production was 733,900 tonnes. This
was a 4.7% decrease on 2019 mainly as grades
at Centinela Concentrates fell as expected.
Performance in 2020
Net cash costs of $1.14/lb, 6.6% lower than
in 2019 due to the weaker Chilean peso, lower
input costs and continued tight cost control,
partially offset by lower production.
Performance in 2020
Mineral resources at Centinela increased as new
geological data were included for the first time.
+ See page 64 for more information
+ See page 64 for more information
+ See page 222 for more information
Sustainability KPIs
Safety
0
0.9
Water consumption
68.1m m3
CO2 emissions intensity6, 7
3.19tC02e
Fatalities
LTIFR5
Continental water
Sea water
1.6
1.5
1.6
28.9
36.5
36.9
39.1
32.6
3.67
3.87
36.9
3.33
32.6
3.10
3.19
2
16
0
17
1
18
1.0
0
19
0.9
0
20
26.5
29.2
30.4
28.2
29.0
16
17
18
19
20
16
17
18
19
20
Why it is important
Safety is our top priority, with fatalities and the
LTIFR5 being two of the principal measures
of performance.
Why it is important
Water is a precious resource and we are focused
on using the most sustainable sources and
maximising its efficient use.
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 2020
Record safety performance with no fatal
accidents and a LTIFR of 0.9.
Performance in 2020
Our consumption of continental water and sea
water increased by 19.9% and 2.8% respectively
mainly due to an increase in water scarcity and
material processed.
Performance in 2020
Total emissions were 2.0% lower in 2020, but
CO2 emission intensity increased by 2.9%
compared to 2019 on lower copper production
due to lower grades at Centinela Concentrates.
+ See page 45 for more information
+ See page 53 for more information
+ See page 53 for more information
antofagasta.co.uk
Antofagasta plc Annual Report 2020
21
• Updated and monitored critical controls and
action plans dashboards
• Prepared new action plans to maintain risk
exposure within acceptable limits
• Embedded timely and comprehensive
risk analysis into each relevant decision-
making process
• Defined specific procedures to support timely
and in-depth risk analysis for the procurement
area and for the planning cycle
• Shared best practices across our
operating companies
• Included budgeting and planning processes
related to risk monitoring in the monthly
executive review to identify and manage
any deviation from expected performance
in a timely fashion
Strategic Report
Risk management
Risk management
framework
Effective risk management is an essential part
of our culture and strategy.
The accurate and timely identification,
assessment and management of key risks
give us a clear understanding of the actions
required to achieve our objectives.
Key elements of integrated
risk management
We recognise that risks are inherent to
our business
Only through adequate risk management can
internal stakeholders be effectively supported in
making key strategic decisions and implementing
our strategy
Exposure to risks must be consistent
with our risk appetite
The Board defines and regularly reviews the
acceptable level of exposure to principal and
emerging risks. Risks are aligned with risk
appetite, taking into consideration the balance
between threats and opportunities
We are all responsible for
managing risks
Each business activity carries out risk evaluations
to ensure the sound identification, management,
monitoring and reporting of risks that could
impact the achievement of our goals
Risk is analysed through a
consistent framework
Our 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 us in achieving our strategic goals
We are committed to
continuous improvement
Lessons learned and best practices are
incorporated into our procedures to protect
and unlock value sustainably
Areas of focus and
development during 2020
Our main focus in 2020 was to implement a
world-class risk management tool, in line with
our commitment to digital transformation,
to review key risks according to our risk
methodology and to improve risk management
tools for the procurement area and in our
planning cycle. These are some of the actions
that have taken place during the year:
• Implemented the Active Risk Manager (ARM)
system and trained its main users. The ARM
system is a single, secure repository of risks
• Co-ordinated the COVID-19 contingency
committees throughout 2020, in line with
the risk management response system
• Held a key risks awareness workshop for the
Executive Committee. During this workshop
the Executive Committee reviewed the risks
faced by the Group during the pandemic
and the relevant aspects to consider when
updating and managing the key risks. External
risks were defined as external threats that
were difficult to predict, with broad consequences
and low probability, that could significantly
impact the Group in achieving its objectives.
Following the outbreak of COVID-19, this
probability has been increased
• Presented an update of the Company’s risk
appetite statement to the Board which included
one new key risk category – external risks,
to which the Board assigned a risk appetite
of medium
• Carried out risk assessment updates
at all operating companies, projects,
exploration activities and support areas,
using the ARM system. 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
22
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Governance
The Board determines the nature and extent
of the principal and emerging 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,
covering safety and health, financial, environmental,
legal and social matters, and 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 principal
and emerging 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 the Group. It implements 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 reviewed quarterly by the
Risk and Compliance Management Department.
We promote a consistent risk management
process across our 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 page 124 for more information
Our risk management structure
Board of
Directors
Board
Committees
Executive
Committee
First line
of defence
Second line
of defence
Third line
of defence
Board of Directors
• 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
Board Committees
• 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
Executive Committee
• 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
Each person is responsible for identifying, preventing
and mitigating risks in their business area and escalating
concerns to the appropriate level, if required.
Second line of defence
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.
Third line of defence
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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
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 that key risks are
identified in a thorough 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 new or emerging risks which
could impact the Company’s sustainability in the
long run, even if there is limited information
available at the time of the evaluation.
Any new or emerging identified risks that
could impact long-term strategic objectives are
included in the key risk analysis and are reviewed
and monitored periodically by the Board. 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 that have taken
place since 2019.
The Board carried out a robust assessment
of the Company’s principal and emerging risks
during the year, which are set out below with
the related preventive and mitigation measures.
24
Antofagasta plc Annual Report 2020
Risk Heat Map
8
9
10
11
4
6
14
3
7
18
12
13
2
15
17
16
1
5
e
r
e
v
e
S
t
n
a
c
i
f
i
n
g
S
i
t
c
a
p
m
I
e
t
a
r
e
d
o
M
w
o
L
w
o
l
y
r
e
V
Movement since previous year
Very unlikely
Unlikely
Possible
Likely
Almost certain
Risk
People
1. Talent management1
2. Labour relations1
Safety and Sustainability
3. Safety and health
4. Environmental management
5. Climate change
6. Community relations
7. Political, legal and regulatory
8. Corruption
Competitiveness
9. Operations
10. Tailings storage
11. Strategic resources
12. Cyber security
13. Liquidity
14. Commodity prices and exchange rates
Growth
15. Growth of mineral resource
base and opportunities
16. Project execution
Innovation
17. Innovation and digitisation
Transversal
18. External risks
Probability
Risk
appetite
Risk level
2020
v. 2019
KEY
Low
Medium
High
Very high
Risk appetite
Risk level
1. Prior to 2020 Talent management and
Labour relations were treated as a single
risk category.
antofagasta.co.uk
Key risks
Defining risk appetite is key in the process of
embedding the risk management system into
our organisational culture. The Company’s risk
appetite statement helps to align our strategy
with the business units’ objectives, clarifying
which risk levels are, or are not, acceptable.
It promotes consistent risk decision-making,
allied to the strategic focus and risk/reward
balance approved by the Board.
During the year the Board reviewed and updated
Antofagasta’s risk appetite, including one new
risk category – external risks – and updating
Climate Change and Project Execution.
We maintain a risk register through a robust
assessment of the potential key risks that could
affect the organisation’s performance. This
process ensures that key risks are identified
in a thorough and systematic way and that
agreed definitions of risk are used.
The key risks, together with related preventive
and mitigation measures, have been presented to
the Board and are in line with the organisation’s
strategic pillars of People, Safety and
Sustainability, Competitiveness, Growth and
Innovation. In addition, 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
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
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.
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 employee retention, as well as 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 when appropriate.
During 2020 our Group leadership
framework was released, the diversity
and inclusion strategy was strongly
promoted and a new remote
working standard was launched.
2. Labour relations
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
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.
We maintain good relations with our employees and unions, which are 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 the 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 with them.
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.
Highlights
Ten labour negotiations took place in
2020. In all cases, the Company and
labour representatives successfully
reached agreement.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
25
Strategic Report
Risk management continued
Safety and sustainability
3. 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 one of our core values. A poor
safety record or serious accidents could
have a long-term impact on morale and
on Antofagasta’s reputation and production.
Risk appetite
Risk level
Trend
v. 2020
Preventive and mitigation measures
We seek to continuously improve 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 goals of zero serious accidents and fatalities and the minimising of the number of
accidents require 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 2020 there were no fatal accidents.
The COVID-19 outbreak threatened the
health of all employees and contractors,
and local communities. We focused on
implementing controls to prevent and
mitigate the impact of infection, prioritising
the health of our employees and
contractors while minimising the
impact on operational continuity.
4. Environmental management
Risk appetite
Risk level
Trend
v. 2020
Description
An operating incident that damages
the environment could affect both our
relationship with local stakeholders and
our reputation, reducing the social value
we generate.
We operate in challenging environments,
including the largely agricultural Choapa
Valley and the Atacama Desert, where
water scarcity is a key issue.
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.
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.
We recognise that environmental sustainability is key to our ability to generate social value and
perform regular risk assessments in order to identify potential impacts and develop preventive
and mitigating strategies.
Each site maintains updated environmental emergency preparedness and detailed closure
plans with appropriate financial provisions to ensure physical and chemical stability once
operations have ceased.
Highlights
We had no significant environmental
incidents during 2020.
We monitored and reinforced our critical
controls in line with our low appetite for
environmental risk.
5. 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.
Risk appetite
Risk level
Trend
v. 2020
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 each phase of the Los Pelambres desalination
plant construction, the proportion of continental water used will decrease and significantly
lower the potential impact of water scarcity on the Group.
We seek constantly 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
In 2020, a Climate Change Strategy was
approved by the Board. It has five pillars:
the development of climate change
resilience, the management of GHG
emissions, supply security and efficient
use of strategic resources, the
management of environmental and
biodiversity, and the integration of
stakeholders. While being committed to
reducing GHG emissions we also support
local communities in preparing for the
effects of increasing emissions.
26
Antofagasta plc Annual Report 2020
antofagasta.co.uk
6. Community relations
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
Failure to identify and manage local concerns
and expectations could negatively impact the
Company. Relations with local communities
and stakeholders affect our reputation and
our ability to generate social value and grow.
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.
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.
During the COVID-19 pandemic the
Company has worked with the local and
regional government to support local
communities, including establishing a
community support fund providing
financial support and PPE and
testing equipment.
7. Political, legal and regulatory
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
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.
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 of the countries 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 matters.
This helps to improve our internal processes and means we are prepared to meet any new
regulatory requirements.
As we have no operations in or material exposure to the UK, Brexit is not expected to have
any appreciable impact on the Company.
Monitoring of possible regulatory changes
due to planned constitutional reform
in Chile. We will evaluate the impact of
these changes on our activities and will
seek to mitigate any negative impacts.
8. Corruption
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
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.
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 our operations, projects 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.
During 2020 new offences were
included in the Chilean anti-bribery and
employment protection laws relating to
health measures during emergencies.
Accordingly, our crime prevention
model was updated, and related risks
re-evaluated. The main risk identified is
a severe transgression of the law, which
has been evaluated as being very unlikely,
yet with potentially severe consequences.
All our employees receive training on our Compliance Model, which is subject
to external certification.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
27
Strategic Report
Risk management continued
Competitiveness
9. Operations
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
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, any
of which could adversely affect production
and/or costs.
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 use 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 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.
In 2020 all operational risks were
continually and consistently monitored
at all our operations. Common operating
models, preventive maintenance and cost
control supported our strong operating
performance during the year, despite
the health restrictions imposed by
the government.
10. Tailings storage
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
Ensuring the stability of our tailings storage
facilities (TSFs) during their entire lifecycle
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 at
our operations.
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 is evaluated
and addressed throughout the life of each facility. Our TSFs 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 using 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.
The Global Industry Standard on Tailings
Management was adopted in 2020.
In accordance with this new standard,
we began to implement a more detailed
risk identification and assessment
methodology focused on failure modes,
in order to avoid catastrophic failures.
11. Strategic resources
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
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.
In order to maintain our 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 continuity. Certain key supplies are purchased from several sources to mitigate
potential disruption arising from exposure to a single supplier.
During the health emergency the supply
of critical inputs has been maintained
through constant monitoring and the
application of contingency plans.
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).
12. Cyber security
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
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.
13. Liquidity
Our information security management model is designed with defensive structural controls
to prevent cyber risks and mitigate their effects. It employs a set of rules and procedures,
including a Disaster Recovery Plan, to restore critical IT functions in the event of an attack.
In 2020 preventive controls and
constant communication with users
were reinforced to prevent cyber attacks.
Our systems are regularly audited to identify any potential weaknesses or threats to the
operations, and specific systems are in place to protect our assets and data.
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Restrictions in financing sources for
future growth could prevent us from
taking advantage of growth or other
opportunities available in the market.
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
and maintain the financial flexibility to take advantage of opportunities as they may arise.
Highlights
During 2020 the Company launched
its inaugural corporate bond, raising
$500 million.
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.
28
Antofagasta plc Annual Report 2020
antofagasta.co.uk
14. Commodity prices and exchange rates
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
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.
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 some 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 occasionally we implement a focused
currency-hedging programme to reduce short-term exposure to fluctuations in the US dollar
against the Chilean peso.
Some limited copper hedge positions
were put in place when prices fell and
the Chilean peso weakened significantly
following the outbreak of COVID-19.
However, both had strengthened
materially by the end of the year.
Growth
15. Growth of mineral resource base and opportunities
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
We need to identify new mineral resources to
ensure continued future growth, and we do
this through exploration and acquisition.
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 a 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, approving or recommending them within authority levels set by the Board.
During 2020 we reduced the volume of
activity during the COVID-19 pandemic,
giving priority to compliance with
protocols to ensure the health of workers.
Our exploration activities continued to be
focused mostly on the Americas and our
risk exposure level remained at the same
level as in 2019.
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.
16. Project execution
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
Failure to effectively manage our
development projects could result in delays
to the start of production and cost overruns.
We have a project management system to ensure that best practices are applied 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.
The Los Pelambres Expansion project
was largely suspended for some five
months following the outbreak of
COVID-19. The project risks are being
proactively managed and frequently
evaluated by the project team
according to a specific project
risk management procedure.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
29
Strategic Report
Risk management continued
Innovation
17. Innovation and digitisation
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
Our ability to deliver on our strategy and
performance targets may be undermined by
missed opportunities or delays in adopting
new technologies or innovations.
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 evaluating
and implementing innovations which have the potential to positively impact our business and
growth options.
In 2020 we launched three automation
projects: a remote operations centre in
the city of Antofagasta, autonomous
drilling at Los Pelambres and the use
of autonomous trucks in a new pit
at Centinela.
Transversal
18. External risks
Risk appetite
Risk level
Trend
v. 2020
Description
Preventive and mitigation measures
Highlights
We must develop the ability to manage
external threats that are complex to
predict and can significantly impact the
Group’s strategic objectives and its
operational continuity.
We promote the flexibility of our business and our labour force. We have defined a new
structure for working both from home and at the workplace and have implemented many
other measures as part of a project on new ways of working.
We incorporate lessons learned into our business, maintaining good practice and including
potential improvements learnt from responses and actions taken during periods of crisis.
We annually challenge the risk strategies associated with each key risk category, including
the diversification of suppliers, routes, levels of autonomy, etc.
We recognise the volatility of the markets and proactively seek new business models and
work to expand our client base.
We regularly review our Business Continuity Plan.
We conduct scenario analysis to challenge the principles on which we base our financial
planning, identifying potential risks and cost/benefits of feasible action plans.
This new key risk category was included
in our risk analysis for the first time in
2020. The risks in this category cut
across the other key risk categories
and high-impact risks were identified,
particularly COVID-19. Control actions
were implemented to guarantee the safety
and health of our employees and provide
support to local communities in order
to maintain their wellbeing and the
operations’ continuity.
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 mining
operation. More detailed medium-term planning is completed for a five-year time
horizon (as well as very detailed annual budgets). Accordingly, 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 any borrowing facilities in place, including their terms and remaining durations.
The Group had a strong financial position as at 31 December 2020, with combined
cash, cash equivalents and liquid investments of $3,672.8 million. Total borrowings
were $3,754.8 million, resulting in a net debt position of just $82.0 million. Of the total
borrowings, only 16% is repayable within one year, and 14% repayable between one and
two years. 43% of the borrowings are repayable after more than 5 years, beyond the
viability review period.
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
• a shut-down of the Group’s operations for several months as the result of COVID-19
related issues
• the occurrence of several of the Group’s most significant potential risks within a
single year, such as temporary shut-downs or operational disruption due to issues
such as labour strikes or water availability.
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 2020
antofagasta.co.uk
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.
• There were 19 Company Ethics Committee
meetings during the year to consider the 162
allegations which were classified: 60% (98)
harassment, abuse and mistreatment, 5% (8)
bribery and corruption, 15% (25) fraud or
misuse of property, 9% (14) conflicts of
interest, 4% (6) wrongful labour or
contractual practices, 0% modern slavery
and 7% (11) other
Areas of focus and
development during 2020
• Review of the complaint management system
and segregation of duties between Compliance
Management and the Crime Prevention Officer
• Launch of digitisation initiatives, including
the automation of the due diligence process
(EVA II) for suppliers, communities and the
development of a system to monitor potential
conflicts of interest
• Development of a virtual management system
for complaint resolution and an Ethics
committee. New methods for rating and
classifying the complaints according to their
severity – critical, high, medium and low
• Compliance e-learning for all Directors
and executives
• In-depth training and briefings in ethics and
compliance, particularly in higher-risk areas
such as procurement and community relations
• 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 through which employees and third
parties can submit questions and complaints
A total of 372 allegations were received, of which
162 (44%) were ethics related and 210 (56%)
were non-ethical concerns.
• By severity the allegations were: 5% (21)
Critical, 28% (105) High, 43% (161) Medium
and 23% (85) Low
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
corruption-related matters it is 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, including the 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
procedures. Each operating company has an
internal Ethics committee which reviews the
conclusions of investigations and suggests
action plans to the Company’s 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 anti-bribery and anti-corruption laws in the
United Kingdom and Chile and is certified by an
external entity.
Due diligence highlights
During the year 5,963 suppliers were reviewed,
of which 0.84% (50) were rejected and the
others were approved. Of the rejected suppliers
64% were local, 34% national and 2% were
international. The reasons for rejection were: 28%
high financial or tax risk, 6% non-compliance
with Law 20.393 (Criminal Responsibility of
Legal Entities), 12% did not comply with Group
guidelines, 4% had criminal records and 50%
were for other reasons.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
31
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 2020
antofagasta.co.uk
Stakeholder review
Our approach to sustainability
Committed to positive impact
Our commitment to the Sustainable
Development Goals
Creating sustainable value
for our stakeholders
Our people
Safety and health
Communities
Environment
Task Force on Climate-related
Financial Disclosures
Suppliers
Customers
Shareholders
Governments and regulators
Non-financial information statement
34
38
40
42
45
48
50
54
57
58
59
60
61
antofagasta.co.uk
Antofagasta plc Annual Report 2020
33
Strategic Report
Our approach to sustainability
Committed
to positive impact
Sustainability is intrinsic to every aspect of
how we do our work, whether it is the safety
and health of our employees and communities,
our impact on the environment or how we
relate to our partners and shareholders.
A commitment to sustainability is one of our
six core values. It influences the way we grow
our business, manage our risks and impacts,
contribute to the development of communities
in the areas where we operate and address
global challenges such as climate change.
Within the framework of our core values, our
Sustainability Policy establishes the principles
that guide our day-to-day actions on economic,
social and environmental matters and the
management of our supply chain. It also
underpins our system of corporate governance.
Its application is overseen by the Board, with
particular focus from the Sustainability and
Stakeholder Management Committee. This
Committee’s regular interaction with the
sustainability team enables it to provide timely
guidance and support should the need arise.
We also seek to ensure the whole organisation’s
alignment behind our commitment to sustainability
through regular training and the inclusion of
sustainability targets in annual performance
bonus agreements.
We constantly review our policies and in
2020 the Board approved a comprehensive
new Climate Change Policy in order to better
co-ordinate the numerous initiatives we are
implementing in this field. We also began work
towards compliance with the recommendations
of the Task Force on Climate-related Financial
Disclosures (TFCD) and signed a letter of
commitment to The Copper Mark, a comprehensive
assurance framework to demonstrate the copper
industry’s responsible production practices and
industry contribution to the United Nations
Sustainable Development Goals (SDGs).
We currently have plans that will increase our
use of sea water and recycled water by 2025.
We have entered into power agreements so that
all our mining operations will be using exclusively
renewable power from 2022. Through these
actions, we are reducing our impact locally
and further afield.
Our purpose
Our purpose is to develop mining for a better
future. As custodians of natural resources,
we believe we have a responsibility not only
to manage these resources efficiently and
responsibly, but also to harness copper’s
potential to contribute to the development
of a greener and more sustainable world.
In line with this, we give particular emphasis
to innovation through our own InnovaMinerals
platform and our participation in Expande,
a broader public-private open innovation
programme for mining. We are also developing
an electromobility roadmap, covering its
applications for society in general and its
use at our mines.
Antofagasta during 2020
Safety and health
• At the end of 2020, we achieved a record 27 months
Suppliers
• We continue with our programme of developing good
Environment
• In 2020, no significant environmental incidents
without fatalities
quality local suppliers
occurred at our operations
• Both Division’s LTIFRs fell to record lows
• High potential incidents fell 63% year-on-year,
far exceeding our reduction target of between 10%
and 15%
Our people
• We approved a permanent form of part-time
remote working
• We set up a Digital Academy to improve
employees’ skills
• In 2020, 50% of employees recruited were women
• Performance agreements and long-term incentives
were used to align and motivate employees to achieve
the Company’s objectives
• SMEs accounted for 54% and 63% of our Mining and
Transport divisions’ spending on goods and services
respectively in the regions where we operate, and
93% of our suppliers are based in Chile
• We reduced payment times for local suppliers to
• Our new climate change strategy was launched
in October 2020
• In July 2020, Zaldívar became our first mine to use
only electricity generated from renewable sources
• We started sponsoring a university programme in
nine days
water sustainability
Communities
• In 2020, the Board approved our first formal
Human Rights Policy
• We created a $6 million COVID-19 fund to
provide economic and health support for our
neighbouring communities
• We renewed our alliance with the Antofagasta Mining
Cluster for two more years
Sustainable governance
• We responded quickly to the pandemic with very
limited impact on production or costs
• It accelerated our innovation and digital
transformation programme
• We conducted a materiality assessment to identify
the most important sustainability issues for
our stakeholders
• We committed to The Copper Mark, an assurance
framework to demonstrate the copper industry’s
responsible production practices
• We published our fifth Payment to Governments
Report in June
34
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Distribution of economic
value generated
Our aim is to develop mining for a better future
and we understand that generating economic
value means more than making a profit.
We generate economic value for all of our
stakeholders; distributed as wages to our
employees, purchases of goods and services
from our suppliers, contributions to local
communities, taxes to governments, dividends
to our shareholders and interest paid to
our lenders.
In 2020, we distributed a total of $4,856 million.
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.
Communities
$46m
Contributions and
project funding
Suppliers
$3,525m
Payments made
to suppliers for the
purchase of utilities,
goods and services
“Our aim is to create lasting value for
communities’ long-term economic and social
development, a task in which we work in
alliance with other players, including local
governments, other companies and NGOs.”
René Aguilar
Vice President of Corporate Affairs and Sustainability
Lenders
$53m
Interest
payments
Shareholders
$131m
Dividends
Subsidiaries´
non-controlling
interests
$280m
Dividends
$4,856m
Total economic contribution
Governments
$327m
Income taxes, royalties
and other payments
to governments
Employees
$494m
Salaries, wages
and incentives
BUS STOP
antofagasta.co.uk
Antofagasta plc Annual Report 2020
35
Strategic Report
Our approach to sustainability continued
“All this help we have been offered adds up,
especially when we are experiencing a crisis.
The help of private companies and the efforts of
the Ministry of Health have led to an exponential
growth that we never thought we would have.”
Alejandro Césped
Director of Illapel’s Hospital
$6m
COVID-19 fund
for communities
Creating value for
stakeholders
We are committed to building lasting and
sustainable relationships with our different
stakeholders in order to foster transparent dialogue
and achieve mutually beneficial outcomes.
We seek to ensure a safe working environment
for all our employees and contractors, and our
top priority is their safety and health. We also
seek to provide a workplace that enables
employees to achieve their maximum potential,
facilitates a healthy work life balance and fosters
diversity and inclusion.
In the case of contractors, we work with them to
ensure they benefit from the same standards we
have for our own employees. Through suppliers,
we seek to support local jobs by prioritising local
suppliers and, in the case of large suppliers from
outside the regions where we operate,
encouraging them to recruit locally.
Our engagement with communities is based on
a bottom-up approach, under which we establish
joint working groups to define priorities, projects
and programmes. We aim to create lasting value
for communities’ long-term economic and social
development, working alongside other players,
including local governments, other companies
and NGOs.
In 2020, in the context of the COVID-19
pandemic, the emphasis of our engagement
with stakeholders necessarily shifted. Our first
concern was to ensure the health and safety
of our employees and contractors. Relations
with local communities also took on particular
importance as, together with the local authorities,
we supported them in addressing the health
challenge and relieving the economic difficulties
they faced.
36
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Materiality analysis
In 2020, we conducted a materiality assessment
to identify the sustainability issues most critical
to our business and stakeholders. This was a
three-stage process:
• Identification of potential issues. Through
desktop research into existing, new and
emerging material topics for the copper
mining industry both in Chile and
internationally, we identified
38 potential topics.
• Prioritisation of issues. Based on internal
workshops, a survey of our operations’
union leaders and interviews with external
stakeholders, we prioritised these topics,
drafting a materiality matrix for each operation.
• Validation. These matrices were presented
to Antofagasta’s Executive Committee for
validation and then weighted by the size of
the operation and the level of risk to produce
a materiality matrix for the Group.
This new matrix, which reassesses the
importance of existing issues and incorporates
topics emerging at both international and local
levels, will not only determine the content of our
2020 Sustainability Report but also guide our
strategies, policies and practices in 2021.
s
n
o
i
s
i
c
e
d
&
s
t
n
e
m
s
s
e
s
s
a
’
s
r
e
d
o
h
e
k
a
t
s
n
o
e
c
n
e
u
l
f
n
l
I
Materiality matrix 2020
h
g
H
i
i
m
u
d
e
M
w
o
L
• Higher-quality education
in regions
• Mine closure
• Circular economy
• Renewable energy
• GHG emissions
• Water management
• Safety and health
• Ethics and compliance
• Creation of local jobs
and capacity building
• Tailings and dust
• Community relations
• Economic performance
and contribution
• Talent attraction,
development and retention
• Diversity and inclusion
• Automation and digitalisation
• Political outlook (elections,
constitutional reform)
• Regulatory changes
• Project permitting
• Operational innovation
• Human rights
• Air quality
• Responsible supply
chain management
• Transparency
• Corporate governance
• Labour relations
• Emergency planning
• Indigenous peoples
• COVID-19
• Heritage buildings
(Transport division)
• Extreme weather events
• Traffic congestion
• Biodiversity
• Marine pollution
• Non-mining waste
management
• Urban development plan
(Transport division)
Low
Medium
High
Significance of organisation’s economic, environmental & social impacts
antofagasta.co.uk
Antofagasta plc Annual Report 2020
37
Strategic Report
Our approach to sustainability continued
Our commitment
to the Sustainable
Development Goals
The United Nations Member States adopted the
Sustainable Development Goals (SDGs) in 2015
as a universal call to end poverty, protect the
planet and ensure that all people enjoy peace
and prosperity by 2030. At Antofagasta, we
are committed to playing our part in achieving
the SDGs.
No
poverty:
End poverty in all its forms everywhere
Antofagasta has an ethical monthly minimum wage
for contractors of Ch$500,000, two thirds above
Chile’s legal minimum wage. During the COVID-19
pandemic, we focused on protecting jobs, and
those contractors unable to work due to restricted
access to offices and sites received at least the
ethical minimum wage. We also supported local
economies and took measures that ranged from
the distribution of boxes of basic supplies to
grants for small businesses.
Good health
and wellbeing:
Ensure healthy lives and promote
wellbeing for all at all ages
Our Safety and Health Strategy aims to protect
the physical and mental health of employees
and contractors and includes the provision of
preventive health programmes and supporting
community health projects. In response to
COVID-19, we spent over $3 million on community
healthcare and prevention measures. Aside from
the pandemic, our Flexitime and Work-Life Balance
Guidelines are designed to help improve our
employees’ work experience and quality of life.
Quality
education:
Ensure inclusive and equitable quality
education and promote lifelong learning
opportunities for all
We support inclusive access to quality education in
order to improve job opportunities in the regions
where we operate. Initiatives range from providing
school and higher education scholarships to
creating or strengthening professional-level
technical courses. We also offer Young Graduate
programmes, apprenticeships and internships to
provide learning and work opportunities for local
young people.
38
Antofagasta plc Annual Report 2020
Gender
equality:
Achieve gender equality and empower
all women and girls
The Group seeks to increase the participation of
women in our workforce. In 2020, we reviewed
and closed gender pay gaps among employees
and surpassed our annual inclusion targets for
women. Our apprenticeship programmes, in
particular, target local women.
Clean water
and sanitation:
Ensure availability and sustainable
management of water and sanitation
for all
All our operations are in water-stressed areas
and to protect the resource’s availability for
our communities, the environment, and our
own operations we apply water management
practices aligned with the International Council
on Mining and Metals’ (ICMM) Water Stewardship
Framework. Our Antucoya and Centinela mines
use almost entirely raw sea water and Los
Pelambres will soon begin to use desalinated
water. To address severe drought in the area
around Los Pelambres, we are implementing a
special programme to secure water for human
consumption and increase the efficiency of the
local agricultural irrigation.
Affordable and
clean energy:
Ensure access to affordable, reliable,
sustainable and modern energy for all
Our Mining division has renegotiated its power
purchase agreements in order to switch all its
operations from conventional to renewable
energy sources in 2022. In July 2020, Zaldívar
became the first of our operations to make the
switch. We have also provided training on the
installation, use and maintenance of solar energy
systems in the town of Sierra Gorda, equipping
49 homes with solar panels.
Decent work and
economic growth:
Promote sustained, inclusive and
sustainable economic growth, full and
productive employment and decent
work for all
The Group complies with the UK Modern Slavery
Act and its Code of Ethics and Human Rights
Policy aims to ensure a harassment-free,
inclusive workplace for all, that respects human
rights and diversity. In 2020 we spent $1.2
million on training initiatives and launched a
Digital Academy to prepare employees for
the world of work and enhance their job
opportunities. We also offer a range of economic
and business development opportunities to
people in the regions where we operate.
Industry, innovation
and infrastructure:
Build resilient infrastructure,
promote inclusive and sustainable
industrialisation and foster innovation
Innovation is one of the five pillars of our
Strategy to develop mining for a better future.
In 2020, we reinforced this objective by creating
a Vice Presidency of Strategy and Innovation to
drive the implementation of our digital roadmap
and transformational change. We foster
innovation through our InnovaMinerals open
platform, participation in the Industrial Weeks for
Innovation in the city of Antofagasta, and pitch
days for technology companies at our operations.
Reduced
inequalities:
Reduce inequality within and
among countries
Antofagasta contributes to reducing inequality
by providing help in the form of scholarships
and educational support. This promotes social
mobility in remote and vulnerable sectors in the
regions where we operate. We also generate
work opportunities and enhance the capabilities
of local people and businesses.
antofagasta.co.uk
Sustainable cities
and communities:
Make cities and human settlements
inclusive, safe, resilient and sustainable
Our Social Management Model ensures that we
choose, develop and implement social investment
projects. Working together with local communities,
we strengthen local leadership and monitor
the long-term impact of our initiatives. Our
operations also work with the local authorities
and communities to improve public spaces,
sports facilities and healthcare infrastructure.
Responsible
consumption and
production:
Ensure sustainable consumption
and production patterns
Our Sustainability Policy establishes the basis
for the responsible management of the Group’s
activities. In 2020, Centinela and Zaldívar signed
letters of commitment to The Copper Mark, the
copper industry’s new responsible production
framework, assessed by independent assurance
experts, and they will be followed by Los
Pelambres and Antucoya.
Climate action:
Take urgent action to combat climate
change and its impacts
Antofagasta takes into account Chile’s particular
vulnerability to climate change. Our risk matrix
has specifically included climate change since
2019 and our Board approved a comprehensive
Climate Change Strategy in October 2020. Since
2017, we have been implementing a series of
projects to reduce our direct and indirect annual
CO2 emissions by 300,000 tonnes by 2022.
To achieve this, we are switching our mining
operations to renewable energy and are
implementing initiatives to reduce the use
of diesel at our mines.
Life below water
and Life on Land:
+ For more information on these initiatives, see
the Safety and Health, People, Communities,
Suppliers, Climate Change and Environment
sections of this report
Conserve and sustainably use the
oceans, seas and marine resources
for sustainable development. Protect,
restore and promote sustainable use
of terrestrial ecosystems, sustainably
manage forests, combat desertification,
halt and reverse land degradation, and
halt biodiversity loss
Our Biodiversity Standard is aligned with
the ICMM’s position statement on Mining and
Protected Areas. It has three goals: to prevent
and minimise impacts on biodiversity, to restore
or appropriately compensate for any impact,
and to generate additional benefits for the areas
where we operate. We implement programmes
to protect animal, bird, plant and marine species
and administer a number of nature sanctuaries.
Peace, justice and
strong institutions:
Promote peaceful and inclusive societies
for sustainable development, provide
access to justice for all and build
effective, accountable and inclusive
institutions at all levels
Antofagasta’s activities conform to the UK’s
Bribery Act and Modern Slavery Act as well as
Chilean Law No 20.393 on bribery and asset
laundering. Our Code of Ethics, Compliance
Model and Crime Prevention Manual define how
we undertake our business in a responsible,
accountable, honest and transparent manner.
Partnerships for
the goals:
Strengthen the means of
implementation and revitalise the global
partnership for sustainable development
We promote the creation of public-private
alliances, taking advantage of our partners’
experience and strategies, to contribute to the
achievement of the SDGs in the regions where
we operate. Our partners include the state,
Chilean and international trade associations,
other mining companies and/or industry groups,
civil society, academic institutions and NGOs.
In particular, we use alliances, mostly with local
or national foundations, to implement our social
programmes which, in many cases, leverage
or complement government programmes.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
39
Strategic Report
Stakeholder review
Creating sustainable
value for our
stakeholders
Respect for people is one of our core values
and therefore we engage with stakeholders
openly, transparently and collaboratively, using
appropriate mechanisms to interact with them,
provide them with information and learn about
their interests and concerns.
This review also includes our Safety and health (p.45), and Environment (p.50) disclosures.
These issues are of high importance to all of our stakeholders.
Our people
Over 23,200 people (direct employees
and contractors’ employees) work at
our operations, projects, exploration
programmes and corporate offices.
They are almost all based in Chile.
Communities
We operate in Chile’s Antofagasta and
Coquimbo regions where our neighbours
include a range of communities around
our mines and transport business as well
as near our port facilities on the coast.
Suppliers
We work with over 3,200 suppliers of
which 93% are based in Chile. They
provide a broad range of products and
services, ranging from large mining
equipment to catering and transport.
Why we engage
Constructive relationships, anchored in mutual
respect and transparency, are crucial for a
good work climate and talent retention, as well
as for productivity and efficiency. Through our
engagement with contractors, who are essential
for operational continuity, we seek to transfer
knowledge and ensure compliance with our
standards, particularly on safety and health.
How we engage
Our mechanisms of engagement with our employees
include regular site visits by senior management,
on-site reviews, work climate surveys and
performance evaluations. Regular meetings take
place with unions and contract managers on specific
topics such as safety and health.
+ See page 42 for
more information
Why we engage
The wellbeing of local communities is directly related
to the sustainable development and success of our
business. Through engagement, we seek to grow
together with these communities and contribute to
their long-term social and economic development,
while taking care to prevent, mitigate and compensate
for any adverse impact our activities may have.
How we engage
We engage with communities through different social
programmes, often implemented in alliance with local
foundations. Initiatives are selected and designed with
the community through working groups on specific
areas of community development or concerns.
+ See page 48 for
more information
Why we engage
Suppliers play a critical role in our ability to operate
sustainably and safely and, through our engagement
with them, we seek to ensure that they comply
with our standards and guidelines on sustainability
matters. We also work with suppliers to ensure that
they offer us cost-effective and efficient solutions.
How we engage
The procurement team regularly meets with
suppliers. Tenders take place through an online
platform, designed to guarantee fairness and
transparency. To ensure the broadest possible access
to tenders, we use an automated invitation system
and utilise different external platforms. By prioritising
local suppliers, we seek to foster the development of
neighbouring communities.
+ See page 57 for
more information
40
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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 108 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
We sell principally to industrial
customers, who refine or further process
our copper concentrate and cathodes.
Why we engage
Most sales are made under long-term framework
agreements or annual contracts with sales volumes
agreed for the following year. Without these
long-term customer relationships, we would have
to sell a larger proportion of our cathodes and
concentrate through traders 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. The Chairman and several
Directors visit Japan each year to meet our partners.
We also hold regular meetings with customers around
the world and have a marketing office in Shanghai.
+ See page 58 for
more information
Shareholders
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
Shareholders, and particularly institutional investors,
are constantly evaluating their holdings in the
Company and require regular information about its
strategy, projects and performance. We therefore pay
special attention to our communications with them,
maintaining fluent and transparent dialogue in order
to ensure that they receive all the 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, either physically or virtually, and its members
are available to answer questions. The Company also
provides regular production and financial reports and
other ad hoc information.
+ See page 59 for
more information
Governments and
regulators
Governments and regulators at
national, regional and local levels draft,
implement and uphold legislation, rules
and regulations, setting the framework
within which we operate.
Why we engage
Mining is a long-term business and 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 the business.
How we engage
We work alongside mining associations and other
industry-related bodies to engage with governments
on public policy, laws, regulations and procedures
that may affect our business. We deal with
governments and regulators strictly within their
engagement mechanisms which, in Chile, are
clearly defined in Law N° 20.730 (lobbying).
+ See page 60 for
more information
antofagasta.co.uk
Antofagasta plc Annual Report 2020
41
In response to COVID-19, Antofagasta’s first
priority was to minimise the number of people
working in the Group’s offices and operations
in order to control the spread of infection
at the workplace and in nearby communities.
We rapidly implemented remote working for
all possible roles, closing corporate offices and
reducing employee numbers at the operations
by between 30% and 35%.
Overall employee feedback was positive about
working remotely, and productivity and efficiency
were not compromised. Most importantly, it
demonstrated that our operations could meet
production and budget targets safely. Although
we partially reopened offices and resumed
suspended activities in the second half of the
year, we decided to examine the longer-term
opportunities offered by remote working with
a view to:
• Building a resilient and flexible organisation
with the capacity to respond to unexpected
external events.
• Capturing opportunities to improve productivity
and efficiency, for example by reducing travel.
• Offering a more attractive work life balance,
which also supports our Diversity and
Inclusion (D&I) strategy.
The resulting “new form of working” project
was approved by the Board in November
adopting a permanent hybrid system of in-person
and remote working that is adapted to individual
positions. We began to roll out the new system
in December.
Strategic Report
Stakeholder review continued
Our people
Antofagasta seeks to promote a diverse and
inclusive culture that fosters innovation and
allows employees to meet their full potential.
Our Digital Transformation Programme is an
increasingly important part of this strategy.
In 2020, the main focus of the Human Resources
area was to manage the impact of the COVID-19
health emergency and to protect the health and
safety of the Group’s employees and contractors,
ensure operational continuity and safeguard jobs.
COVID-19 forced us to change some plans but
also helped to reinforce parts of our People
Strategy, which is built on the four pillars of
culture, organisational effectiveness, labour
relations and engagement, and organisational
capabilities and talent management.
Organisational effectiveness
In April we created the Strategy and Innovation
function to drive the Company’s digital adoption
plan and innovation. Its responsibilities include
the Digital Transformation Programme to
introduce technologies to eliminate paperwork,
automate repetitive processes and make
data-based decisions. By the end of the year,
20 projects had been implemented, seven
were under development and six were in
the design stage.
To support this change in the way everyone
works, we established a Digital Academy to
ensure we have the organisational capabilities
to capture the benefits of technology as well as
improve employees’ skills and job opportunities.
Over 1,500 senior leaders and supervisors took
digital literacy courses on basic terminology and
tools. By the end of the year, 94% had received
diplomas for completing all nine online courses
and 234 had moved onto a specialist course on
data-based decision-making.
42
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Inclusive culture
These initiatives build on our Work Life Balance
Guidelines, launched in 2019, which introduced
flexitime, time off for family and personal
reasons, and occasional remote working, among
other measures designed to improve employees’
work experience. The guidelines are a central
part of the Group’s Diversity and Inclusion (D&I)
strategy to increase the participation of women,
people with disabilities and employees with
international experience in the workforce.
In 2020, we included targets for the inclusion of
women in employees’ performance scorecards
for the first time and we continue to raise
awareness about unconscious bias through
webinars and video spots. We also reviewed
and closed any identified gender pay gaps.
“As a woman this is a great opportunity for me,
not only to take part but also to be able to
continue my training and work in the mining
sector, which has always been my dream.”
Katerine
Apprentice 2020
Gender Balance
Male
Female
Executive Committee
Reports to the Executive Committee
9
2
82%
18%
59
12
83%
17%
95%
of the apprentices live in the
Antofagasta region where
Centinela is located
Centinela’s apprentices
drive change
Antofagasta seeks to increase the share
of women in its workforce, improve
employees’ job opportunities and give
more jobs to local people in the regions
where we operate.
Centinela’s growth strategy meets all
of these objectives.
Some of its mine truck drivers are being
retrained to operate the autonomous trucks
which will start working in the new Esperanza
Sur pit at the end of 2021.
Women make up all but four of the 91
apprentices that began training in December
to take over operations of its current fleet of
manual trucks.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
43
Strategic Report
Stakeholder review continued
23,248
People
29%
Employees
71%
Contractors
14.7%
Women
76%
Unionised employees
Chilean legislation prohibits forced and child
labour, limits working hours and includes 15
days’ annual paid leave and a minimum wage.
Our employees and contractors can make
complaints on the confidential Tu Voz system
available on our website, as well as directly with
the operations.
Contractors
In early 2020 we demobilised 1,875 contractors,
due to the temporary suspension of the Los
Pelambres expansion project to protect workers
and communities from COVID-19. Agreements
were reached with contractor companies to keep
suspended contractors on at least the ethical
monthly minimum wage of Ch$500,000, set
by Antofagasta in January 2020, which is
approximately two thirds higher than the
national minimum wage. This commitment
to our contractors’ job retention allowed us
to resume activities quickly when we began
restarting projects in the third quarter.
Contractors perform key tasks in our businesses
and account for 71% of our total workforce.
They are contractually required to comply with
Antofagasta’s safety and health, environmental
and ethical standards, as well as the UK Modern
Slavery Act, and are monitored for compliance.
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.
+ See page 57 for more information
By the end of 2020, women represented 14.7%
of our workforce compared to 10% last year and
exceeded our target of 13.3% for the year. Our
goal is to double female participation by the end
of 2022 compared to the 2018 baseline of 8.6%.
Under Chile’s Workplace Inclusion Law, from
1 April 2020 people with disabilities must account
for at least 1% of a company’s workforce. The
Group has met, and aims to go beyond, this
requirement by focusing on inclusive recruitment
and adapting the workplace environment to be
more suitable for people with some disabilities.
We continue to work with Chile’s Mining Council
to define the minimum standards to allow people
with disabilities to work at mine sites.
Building human capital
Antofagasta is committed to promoting a culture
that fosters innovation, develops skills and
enables transformation. In 2020, we invested
$1.2 million in employee training, the equivalent
of 23 hours of training per employee, including
the Digital Academy and courses of inclusive
leadership and safety and health.
We also developed a training programme that will
be implemented in 2021 on non-technical skills
that are required in today’s digital world such as
the capacity to learn quickly, change habits, work
in a team, be curious and promote innovation.
Our Mining division ran leadership development
programmes for 130 women, a record number.
We also run graduate programmes for our
executive talent pool as well as apprenticeships
and internships at our operations, the latter
through a public-private partnership called Eleva.
+ See page 48 for more information
Labour relations
Antofagasta recognises employees’ rights to
union membership and collective bargaining. In
Chile, freedom of association is protected by law.
The Group has 16 unions: 11 in the Mining division
and five in the Transport division. Together they
represent 76% of our direct employees.
In 2020, we closed 10 labour agreements:
one at Zaldívar, four at Centinela and five in our
Transport division. Negotiations were conducted
remotely and involved no strikes. Under Chilean
law, these binding agreements are renegotiated
up to every three years and cover salaries,
shift patterns and employment benefits
among other matters.
44
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Safety and health
The Group began using HPIs as a measure
of safety performance in 2020, to reinforce
a preventative and resilient safety culture.
High-potential hazards, near-misses and
accidents are leading indicators of the
effectiveness of safety controls and facilitate
the early introduction of improvements to
prevent future accidents. We recorded 71 HPIs
during the year, a decline of 63% year-on-year,
far exceeding our reduction target of between
10% and 15%. The frequency rate for near-
misses, which includes high-potential hazards,
rose by 9% to 288, reflecting a significant
improvement to our reporting culture.
During the year, we strengthened the
management of contractors’ safety and
health performance. At the end of the contract,
the contractor is graded according to their
overall safety and health performance, and this
information is used by the Supply area when
awarding new contracts. Contractors may be
removed from the Suppliers register if they fail
to meet certain standards.
Automated drill rigs
The Mining division successfully implemented
autonomous production drill rigs at Los
Pelambres during the year, which not only
increased productivity but improved safety,
reducing workers’ exposure to occupational
hazards such as noise, dust and vibration.
The safety and health of our employees,
contractors and nearby communities are
our top priority. During 2020, our swift and
decisive action helped control the spread of
COVID-19, allowing us to operate safely and
continuously throughout the year.
In 2020 we continued to deepen our safety and
occupational health strategy, which is based
on four pillars: safety risk management, health
risk management, standardised reporting and
continuous improvement, and leadership.
The strategy aims to meet four main goals:
zero fatalities, zero occupational illnesses,
the development of a resilient culture and
the automation of hazardous processes.
During the year we strengthened the effective
implementation of our critical controls for
our high-risk activities. The strategy involves
continually improving the identification of safety
breaches and understanding the root causes
of high-potential incidents (HPIs), in order
to establish corrective actions to reinforce
the preventive and mitigating controls for
such events.
Safety risk management
In 2020, we updated our Control Strategies for
10 identified fatal risks and more clearly defined
the safety and health roles and responsibilities
at operational level to improve the management
of critical controls. We continue to focus on
learning and sharing findings across operations,
from investigations into HPIs to closing risk
management gaps. The improved identification
of the root causes of accidents has in turn
strengthened our corrective actions to
prevent safety breaches.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
45
Strategic Report
Stakeholder review continued
Occupational health
risk management
The Group is committed to providing a healthy
workplace and contributing to the physical
and mental wellbeing of our employees and
contractors. In 2020 we established Control
Strategies for four of our most significant
occupational health risks: silica dust, noise,
fatigue and drowsiness, and acid mist.
Number of fatalities
Chilean mining industry
Mining division
Transport division
Group
Lost Time Injury Frequency Rate (LTIFR)1
For the first time, we also established a
reporting target for high-potential health events
to stimulate awareness, reporting and to facilitate
improvements. The Group registered a frequency
rate of 111 such events per million hours worked.
Chilean mining industry
Mining division
Transport division
Group
2020
2019
2018
2017
2016
12
0
0
0
2020
N/A
0.73
2.37
0.86
2020
0.00
0.00
0.00
14
0
0
0
16
1
0
1
14
0
0
0
18
1
1
2
2019
1.54
0.75
4.03
1.01
2019
0.08
0.47
0.11
2018
1.65
1.10
6.66
1.59
2018
0.09
0.24
0.10
2017
1.78
0.99
7.20
1.53
2017
0.00
0.00
0.00
2016
1.83
1.21
5.78
1.61
2016
0.03
N/A
0.02
Occupational Illness Frequency Rate (OIFR)2
Mining division
Transport division
Group
1. Number of accidents with lost time during the year per million hours worked.
2. Number of occupational illnesses during the year per million hours worked.
In addition, we strengthened our psychosocial
health programme to help employees and
contractors handle any harmful effects on their
mental health caused by the COVID-19 pandemic,
including a new, confidential 24/7 helpline. We
also set up a working group of representatives
from the unions, human resources, operating
companies and occupational health areas, to
deepen the understanding of psychosocial
risks and identify improvements.
Performance in 2020
For the second consecutive year, there were
no fatal accidents related to the Group’s activities
among employees and contractors of our Mining
and Transport divisions or related third parties,
such as communities. By the end of 2020, we
had completed almost 27 months with no
fatalities, a record for the Group.
We continued to improve our Lost Time Injury
Frequency Rate (LTIFR) which fell 15% to 0.86
per million hours worked compared to 2019,
another new record.
The Transport division continued to make
significant safety improvements, more than
halving its LTIFR over the last 24 months
by focusing on the implementation and
management of Control Strategies and
critical controls respectively.
In 2020, the Group did not register any cases of
occupational illness.
46
Antofagasta plc Annual Report 2020
antofagasta.co.uk
COVID-19
Antofagasta began implementing measures
in February to prevent or slow the spread
of COVID-19, maintaining a safe and healthy
workplace and protecting the health of our
employees, contractors and nearby communities.
Our first step was to limit access to offices and
operations to those roles that required in-person
attendance to ensure operational continuity.
Higher-risk individuals, including those with
respiratory symptoms, were excluded from
attending work. Remote working, including
through online platforms, was swiftly
organised for all possible administrative
and supervisory roles.
Main controls
Four basic controls were implemented to prevent
COVID-19 infection in the workplace:
• Health self-assessment questionnaires and
health checks prior to each shift
• Obligatory use of masks in all common areas
• Physical distancing on buses, pick-up trucks,
charter planes and common areas
• Frequent hand cleansing
In addition, we hired buses and charter planes
to transfer employees and contractors to and
from site at the start and end of each shift. Other
measures included installing barriers in vehicles
to separate people, frequently disinfecting spaces
and training catering staff on how to handle food.
We also carried out information campaigns
on critical COVID-19 control habits through
e-learning, posters, videos and competitions.
COVID-19 protocol
In 2020, the Group traced and monitored
11,131 suspected cases of COVID-19 among its
employees and workers. 1,186 of the cases tested
positive with a quarter of them being identified at
the workplace. Tragically, three of our contractor
workers died of COVID-19 during the year.
Employees or contractors with COVID-19-
related symptoms identified in the workplace
are immediately isolated in the polyclinic and
transferred as soon as possible to a health centre
for a PCR test. Low-risk cases and their close
contacts are traced, tested and removed from
the workplace.
Close workplace contacts must quarantine for
14 days at home or in sanitary accommodation.
For low-contact cases, quarantine is lifted as
soon as they test negative for COVID-19.
Asymptomatic confirmed cases must stay
in quarantine for 14 days and symptomatic
confirmed cases for 28 days, to ensure that
employees and contractors only return to work
once they are fully recovered.
We also proactively test employees and
contractors in areas where there are high
levels of personal contact.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
47
Strategic Report
Stakeholder review continued
Communities
Health measures
Health measures in neighbouring communities
ranged from the provision of medical supplies
and PPE to the donation of PCR testing machines
and respirators. In northern Chile’s Antofagasta
region, where our Antucoya, Centinela and
Zaldívar mines are located, we reduced pressure
on local health services by taking doctors into the
communities to treat non-COVID health problems
and by setting up a telemedicine programme.
Economic relief
In one key initiative, Fundación Minera Los
Pelambres (FMLP) implemented the Choapa
Emergencia Económica (Choapa Economic
Emergency) programme in the Coquimbo region
where Los Pelambres is located. In a bid to save
struggling small businesses, the programme
awarded over 2,000 grants accompanied by
technical assistance. FMLP also published a
number of guides with advice on how to access
the support available from the government. Other
initiatives in the Coquimbo and Antofagasta
regions ranged from the distribution of boxes
with basic supplies to the organisation of local
suppliers to produce masks. A total of 90,000
reusable masks were distributed in the Choapa
Province, equivalent to one for each inhabitant.
Reactivation
This phase of our response included measures at
a micro level – for example, pavement markings
to enable street markets to resume activities in
a safely distanced way – and at a more macro
level, as in the case of the funds we set up with
other companies in the Antofagasta region to
expand the reach of the reactivation funds
Healthcare and prevention
Economic reactivation
Community support
established by the government’s economic
development agency, CORFO.
Due to the pandemic, demand for local job
creation, always a key issue in community
relations, acquired new intensity. In 2020, as part
of our regular activities, we launched a platform
to encourage our larger suppliers to hire locally.
+ See page 57 for additional information
Social Management Model
The Social Management Model rolled out by our
Mining division in 2019 is designed to ensure
the consistent application across operations of
our engagement principles, methodologies and
practices. It has four components: Engagement,
Initiative Management, Impact Measurement and
Socio-Territorial Risk Management. Following
the planned incorporation of our new Impact
Measurement and Risk Management Standards
in 2020, all four components now have a
corresponding standard.
In 2020, we formally adopted a Human Rights
Policy. This applies to all the Group’s companies,
which will also seek to ensure compliance by
contractors and other companies in our
supply chain.
Community members have a number of channels
through which to register a complaint. They can
send an email to the corresponding operation
or a letter to one of its local offices or use the
confidential Tu Voz (Your Voice) reporting line
on the Group’s website. However, their first
point of contact is typically the local community
relations co-ordinator.
Indigenous peoples
Our Human Rights Policy explicitly recognises
and undertakes to respect the rights, culture and
traditions of indigenous peoples. The areas of
influence of Los Pelambres and Zaldívar include
indigenous communities and relations with them
are aligned with local legislation, ILO Convention
169 and the guidelines of the International Council
on Mining and Metals (ICMM).
During the COVID-19 crisis, our operations’ ties
with neighbouring communities strengthened
as we stood by them, seeking to protect their
health and economic wellbeing.
In response to the pandemic, we rapidly
refocused our social programmes to support
nearby communities in containing the spread
of the virus and mitigating its economic impact.
In April, we established a $6 million COVID
Fund to finance a three-phase response: an
Emergency Phase, focusing on preventive
health measures; a Recovery Phase to alleviate
economic hardship; and a Normalisation Phase
to support communities once the worst of the
pandemic had passed.
In all these activities we worked closely with
local authorities and the central government,
complementing their efforts, while collaborating
with other companies and industry and business
associations. As with our regular social
programmes, we implemented many of the
COVID Fund’s initiatives in alliance with local
and national foundations and, in the case of
Los Pelambres, its own foundation, Fundación
Minera Los Pelambres.
COVID Fund
56%
25%
$5.9m
19%
48
Antofagasta plc Annual Report 2020
antofagasta.co.uk
$46.7m1
Economic social
contribution in 2020
In 2020, our three operations in northern Chile
implemented an Apprentices Programme in
which a total of 181 young people, mostly from
local communities, participated. Similarly, in
selecting students to prepare their undergraduate
thesis at our operations, we give priority to
universities in the Antofagasta region, which
accounted for 75% of the intake in 2020.
+ See page 57 for supplier development and
innovation activities
Impact measurement
In 2020, we met our goal of measuring the
impact of four social programmes. All showed a
positive social return on investment (SROI), led
by the Relevos programme and followed by the
programme of doctors’ visits and telemedicine
for the town of María Elena.
Citizen participation processes
In 2020, Zaldívar successfully carried
out the Group’s first voluntary indigenous
consultation process. Implemented as part of
the environmental evaluation of the operation’s
mine life extension project, it concluded with
the signing of an agreement with the Socaire
Atacameño community.
Los Pelambres implemented an Early Citizen
Participation Process (PACA) to inform the
community about its Operational Adaptation
project, which was announced in September.
$45.7m
Mining division
$1.0m
Transport division
1. Includes community investment programmes (Somos
Choapa, Dialogues for Development), 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.
Meetings have been held with local farmers’
organisations, water users’ associations,
fishermen’s organisations, neighbourhood
associations and indigenous communities.
In November, the Transport division launched
a consultation process about the future use of
its Estación Valdivia, an old railway station in
the city of Antofagasta, which it plans to restore.
The restoration forms part of a broader plan to
vacate the division’s railway yards in the city and
prepare them for urban development. Built in
the early twentieth century and no longer in use,
Estación Valdivia, like other buildings owned by
the division, is an important part of the city’s
heritage and identity.
Flagship programmes
Most of the activities of our Somos Choapa
(We are Choapa) and Diálogos para el Desarrollo
(Dialogues for Development) social engagement
programmes, implemented in the Coquimbo and
Antofagasta regions, respectively, had to be
adapted in response to the pandemic. In the
Coquimbo region, however, some key projects
were completed:
• Los Vilos dialysis centre. Thanks to this new
centre, which opened in September, patients in
the town of Los Vilos no longer have to travel
long distances several times a week to centres
in other towns. Los Pelambres financed the
construction of the building while the regional
government provided the equipment.
• Aguas Claras 2 housing project. Los
Pelambres implemented this public-private
project in Salamanca, in alliance with the
Housing Ministry, providing the design and
assisting with obtaining the required permits.
Homes have been provided for 50 low-income
families, mostly with female heads of
household, including some homes adapted for
the needs of family members with disabilities.
The Coquimbo region is suffering a longstanding
drought and, in light of this, Somos Choapa
reinforced its drinking water and water
conservation programmes.
Antofagasta mining cluster
We participate actively in the Antofagasta
Mining Cluster, a public-private alliance of
mining companies, government agencies and
educational institutions to foster the development
of the Antofagasta region. We are particularly
committed to two of its strategic pillars: the
creation of human capital and the development
of regional suppliers, especially those with a
focus on innovation.
Our contribution to strengthening human capital
includes Antucoya’s Relevos (Relief Workers)
programme, which trains people from nearby
communities to operate mine trucks and employs
them to cover the regular operators’ shift breaks.
In 2020, 10 participants in the programme (five
men and five women) received certification
under the Eleva programme, a public-private
educational initiative.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
49
Strategic Report
Stakeholder review continued
Environment
Incidents are classified as Real, with high-,
medium- and low-severity, or Potential Severity
(high or low) if the event could, in slightly different
circumstances, have caused an incident. Real high
or medium-severity incidents are investigated by a
commission established especially for this purpose.
Training
Environmental training programmes for both
our operations and projects have continued
throughout the year with lectures taught by
external experts. During the year, there was
a workshop on mine closure plans and talks
included topics such as waste management,
climate change, project permitting
and archaeology.
Responsible production
In November, Centinela and Zaldívar committed
to The Copper Mark, an independent assurance
process for copper companies’ environmental,
social and governance practices. Developed by
the International Copper Association (ICA) in
line with the UN Sustainable Development Goals
(SDGs), it includes matters such as greenhouse
gas emissions, tailings management and
biodiversity, and is designed to enable investors
and consumers to make informed decisions
about responsibly produced copper. Antofagasta
plans to extend the assurance process to Los
Pelambres and Antucoya.
Environmental management
Our Environmental Management Model covers
leadership, incident reporting, operating risk
management, and regulatory risk management.
Environmental performance is reported monthly
to the Executive Committee and at least twice a
year, or when is needed, to the Sustainability
and Stakeholder Management Committee.
In 2020, Internal Audit performed environmental
audits on all our operations with no significant
negative findings.
At all four mining operations, compliance with
our emissions budget reduction plan accounts
for 5% of employees’ annual performance bonus
targets. Los Pelambres, which is in the drought-
stricken Coquimbo region, also has specific water
consumption targets.
Environmental compliance
In Chile, large-scale projects are subject to strict
environmental and social impact assessments
by the Environmental Evaluation Service (SEA)
in order to obtain a Resolution of Environmental
Approval (RCA) and to proceed with the project.
These RCAs include legally binding commitments
on matters such as the prevention and mitigation
of the project’s impact on the environment
and any necessary compensation measures.
Compliance with the commitments is verified by
the Superintendency of the Environment (SMA)
and failure to comply can result in fines or the
revocation of the RCA. Antofagasta has a total
of 62 RCAs, entailing over 10,000 commitments
on matters that include water use, air quality,
biodiversity, construction, operation and closure.
Zaldívar is currently seeking approval of the
Environmental Impact Assessment (EIA) for its
mine life extension project. In the first quarter of
2021, Los Pelambres plans to submit the EIA for
the first stage of its Pelambres Futuro project.
This will be followed by the EIA for the second
stage of the project.
Incident reporting
In 2020, the Group reviewed its procedures for
the internal reporting, investigation, evaluation
and classification of environmental incidents.
In addition to purely environmental parameters,
classification now takes into account community
reaction to an incident in order to incorporate
the reputational effect that an incident may have,
even if no environmental norm was infringed.
50
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Tailings
Our mining operations have three main tailings
storage facilities (TSFs): the El Mauro and Los
Quillayes conventional tailings dams at Los
Pelambres and a thickened tailings deposit at
Centinela. In addition, Zaldívar has a small TSF
from the flotation of some of its sulphides. Los
Quillayes, the original TSF at Los Pelambres, has
limited remaining capacity and is used as backup
for El Mauro TSF.
All our TSFs are built using the safest
downstream construction method and are
designed to withstand severe earthquakes and
extreme weather. They are subject to regular
inspection by the government’s National Geology
and Mining Service (SERNAGEOMIN).
In 2020, we strengthened our system of
governance for TSFs. This included an increase
in the involvement of the independent Review
Board we have for the Los Pelambres and
Centinela TSFs. In 2020, in line with best
international practices, an independent review
of the Zaldívar deposit was also conducted.
In August, the new Global Industry Standard on
Tailings Management (Standard) was launched.
This followed the completion of the Global
Tailings Review, co-convened by the International
Council on Mining and Metals (ICMM), the United
Nations Environment Programme (UNEP) and
the Principles for Responsible Investment (PRI)
in the wake of the failures at the Brumadinho
and Mariana TSFs in Brazil. We have undertaken
to comply with the Standard at Los Pelambres
within three years and, at Centinela and Zaldívar
within five years of its launch.
El Mauro has continued its work as a pilot for
the Programa Tranque (Tailings Programme),
a public-private and community initiative to
establish an online monitoring system for
TSFs in Chile.
In 2020, Centinela started using remotely
operated equipment, such as the excavators
used on its TSF. This reduces a potential risk
to employees’ safety.
Air quality
At our mines, we have robust programmes
to suppress and control dust (PM10 and 2.5)
emissions. They are monitored permanently,
in some cases with the participation of the
local community. In addition, air quality data
is reported monthly to the regional authority.
In May, a combination of unusual weather
conditions, thermal inversion and operating
conditions at the El Mauro TSF at Los Pelambres
produced a dust cloud that was visible from the
nearby Pupío Valley and the town of Caimanes.
The emissions were controlled and the
corresponding air quality norm was not infringed.
However, in response to community concerns,
we are implementing a series of additional
voluntary controls in conjunction with the
environmental authority, the SMA.
Biodiversity
Our Biodiversity Standard is aligned with
the ICMM’s position statement on Mining and
Protected Areas. It has three goals: to prevent
or minimise impacts on biodiversity, to restore or
provide appropriate compensation for any impact,
and to generate additional benefits for the areas
where we operate.
We currently implement programmes for bird,
animal and plant species in our operations’ areas
of influence. Of these, the gaviotín chico – a type
of tern – is classified as endangered by the
International Union for Conservation of Nature
(IUCN) while another bird species and four
plant species are classified as vulnerable.
Both Centinela and Los Pelambres monitor
the environmental variables of the marine
environment in the vicinity of their port facilities,
studying the water column, sediments and
the marine fauna. Through a public-private
programme led by the Chilean government’s
economic development agency, CORFO, Los
Pelambres participates in R&D projects to
repopulate the area near its port facilities with
the Chilean sea urchin and the Chilean abalone.
Other initiatives are associated with the Chilean
conger (congrio colorado and congrio dorado).
The Los Pelambres mine is located at the head
of the Choapa Valley, which is rich in biodiversity.
We manage four nature sanctuaries in the area,
including an important wetland (a RAMSAR site).
Together with areas of reforestation and other
initiatives, these sanctuaries and protected areas
total 27,000 hectares, equivalent to seven times
the area used for the operation.
Mine closure
As required under Chilean law, all our operations
have closure plans approved by SERNAGEOMIN.
In addition, we have our own Integrated Mine
Closure Standard that goes beyond legal
requirements in some areas.
As part of the required programme to regularly
update closure plans, Centinela presented its
update to SERNAGEOMIN in November and
Antucoya plans to submit its update early in
2021. In 2020, our operations also progressed
the alignment of their closure plans with the
ICMM’s Integrated Mine Closure – Good
Practice Guide.
Twin Metals Minnesota (TMM)
Our copper, nickel, cobalt and PGM project in
the United States, continued progressing the
environmental review having submitted the
Mine Plan of Operations (MPO) in late 2019.
The US Bureau of Land Management has
confirmed that the MPO is sufficiently
complete to begin the environmental impact
statement (EIS) process and notified TMM
in June that it intends to progress the EIS
and commit the necessary resources to
the process. In addition, the Minnesota
Department of Natural Resources reviewed
the state data submittal and numerous
comments raised have been resolved.
Once the submittal is complete, it will be
published for public comment and the
state EIS will begin.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
51
Strategic Report
Stakeholder review continued
Climate change
At Antofagasta, we take into account Chile’s
particular vulnerability to climate change. Since
2019, our risk matrix has specifically included
climate change as a key risk and we have
drawn up a comprehensive Climate Change
Strategy, which was approved by the Board
in 2020.
As part of this Strategy, we will take a multi-
disciplinary approach to the challenges posed by
climate change, better co-ordinating the many
initiatives, large and small, undertaken by our
operations and projects, and taking advantage
of synergies between them. The Strategy has
five pillars: the development of climate change
resilience; reduction of greenhouse gas (GHG)
emissions; supply security and the efficient
use of strategic resources; management of
the environment and biodiversity; and the
integration of stakeholders.
In 2020, we also worked on the implementation of
a programme to comply with the recommendations
of the Task Force on Climate-related Financial
Disclosures (TCFD). These propose that
companies report the impact of climate change
on their operations and results in order to help
financial markets understand whether it has been
correctly accounted for in the valuation of the
company’s assets. We expect to complete the
process in 2022 and have reported on our
progress on pages 54-56.
Switching to renewable energy
Over the past few years, our mining operations
have renegotiated their power purchase
agreements (PPAs), switching from conventional
sources – principally coal – to renewables.
In July 2020, Zaldívar became the first of
the Group’s mining operations to use 100%
renewable energy and by the end of 2020,
19.4% of the Mining division’s energy came
from renewable sources.
Zaldívar will be followed by Antucoya, Centinela
and Los Pelambres, and during 2022, the Group
expects that its Mining division’s electricity
consumption will be supplied exclusively
from renewable sources.
Reducing greenhouse gas emissions
Since 2017, we have been implementing a series
of projects to reduce our annual direct (Scope 1)
and indirect (Scope 2) CO2 emissions by
300,000 tonnes between 2018 and 2022. By
the end of 2020 emissions had been reduced
by 581,355 tCO2e achieving the Mining division’s
target two years early.
Streamlined energy and carbon reporting
Energy consumed (MWh)1
• Outside the UK
• Within the UK
1. To calculate energy in kWh, multiply by one thousand.
2020
2019
2018
7,339,151
49
7,154,015
65
7,179,013
65
Energy consumed is the sum of the electric energy consumed, measured in MWh, and total fuel consumption, measured in GJ. A conversion factor of
0.28 was used to convert GJ to MWh. Fuels include diesel, petrol and LNG.
The five pillars of our Climate Change Strategy
To strengthen the Group’s capacity
to mitigate and adapt to climate change
1.
Development of
climate change
resilience
2.
Reduction of
GHG emissions
3.
Supply security
and efficient use
of strategic
resources
4.
Management of
the environment
and biodiversity
5.
Integration
of stakeholders
52
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Our reduction of Scope 2 emissions reflects the
impact of the energy efficiency projects at all our
mining operations and the introduction of hybrid
diesel-electric trains at the Transport division.
A key contributor has also been the integration
of Chile’s formerly separate electricity systems
which 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.
In July 2020, Zaldívar started operating with
100% renewable energy, which reduced our
Scope 2 emissions by a further 67,615 tCO2e.
However, in accordance with the GHG Protocol
Standard, this is not included in the above
reduction numbers as the certification from
the power suppliers requires validation and the
necessary local regulatory changes have not
yet been implemented to allow this. As a result,
the Chilean average grid emission factor has
continued to be used to calculate our emissions
from all the energy we consumed during 2020.
In 2021 we are identifying the gaps in the
available data and determining the methodology
we will use to calculate our Scope 3 emissions
in 2022.
CO2 emissions (tonnes of CO2 equivalent)1
Scope 1 Direct emissions
Scope 2 Indirect emissions
Total Scope 1 & Scope 2 emissions
2020
2019
2018
2020
2019
2018
2020
2019
2018
CO2 emissions intensity
tCO2e/tCu2
2019
2020
2018
Los Pelambres
Centinela
Zaldívar
Antucoya
Corporate offices
Mining division
Transport division
Total
257,801
492,496
152,340
152,577
108
1,055,322
88,936
251,580 262,355
448,890 453,898
141,475
140,623
168,490
152,231
1
106
544,900
539,300
192,862
114,337
825
993,430 1,026,219 1,289,890 1,392,224
1,118
99,400
1,144,258 1,090,284 1,125,619 1,290,748 1,393,342
464,492
542,020
162,688
120,087
603
96,854
858
523,942
722,293
563,101 1,034,516
315,028
180,109
272,664
123,353
711
1,189
796,480
988,190
333,485
266,568
931
1,391,694 2,345,212 2,385,654
97,972
89,794
1,191
2,417,914
100,624
1,392,918 2,435,006 2,483,626 2,518,538
786,297 2.01
4.19
1,016,999
321,584 3.27
291,843 3.44
–
3.19
N/A
–
1,224
2.19
3.57
2.87
3.71
–
3.10
N/A
–
2.20
4.10
3.40
4.04
–
3.33
N/A
–
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.
Water consumption
All our mining operations are in water-stressed
areas. Care for water is therefore a key part
of our approach to mitigating and adapting to
climate change, as we seek to ensure sufficient
water availability for our operations and local
communities, and for the benefit of the
environment. We are achieving this already
through the use of raw sea water at two of
our mines and will increase our use of sea
water further once the desalination plant
at Los Pelambres is completed in 2022.
In 2020, sea water accounted for 43% of
our Mining division’s water consumption.
At Antucoya, it accounted for 97% and, at
Centinela, 86%. Centinela, which also uses
thickened tailings technology to reduce its
water consumption, currently has some water
extraction rights which it does not plan to renew
when they expire in 2022.
Zaldívar exclusively uses continental water,
drawn from wells some 100km from the mine.
These water extraction permits will expire in
2025 and, as part of the Environmental Impact
Assessment (EIA) submitted to extend the mine’s
life, we are seeking to extend them to 2031.
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 rates, which currently
Water withdrawal by source in 2020
(millions of m3)
Source
Surface water
Underground water
Third-party suppliers
Sea water
Total
antofagasta.co.uk
2020
19.5
19.4
0.2
29.0
68.1
2019
13.9
18.3
0.4
28.2
60.8
2018
16.5
19.4
0.9
30.4
67.2
vary between 78% and 96%, depending on
the operation.
Los Pelambres is located in the mainly
agricultural Choapa Valley and currently only
uses continental water. However, a 400 l/s
desalination plant is being built, which is
scheduled to start operation in 2022.
During the year, it was decided to double the
plant’s capacity to 800 l/s by 2025. This will
allow Los Pelambres to stop drawing water
from the Choapa River and increase its use of
desalinated and recycled water to around 96%
of its total consumption.
In 2020, total water consumption rose mainly
because continental water withdrawal increased
at Los Pelambres due to the critical lower levels
of water in the Mauro tailings storage facility
(where water is recirculated to the concentrator
plant), the increased ore throughput volumes
and our prioritisation of local communities’ use
of continental water.
Antofagasta plc Annual Report 2020
53
Strategic Report
Stakeholder review continued
Task Force on Climate-related
Financial Disclosures
The recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD)
provide a framework with which to disclose
our ongoing work to reduce our exposure
to climate risks, ensure business continuity
and future-proof our position as responsible
and sustainable producers of copper in
the long term.
We recognise that TCFD is a journey that will
evolve through time and is an important part
of an ongoing dialogue with our stakeholders to
ensure they have the right information about our
business response to climate change. As our first
disclosure against the TCFD recommendations,
we are building on our existing carbon
management programme and have a clear
understanding of what we must focus on next.
In recent years we have more clearly identified
our climate change impact, developing robust
systems to measure, manage and target carbon
emissions. We have also established adaptation
and mitigation plans, many of which are now
incorporated into our near-term financial plans.
Strategy
In 2020 we conducted a climate scenario
analysis to evaluate the resilience of our
Group strategy to climate change over time.
We reviewed a range of globally recognised
and publicly available scenarios for two different
hypothetical climate futures in the short (present
– 2025), medium (2025-2040) and long (2040+)
term; one aligned to a low-carbon economy
through aggressive mitigation, and one aligned
with a high global warming scenario under
which limited action to address rising emissions
leads to an increase in average temperatures.
These scenarios are used to consider potential
changes in the physical, regulatory, market and
stakeholder operating conditions over the lifetime
of our assets and long-term financial planning
forecasts. In both cases we selected the most
ambitious or extreme scenario, in order to assess
the full potential spectrum of climate-related risks
and opportunities that could occur.
• Transition scenario selected: To provide a
global view of and context for a low-carbon
transition, we selected the International Energy
Agency’s (IEA) Sustainable Development
Scenario (SDS). The SDS is one of the most
ambitious scenarios limiting temperature rise
to between 1.5°C and 1.65°C by the end of the
century. It is also one of the most commonly
used transition scenarios, thereby allowing
comparison with other companies.
• Physical scenario selected: To explore the
upper range of physical changes to which we
may eventually be exposed, we selected the
RCP8.5 scenario. The RCP8.5 scenario is
commonly used across our industry to assess
physical risks and relevant information is
readily available. This choice is aligned with
the MiCA (Mining Climate Assessment tool)
developed by the ICMM. It is also the principal
scenario analysed by the Government of Chile
to inform development of adaptation policies.
We used these scenarios to identify potential
risks and opportunities, and convened internal
working groups to understand the relevance
and impact of these across our business.
The TCFD recommendations
Governance
The organisation’s governance
around climate-related risks
and opportunities
Strategy
The actual and potential
impacts of climate-related
risks and opportunities
on the organisation’s
businesses, strategy and
financial planning
Risk Management
The processes used by
the organisation to identify,
assess and manage
climate-related risks
Metrics and Targets
The metrics and targets
used to access and manage
relevant climate-related
risks and opportunities
54
Antofagasta plc Annual Report 2020
antofagasta.co.uk
“We recognise climate change as one of the greatest challenges facing
society. At Antofagasta we acknowledge our role and responsibility to
become part of the solution and that is why we are on a journey to put
climate change at the heart of our business. Our response to tackling
climate change directly aligns with our core business strategy, to
reduce exposure to future risk, fulfil our commitment as a responsible
mining company as well as developing mining for a better future.”
Iván Arriagada
Chief Executive Officer
Governance
The Board of Directors has ultimate responsibility
and oversight, with the Sustainability and
Stakeholder Management Committee, and the
Audit and Risk Committee having key roles to play.
Climate-related responsibilities are assigned to
specific management-level positions. The CEO is
responsible for approving goals and monitoring
the status of emissions reduction initiatives.
Responsibility for the management of specific
climate-related risks and opportunities is
distributed within the organisation, with
some roles defined.
In 2020, an internal, cross-departmental Climate
Change Committee was established, chaired
by the Corporate Affairs and Sustainability Vice
presidency to monitor the development and
implementation of the Climate Change Strategy.
The achievement of the 2018-22 emissions
reduction target is a performance measure for
senior managers.
+ See LTIP Awards, page 147
Risk management
Climate change risks are identified, assessed and
managed within our Integrated Risk Management
System. In assessing climate-related risks, we
broadly divide risks into two categories; risks
related to the impact of the transition to a
low-carbon economy, and risks related to
the physical impacts of climate change.
The Board has defined the Group’s risk appetite
for climate change as “low”, indicating that the
level of risk should be reduced to the minimum
level theoretically possible, with the cost of
achieving this being a secondary consideration.
Existing and short-term physical risks were
identified, evaluated and incorporated into the
Risk Register for the first time in 2019. Transition
and physical risks that may emerge in the
medium and long term, identified during the
scenario analysis, will be assessed and
incorporated in 2021.
+ See Risk management, page 22
Metrics and targets
Reporting our GHG emissions and environmental
footprint helps us to understand our contribution
to climate change and allows us to monitor
performance and progress against our
environmental commitments and targets.
+ See Reducing greenhouse gas
emissions, page 52
Through conversion of our mining operations
to fully renewable energy by 2022 and energy
efficiency initiatives such as replacing the diesel
used in boilers with LNG, we plan to progress
on our five-year target to reduce emissions
by 300,000 tCO2e.
+ See page 52
Our long-term ambition is to replace our
consumption of diesel with low-carbon
alternatives. This aligns with our Electromobility
Plan, currently in development, which aims to
replace diesel used for transportation purposes
at our mines. We are conducting analysis to
understand how further low-carbon alternatives
and reduction measures could be implemented
in the medium and long term.
Next steps
We have set ourselves ambitious goals for 2021
to further strengthen our resilience to future
physical and transition climate impacts:
• We will fully integrate climate change into
our governance procedures to ensure
accountability across our business.
• We will further customise risk management
processes to ensure the intricacies of climate
risk are effectively managed.
• We will deepen our climate scenario analysis
by quantifying the potential financial impacts
from our most material climate-related risk,
and the opportunities across different forward-
looking climate scenarios.
• We will seek to better understand the full
scope of our GHG emissions, including
those from associated upstream and
downstream operations.
• We will further demonstrate our commitment
to reduce our climate impact and exposure by
setting longer-term carbon reduction targets.
• We will continue to advance our mitigation
and adaptation response.
• We will report in full in accordance with
the TCFD in 2022 and publish a Climate
Change Report.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
55
Strategic Report
Stakeholder review continued
Transition risks and opportunities
Local context
• Chile carbon price instrument
• The Co-operation Agreement and
Energy Efficiency Law
• Phasing out coal and increasing use
of renewables
• National Green Hydrogen Strategy
to develop a roadmap for competitive
green hydrogen
• National Electromobility Strategy
• Long-Term Climate Strategy and
sector-specific mitigation and
adaptation plans
Physical risks
Local context
Chronic
• Coquimbo and Antofagasta regions
experience an increase in average
temperatures of around 2°C by 2050,
rising to as high as 4°C by the end of
the 21st century
• More frequent and longer heatwave events
• Drought events in the Coquimbo region,
where Los Pelambres is located, become
more frequent and average annual
precipitation drops
• Arid conditions in the Antofagasta region,
where Centinela, Antucoya and Zaldívar
are located, continue and cumulative
annual precipitation remains low
Acute
• Increase in the frequency of short,
intense rainfall events, in particular in
the Antofagasta region during the winter
• Potential to generate flash flooding, that
may carry alluvium, and other hazards
TCFD category
Risk
Policy
and legal
Transition risks and opportunities
Potential impacts
• Carbon tax on operational emissions
if industry coverage is revised
• The development of the Co-operation
Agreement and Energy Efficiency
Law results in stricter legislation
and mandates
• High GHG emission costs
• Increased costs of compliance
Market and
technology
• Increased cost of fuel and electricity
• Change in consumers’ mindset about
low-carbon products
• Dependence on development
of hydrogen technologies
Reputational
• Pressure from stakeholders for
responsible mining
Opportunities
Resource
efficiency
• Implementation of energy efficiency
and carbon reduction measures
• Increased operating costs
• Large upfront costs for
low-carbon investments
• Early retirement of existing technology
• Increased cost of research and
development (R&D), and implementation
• Lose licence to operate
• Compliance with The Copper
Mark expected
• Lower carbon intensity and reduced
exposure to potential future cost
of carbon
Energy source • Replace diesel with
• Reduced operating costs and
low-carbon alternatives
• Reduced price for renewable electricity
increased capital availability for further
abatement measures and investments
in low-carbon solutions
Products
• Increased demand for copper as a key
material in low-carbon technologies
• Potential impact on the copper price and
the Group’s revenues
TCFD Category
Physical risks
Potential impacts
Rising air
and ocean
temperatures
• Extreme temperatures and
heatwave events
• Dry particulate matter blown
into the air
• Proliferation of algae and
other microorganisms
• Stress to infrastructure and equipment
• Safety and health conditions not met
for workers and local communities
• Disruption to sea water capture and
port activities
Low or
reducing
annual rainfall
• Reduced security of water supply
• Sites reliant on continental water
cease operation
• Increased need to support
local communities
Intense rainfall
events
• Flood and alluvium events
• Damage to assets and suspension
of operations, as well as to
local communities
• Disruptive wave and swell events
become more frequent in some parts
of the coastline
Extreme
waves and
sea swells
• Warmer sea temperatures may encourage
algal blooms
• Increased frequency and intensity
of wave and swell events
• Disruption to port activities and delays
in the export of product and import of
key supplies
56
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Suppliers
Our suppliers play a critical role in our ability to
operate continuously, safely and efficiently, and
we worked particularly closely with them this
year in combating the impact of COVID-19.
Responsible supply
Antofagasta works with 3,250 suppliers of goods
and services ranging from electricity and fuel to
catering and maintenance services. Our central
procurement team applies common procedures
to ensure compliance with our standards
throughout the Group, as well as competitive
and fair tender processes.
We carry out due diligence on all potential
suppliers prior to awarding a contract. We
review company ownership, the participation
of politically exposed persons (PEP), anti-trust
issues, compliance models, commercial
behaviour, legal cases, labour practices,
conflicts of interest and contract risks.
Tenders take place on an online platform
to ensure objective and auditable award
procedures. In 2019 we introduced Robotic
Process Automation (RPA) solutions to automate
tender invitations, leading to greater participation
and competitiveness. In 2020, the software was
updated to assist in the evaluation of bids.
Contracts with suppliers include clauses
requiring compliance with Chilean Law N° 20.393
on bribery and asset laundering, the UK’s Bribery
Act and Modern Slavery Act, and the Group’s
own policies and procedures. In addition, we
consider safety and health, and energy efficiency
criteria when awarding contracts. Audits are
conducted to ensure compliance.
In 2020, our procurement team received
refresher training on the Group’s Crime
Prevention Manual, modern slavery and
our Compliance Model.
Suppliers can use the tender platform, as well as
the Tu Voz reporting line on the Group’s website
to make complaints that can be filed anonymously.
COVID-19
The COVID-19 pandemic posed extra challenges
for our procurement team in 2020, mainly due
to health restrictions on manufacturing and
transport logistics which had an impact on
international supply chains. Weekly review
meetings with critical suppliers allowed us to
address these issues by accelerating purchases
and increasing stocks when alerted about longer
delivery times.
Contractors affected by Antofagasta’s decision
to temporarily suspend its Los Pelambres and
Zaldívar expansion projects and some other
activities at its operations received a minimum
monthly salary of at least Ch$500,000, the
ethical minimum wage set by the Group. The
Company began gradually resuming suspended
activities in the third quarter of the year.
Prioritising local growth
Our procurement team seeks to stimulate
economic growth in the regions where we
operate by generating opportunities for local
suppliers, enhancing their business capabilities
and encouraging suppliers to employ local
people. Our strategy is supported by alliances
with regional stakeholders such as business
associations, universities, government agencies,
local municipalities and community organisations.
Opportunities for local suppliers
Our Mining and Transport divisions have
guidelines on regional procurement and
recruitment to promote the contracting of
supplier companies with headquarters in the
Antofagasta and Coquimbo regions where our
operations are based. The guidelines reduce
administrative and financial conditions in tenders
for small and medium-sized companies (SMEs)
in these regions.
In 2020, we met our objectives to increase
the number of local suppliers registered in our
database and invited to participate in our tenders.
During the year, SMEs accounted for 54% and
63% of our Mining and Transport divisions’
spending on goods and services respectively
in the regions where we operate, and 93%
of our suppliers are based in Chile.
In July we signed an agreement with the
Antofagasta Industrialists’ Association (AIA)
to use its Approved Supplier Company System
(SICEP), a digital database of certified suppliers.
This allowed us to increase our list of potential
local suppliers and to publish tenders for the
next six months, providing local suppliers with
advance knowledge of upcoming opportunities
and therefore more time to prepare offers.
The Group held online business meetings for
Antofagasta and Coquimbo-based suppliers in
August and November respectively, to discuss
upcoming tenders and connect potential suppliers
with opportunities.
Fostering local employment
In August our Mining division launched a
platform to allow large suppliers to publish
job opportunities locally for contracts with our
northern mining operations. Four major global
suppliers have committed to using this platform
and giving priority to hiring local people.
Our Transport division required 100% of the
workforce to be from the Antofagasta region
in a tender to maintain railway equipment.
Los Pelambres includes a KPI in non-specialist
contracts for 30% of supplier companies’
workforce to be recruited locally.
Developing suppliers
As active members of the Antofagasta Mining
Cluster, in 2020 we proposed operational
challenges to local technology companies at the
Industrial Weeks for Innovation in Antofagasta.
After two series of online workshops,
participating suppliers pitched their solutions:
four to the Mining division and six to the
Transport division. Since this initiative was
launched in 2018, 120 companies have taken
part, with 754 people attending the launch
events and 398 attending the workshops.
In addition, our Mining division held 17 online
pitch days for suppliers to present solutions to
10 challenges published on our InnovaMinerals
open innovation platform. We are currently
co-developing 12 innovation projects.
In December we provided training to around 200
regional SME suppliers on taking part in our
tenders and using our digital platforms.
+ See page 49 for more information
antofagasta.co.uk
Antofagasta plc Annual Report 2020
57
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.
Structure of sales contracts
Typically, 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.
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.
Customers
Most 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 value
added 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.
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.
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.
Revenue by location of customer and product
Europe
19%
North America
4%
Japan
32%
Copper 85%
Molybdenum 7%
Gold 4%
Transport 3%
Silver 1%
Rest of
Asia Pacific
37%
South America
8%
58
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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 153, 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.
Throughout 2020, due to the travel restrictions
imposed by the COVID-19 pandemic we have
held virtual meetings with institutional investors
and sell-side analysts, including international
investor roadshows and presentations at industry
conferences. These were attended by the CEO
and various members of the management team,
including the CFO and the Vice President of
Corporate Affairs and Sustainability.
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.
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 2020
• Our ability to achieve our full-year
production and cost guidance
• Impact of COVID-19 on our
operations, and our workers
and neighbouring communities
• Free cash flow generation and
capital allocation
• Our capital expenditure programme
and the potential of our longer-term
growth projects
• Progress on the Los Pelambres
Expansion, Esperanza Sur pit and
Zaldívar Chloride Leach growth projects
• Supply and demand factors in the
world copper market
• Labour negotiations at some of
our operations
• Potential impact on the Company of the
planned rewriting of Chile’s constitution
2020 Shareholder engagement calendar
Q1 • CEO presented at an industry conference for institutional investors in the US
• In-person and virtual one-on-one and small group meetings with some 65 investors, of which senior management participated in 50%
• Virtual presentation of full-year 2019 results by the CEO and CFO followed by a telephone question and answer call open to all investors,
and a virtual roadshow with investors in Europe and the US
• Investor relations team attended one in-person investor conference in the US
Q2 • CEO presented at an industry conference for institutional investors in London
• Virtual one-on-one and small group meetings with some 80 investors, of which senior management participated in 60%
• A recorded presentation by CEO at the time of the Annual General Meeting
• Investor relations team attended four virtual investor conferences
Q3 • Virtual presentation of half-year 2020 results by the CEO and CFO followed by a question and answer video call open to all investors,
and a virtual roadshow with investors in Europe and the US
• Virtual one-on-one and small group meetings with some 210 investors, of which senior management participated in 40%
• CEO and CFO made a virtual presentation to institutional investors in Chile
• Investor relations team attended four virtual investor conferences
Q4 • Video conference question and answer call by the CEO with investors following the release of the 3Q production report
• Virtual one-on-one and small group meetings with some 140 investors, of which senior management participated in 40%
• Investor relations team attended eight virtual investor conferences
antofagasta.co.uk
Antofagasta plc Annual Report 2020
59
Strategic Report
Stakeholder review continued
Governments
and regulators
Chilean Constitutional
reform process
In a referendum in October 2020, the
Chilean people voted in favour of rewriting
the country’s Constitution. This process
will be conducted through a Constitutional
Assembly of 155 members elected in a
national vote in April 2021.
The Constitutional Assembly will have
a maximum of 12 months to discuss and
agree the text of a new Constitution, which
then must be ratified through the means
of another national referendum within
60 days of its approval by the Assembly.
If approved, the new Constitution will
be enacted and replace the current
Constitution. If it is not approved the
current Constitution will remain in force.
Chilean law allows political donations to be made
subject to certain requirements, but Antofagasta
made no political donations in 2020. 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 alliances
Since mining is a long-term business, we seek to
contribute to Chile’s development and prosperity,
including through public-private alliances with
local government. Examples include our active
participation in a workshop jointly organised
by the Mining Ministry and the Women and
Gender Equality Ministry to encourage female
participation in the mining industry, and our
commitment to the Mining Cluster in northern
Chile, a public-private alliance to promote local
employment, technology and skills development.
Another example of our active participation
in a public-private alliance 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.
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.
Governments and
regulators engagement
Our 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 that
are part of our areas of direct influence.
The relationship with governments and
regulators is subject to their strict engagement
mechanisms, which in Chile are clearly defined
under Lobby Law No. 20.730. This Law seeks to
regulate the activity of lobbying and other efforts
to 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 the decisions of the authorities
and officials.
Outside Chile, we comply with our own
policies and the laws and regulations of the
host countries, at all times maintaining high
standards of engagement.
Payments to governments
Antofagasta makes payments to governments
relating to our 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 2020 totalled $327 million of which
99.5% was paid in Chile.
60
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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 guidelines
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
Description of the business model
Non-financial Key Performance Indicators
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
The mining lifecycle
2020 highlights
Total economic contribution
Key Performance Indicators
Page
6
8
40
40-41
129
45
50
42
48
57
43
31
22
24
25
16
3
35
20
antofagasta.co.uk
Antofagasta plc Annual Report 2020
61
Strategic Report
Operating
review
The Group seeks to set realistic but demanding
operating targets each year and achieves them
year after year.
62
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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: supplying metals
for a better future
64
66
68
70
71
72
74
77
78
80
82
antofagasta.co.uk
Antofagasta plc Annual Report 2020
63
Strategic Report
Operating review
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 in the Antofagasta region of
northern Chile.
“The COVID-19 pandemic
placed significant
pressure on our
operations, but we
swiftly adopted new
operating procedures
that allowed us to adapt
our production, waste
stripping and maintenance
schedules so that most of
our planned targets were
achieved and copper
production of 733,900
tonnes was only slightly
impacted. We entered
2021 with a clear plan on
how to continue operating
under the COVID-19
restrictions while
operating effectively
and safely.
Our strong safety
culture formed the
basis for confronting the
additional challenges and
our safety performance in
2020 was good with no
fatalities and lower injury
frequency rates.”
Hernán Menares
Vice President of Operations
Production highlights
Tonnes of copper produced
733.9k tonnes
Ounces of gold produced
204.1k ounces
709.4
704.3
725.3
770.0
733.9
270.9
282.3
212.4
210.1
204.1
16
17
18
19
20
16
17
18
19
20
Tonnes of molybdenum produced
12.6k tonnes
Net cash costs1
$1.14/lb
13.6
12.6
11.6
1.25
1.29
1.20
1.22
1.14
10.5
7.1
16
17
18
19
20
16
17
18
19
20
1. Non-IFRS measure, refer to the alternative performance measures section on page 216.
64
Antofagasta plc Annual Report 2020
antofagasta.co.uk
P e r u
B o l i v i a
P a c i f i c O c e a n
Antofagasta
region
Coquimbo
region
A r g e n t i n a
Santiago
Antofagasta region
Esperanza Port
Antucoya
Mejillones
Centinela
Antofagasta
Zaldívar
Coquimbo region
La Serena
Punta
Chungo
Port
Illapel
Los Pelambres
Los Vilos
Los Pelambres
Centinela
Antucoya
Zaldívar
Capital city
Cities and town centres
Ports
antofagasta.co.uk
Antofagasta plc Annual Report 2020
65
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.
60%
Owned
2020 financials
$2,655m +12.3%
Revenues
$1,663m +20.2%
EBITDA
2021 forecast
340-350k
Copper (tonnes)
50-60k
Gold (ounces)
8.0-9.0k
Molybdenum (tonnes)
$1.05/lb
Net cash costs
Lifecycle of mine
21 years
2000
2021
14 years
2035
Start of operations
Projected mine life
Net cash costs
$0.81/lb
0.91
0.91
0.81
18
19
20
Copper production
359.6k tonnes
Gold production
60.3k ounces
Molybdenum production
10.9k tonnes
357.8
363.4 359.6
63.2
59.7
60.3
13.3
11.2
10.9
18
19
20
18
19
20
18
19
20
66
Antofagasta plc Annual Report 2020
antofagasta.co.uk
2020 Performance
Operating performance
Los Pelambres had a strong year with copper
production at the top end of guidance and costs
outperforming guidance despite restrictions due
to the pandemic. This confirms its position as
a stable and reliable world-class operation.
EBITDA at Los Pelambres was $1,663 million,
compared with $1,384 million in 2019, reflecting
higher sales volumes and realised prices,
combined with lower operating costs.
Production
Copper production for the year decreased by 1.0%
to 359,600 tonnes.
Molybdenum production in 2020 was 10,900
tonnes, slightly lower than in 2019 as a result
of the lower throughput.
Gold production was 60,300 ounces, 1.0%
higher than the previous year.
Cash costs
Cash costs before by-product credits at $1.27/lb
were 9.3%, or 13c/lb, lower than in 2019,
reflecting strong cost control during the
year and the weaker Chilean peso.
Net cash costs for the full year were $0.81/lb,
or 11.0% lower than in 2019.
Capital expenditure
As a result of the COVID-19 pandemic the Los
Pelambres Expansion project was temporarily
suspended from March to August. Work resumed
with approximately 75% of the original planned
workforce on-site and it is assumed that these
manpower levels will continue throughout 2021.
Outlook for 2021
The forecast production for 2021 is 340–
350,000 tonnes of copper, 8–9,000 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 $1.05/lb as grades decline in 2021.
A detailed review of the project schedule
and costs, including those associated with
the realised and continued restrictions due to
COVID-19, and changes to the marine works to
enable the future expansion of the desalination
plant to 800 l/s was completed. The revised
capital cost estimate is $1.7 billion and
completion is expected in early H2 2022.
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 2020, the Los Pelambres
Expansion project (engineering, procurement
and construction) was 45% complete.
Capital expenditure during 2020 was
$783 million, including $139 million on mine
development and $471 million on development.
Los Pelambres will operate
mainly with sea water
from 2025
After producing copper for more than 20 years,
Los Pelambres will invest in works to adapt its
operations to the changes that have occurred in
the Choapa province as a result of the prolonged
drought caused by climate change and the
increase in the region’s population and
productive activity.
A central objective of the investment is to stop
using water from the Choapa River and nearby
wells, and to use mainly sea water from 2025
onwards by expanding the 400 l/s desalination
plant that is currently being built, to 800 l/s.
In addition, Los Pelambres is planning to build a
replacement concentrate transportation system
with modern control systems, routed away from
the most populated areas.
By 2025 approximately 95% of the water
consumed at Los Pelambres is expected to
be sea or recycled water.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
67
Strategic Report
Operating review continued
Mining division
Centinela
Centinela mines sulphide and oxide deposits
1,350km 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.
70%
Owned
2020 financials
$1,845m -8.1%
Revenues
$912m -5.0%
EBITDA
2021 forecast
270-280k
Copper (tonnes)
190-200k
Gold (ounces)
1.5-2.0k
Molybdenum (tonnes)
$1.15/lb
Net cash costs
Lifecycle of mine
2021
47 years
20 years
2001
2068
Start of operations
Projected mine life
Net cash costs
$1.27/lb
1.51
1.26
1.27
18
19
20
Copper production
246.8k tonnes
Gold production
143.7k ounces
276.6
248.0
246.8
222.6
146.9
143.7
68
Antofagasta plc Annual Report 2020
antofagasta.co.uk
18
19
20
18
19
20
2020 Performance
Operating performance
Centinela had a solid year in 2020 despite
expected lower copper and gold grades, as
throughput increased at both the concentrate
and cathodes lines and cash costs
outperformed guidance.
EBITDA at Centinela was $912 million, compared
with $960 million in 2019, on lower copper and
gold sales volumes, offset by higher realised
prices and lower unit costs.
Production
Copper production was 246,800 tonnes, 10.8%
lower than in 2019 due to the expected lower
grades at Centinela Concentrates, partially offset
by the higher production at Centinela Cathodes
due to increased plant throughput during
the year.
Production of copper in concentrate was 153,500
tonnes, 21.5% lower than in 2019 as copper
grades decreased to an average of 0.53%.
Copper cathode production during the year
was 93,300 tonnes, 15.0% higher than in 2019,
primarily due to higher throughput and grades.
Capital expenditure
Capital expenditure was $442 million, including
$198 million on mine development.
Gold production was 143,700 ounces, 35.4%
lower than 2019, due to expected lower grades.
Molybdenum production was 1,700 tonnes on
improved grades.
Cash costs
Cash costs before by-product credits in 2020
were $1.85/lb, 1.1% higher than in 2019 as a
result of the lower copper production offset by
tight cost control, a weaker Chilean peso and
lower input costs.
By-product credits were $0.58/lb, $0.01/lb
higher than in 2019 as lower gold production
was offset by a higher realised gold price.
Net cash costs during the year were $1.27/lb,
0.8% higher than in 2019.
Pre-stripping started at the Esperanza Sur pit in
the third quarter and is expected to be completed
in H1 2022.
During 2021 and 2022 autonomous trucks
will be acquired to continue mining once the
contracted stripping has been completed.
Outlook for 2021
Production for 2021 is forecast at 270–280,000
tonnes of copper, 190–200,000 ounces of gold
and 1,500–2,000 tonnes of molybdenum.
Copper production should increase compared
to 2020 as grades improve at Centinela
Concentrates to an expected 0.59%.
Cash costs before by-products are forecast to be
approximately $1.75/lb and net cash costs $1.15/lb.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
69
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.
70%
Owned
Lifecycle of mine
2021
5 years
2016
19 years
2040
Start of operations
Projected mine life
2020 Performance
Operating performance
Antucoya improved its operational reliability
and consistency during the year with daily ore
throughput increasing by 14.3% compared
to 2019.
EBITDA was $166 million compared with $86
million in 2019, reflecting higher sales volumes
and realised prices, and lower operating costs.
Production
Antucoya produced 79,300 tonnes, 10.3% higher
than the previous year on higher throughput,
partially offset by lower grades and recoveries.
Cash costs
Cash costs for 2020 were $1.82/lb, 16.1% lower
than in 2019 due to tight cost control, higher
production, the weaker Chilean peso and
lower input prices.
Capital expenditure
Capital expenditure was $42 million, including
$19 million on mine development.
Outlook for 2021
Production is forecast to be 75–80,000 tonnes
of copper and cash costs are expected to be
approximately $1.80/lb.
2020 financials
$480m +11.1%
Revenues
$166m +92.1%
EBITDA
2021 forecast
75-80k
Copper (tonnes)
$1.80/lb
Cash costs
Copper production
79.3k tonnes
Net cash costs
$1.82/lb
79.3
72.2
71.9
2.17
1.99
1.82
18
19
20
18
19
20
70
Antofagasta plc Annual Report 2020
antofagasta.co.uk
2021
10 years
2031
Projected
mine life
Lifecycle of mine
26 years
1995
Start of operations
2021 forecast
45-50k
Copper (tonnes)
$1.75/lb
Cash costs
Mining division
Zaldívar
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.
50%
Owned
2020 financials
$96m -15.2%
EBITDA
2020 Performance
Operating performance
Zaldívar had a challenging 2020 due to lower
recoveries compared to 2019.
Attributable EBITDA was $96 million compared
with $113 million in 2019.
Production
Attributable copper production was 48,200
tonnes, mainly due to lower recoveries. Ore
throughput and grades were slightly lower
than in 2019.
Cash costs
Cash costs were $1.80/lb, 2.9% higher than
in 2019, as lower production was offset by the
weaker exchange rate and lower input prices.
Capital expenditure
Attributable capital expenditure in 2020 was
$74 million, including approximately $18 million
of mine development.
Outlook for 2021
Attributable copper production is forecast
to be 45–50,000 tonnes at a cash cost of
approximately $1.75/lb.
Other matters
An Environmental Impact Assessment (EIA) has
been submitted to extend the mine’s life to 2031.
The application process was delayed during
2020 due to COVID-19 and approval is now
expected in early 2022. This EIA includes the
extension of the water permit from 2025 to 2031
and remediation.
Zaldívar’s final pit phase, which represents
approximately 20% 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.
Copper production
48.2k tonnes
Net cash costs
$1.80/lb
58.1
47.3
48.2
1.94
1.75
1.80
18
19
20
18
19
20
antofagasta.co.uk
Antofagasta plc Annual Report 2020
71
Strategic Report
Operating review continued
Transport division
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.
2020 financials
$149m -6.9%
Revenue
$61m -24.5%
EBITDA
2020 Tonnage transported
6,444k tonnes
6,533 6,444
6,065
18
19
20
Tocopilla
María Elena
Calama
Sierra Gorda
A n t o f a g a s t a R e g i o n
Mejillones
Antofagasta
Taltal
Customer map
Road route
Rail route
FCAB customers
72
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Sustainability
The maturity of the safety processes applied at
the division continued to show improvement,
with the division recording its fourth year with
no fatalities and the LTIFR (Lost Time Injury
Frequency Rate) falling by 41% to 2.37, a
record for the division.
In the occupational health area, the operation
successfully managed the challenge of managing
the impact of COVID-19 with minimal disruptions
to its operations.
Also, in line with the Group’s Diversity and
Inclusion Policy, the number of women and
people with disabilities in the division increased to
13% and 1% of the total workforce respectively.
Outlook
Over the next few years the division will
transport an increasing quantity of bulk materials
and is currently commissioning a project to
further increase transport volumes, particularly
of copper concentrates.
The division continues advancing its plans to
convert land it owns in the centre of the city
of Antofagasta from industrial to urban use.
This has involved extensive consultion with
communities, neighbours and other stakeholders,
and approval of the project’s Environmental
Impact Assessment is expected in the first
half of 2021.
2020 Performance
The Transport division continued to improve its
operating activity through the implementation of
its Management Model, which is based on five
key pillars: operating continuity, growth, urban
development, transformation and community
affairs. In 2020, the division optimised its
organisational structure and focused on
operational continuity, with an in-depth
review of the processes and procedures
used in the operations and maintenance areas.
Tonnage transported in 2020 was 1.4% lower
than in the previous year as a result of the impact
of COVID-19 on some of the division’s customers,
which affected their production levels and, to
a lesser extent, adverse weather conditions.
During 2020 the division completed the
investment and preparatory work for a significant
new transport service contract for a mining client
which will start in early 2021.
The truck transport business was awarded a
new contract during 2020 to transport products
for the lithium industry.
Operating performance
The division’s EBITDA was $61 million, 24.5%
lower than in 2019, reflecting the lower revenue
and decreased EBITDA from associates and
joint ventures, partly offset by the lower
operating costs.
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)
continued to be applied at the division during
2020 to improve its cost structure, revenue
stream and operating standards.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
73
Strategic Report
Operating review continued
Growth projects
and opportunities
Our approach to considered growth means
we focus on value, which includes controlling
capital costs and optimising production at our
existing operations and the development of
new mining operations to deliver replacement
and new production in the future. We achieve
this through careful project management and
constant monitoring of the efficiency of our
mines, plants and transport infrastructure.
Development of our growth projects at Los
Pelambres, Centinela and Zaldívar was impacted
by COVID-19 during the year. Work at the Los
Pelambres Expansion project was already
under way when the pandemic reached Chile and
the decision was made to temporarily suspend
part of the project to reduce health risks. The
start of work on the Esperanza Sur pit and the
Zaldívar Chloride Leach projects was delayed
for the same reason.
After the initial impact caused by COVID-19, work
on all three projects started in the third quarter,
but with workforces approximately 65% of the
originally planned size. All projects are proceeding
with fully integrated COVID-19 health protocols in
place and these are expected to continue until the
end of 2021.
With the impact of the initial delay and the
revised execution schedules that incorporate
the COVID-19 health protocols, the projects
are now all expected to be completed in 2022.
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.
During 2020 the decision was made to change
the scope of the project and double the planned
capacity of the desalination plant that is part
of Phase 1 of the project, from 400 litres per
second to 800 litres per second. The amount of
work that can be done on the expansion of the
desalination plant during Phase 1 is limited by
what is allowed under the permits that have
already been issued.
Following the change of scope and the delays
due to COVID-19 the project reached 45% overall
project completion by the end of the year and is
now expected to be completed in the second half
of 2022.
As mining progresses at Los Pelambres ore
hardness will increase. The expansion is
designed to compensate for this, increasing plant
throughput from the current capacity of 175,000
tonnes of ore per day to an average of 190,000
tonnes of ore per day. The plant expansion
includes not only the desalination plant and
pumping infrastructure, but also an additional
SAG mill, ball mill and six additional cells in the
flotation circuit.
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 the higher milling capacity is fully realised.
The 400 litres per second desalination plant
includes a 62 km pipeline from the coast to
the Mauro tailings storage facility, where it
will connect with the existing recycling circuit
that returns water to the Los Pelambres
concentrator plant.
To complete the expansion of the desalination
plant to 800 litres per second additional permits
will be required, but some preparatory work will
be carried out as part of Phase 1 of the Los
Pelambres Expansion project. The planned
investment to enable the future expansion will
be limited to what is allowed under the existing
permits and includes changes to the marine
works associated with the inlet and outlet pipes,
expanding the plant footprint and changes in the
piping, cabling and civil works.
The capital cost of the project was revised to
$1.7 billion during the year to include the direct
costs related to COVID-19 and the delay caused
by it, and the investment in enabling the future
expansion of the desalination plant.
Phase 1
+60,000 tonnes
annual copper production
+400 litres
per second
74
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Phase 2 – Future expansion
Following the decision in 2020 to increase the
size of the desalination plant, Phase 2 of the
expansion requires two separate EIA applications:
Desalination plant expansion
This project is to protect Los Pelambres from
the future impact of climate change and the
deteriorating availability of water in the region.
The additional works required, beyond those
being completed as part of Phase 1, include
the expansion of the desalination plant and the
construction of a new water pipeline from the
Mauro tailings storage facility to the concentrator
plant. This project requires a new EIA application
which will be submitted in the first half of 2021
following the completion of a community
consultation process earlier in the year. The EIA
also includes the desalination plant expansion and
two sustaining capital infrastructure projects, the
replacement of the concentrate pipeline, which
is approaching the end of its useful life, and the
construction of certain planned enclosures at
the Mauro tailings storage facility. The EIA is
expected to be approved in approximately two
years with the project being completed by 2025
when the desalination plant will be able to supply
Los Pelambres with over 95% of its water needs.
Mine life extension
The current mine life of Los Pelambres is 14
years and is limited by the capacity of the Mauro
tailings storage facility. The scope of the second
EIA will include increasing the capacity of the
tailings storage facility and the mine waste
dumps. This will extend the mine’s life by a
minimum of 15 years, accessing a larger portion
of Los Pelambres’s six billion tonne mineral
resources. The EIA will also include the option
to increase throughput to 205,000 tonnes of
ore per day, increasing copper production by
35,000 tonnes per year.
Critical studies on tailings and waste storage
capacity have been completed and are now
progressing towards the feasibility study stage.
The study will also include repowering the
conveyor that runs from the primary crusher
in the pit to the concentrator plant to support
the additional throughput.
The capital expenditure to extend the mine life
was estimated in a pre-feasibility study in 2014
at approximately $500 million, with most of the
expenditure on mining equipment and increasing
the capacity of the concentrator and the Mauro
tailings facility. Community consultation is in its
early stages and the EIA application is expected
to be submitted to the authorities during 2022.
Phase 2
+15 years
Life-of-Mine extension
+35,000 tonnes
annual copper production
+400 litres
per second
antofagasta.co.uk
Antofagasta plc Annual Report 2020
75
Strategic Report
Operating review continued
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, and 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 initial feasibility
study for Phase 1 was completed during 2020
with further detailed and supplier engineering
progressing during 2021 ahead of an expected
decision by the Board in H1 2022. 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 storage facility,
a water pipeline and other infrastructure, plus
the owner’s and other costs.
In late 2020 a tender process was started
to invite third parties to provide water for
Centinela’s current operations, by acquiring
the existing water supply system, and building
the new water pipeline. It is expected this
process will be completed during 2021.
Esperanza Sur pit
The Board has approved a pre-stripping contract
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 was expected to start in early 2020
but was rescheduled in response to COVID-19
to the third quarter, and is now expected to
be completed in the first half of 2022 at an
unchanged capital cost of $175 million. The
stripping cost is being capitalised and is being
carried out by a contractor. Once it is completed,
autonomous trucks operated by Centinela will be
used to mine the deposit.
Opening the Esperanza Sur pit will improve
Centinela’s flexibility to supply its concentrator
and, over the initial years, the higher-grade
material from the pit 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.
Zaldívar Chloride Leach
The start of the project was rescheduled in
response to COVID-19 to the third quarter of
2020 and completion is now expected to be
in the first half of 2022.
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 copper production at Zaldívar
by approximately 10–15,000 tonnes per annum
over the remaining life of the mine.
The project requires an upgrade of the Solvent
Extraction (SX) plant, new reagents facilities and
the construction of additional washing ponds for
controlling the chlorine levels, at an estimated
capital cost of $190 million.
As the Group equity accounts for its interest
in Zaldívar, capital expenditure at the operation
is not included in Group total capital
expenditure amounts.
Twin Metals Minnesota
In late 2019, Twin Metals Minnesota presented its
Mine Plan of Operations (MPO) to the US Bureau
of Land Management (BLM) 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.
In June 2020, the BLM issued its Notice of
Intent (NOI) to begin its environmental review, a
process that is likely to take several years. The
review process will include additional baseline
data collection, impact analyses and multiple
opportunities for public input. Permitting for
the project will follow the environmental review.
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, cobalt-PGM deposits in
north-eastern Minnesota, US. The MPO design is
based on mining and processing 18,000 tonnes
of ore per day for 25 years. The concentrator
will produce three saleable concentrates
– copper, nickel and cobalt/PGM.
Reko Diq project
In July 2019 the World Bank Group’s International Centre 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 an arbitration claim 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.
In 2019, Pakistan requested that ICSID annul the award, and this triggered a provisional stay
of enforcement of the award under the ICSID Convention. In March 2020, ICSID appointed a
committee to consider Pakistan’s request for annulment and whether the provisional stay of
enforcement should continue for the duration of the annulment proceedings. The committee
issued a decision in October partially terminating the stay of enforcement, permitting Tethyan
to enforce 50% of the award plus accrued interest on the condition that any amounts collected
through enforcement of the award must be put into escrow and returned if the award is
annulled. Tethyan has resumed proceedings to enforce the award in accordance with the
conditions set by the annulment committee.
The committee is expected to issue a decision on Pakistan’s annulment application within the
next one to two years.
The proceeds of the award will only be recognised in Antofagasta’s financial statements once
they are received by the Company.
76
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Exploration
activities
The exploration team has continued to conduct
its activities at a reduced level in Chile and
elsewhere in the Americas as it has adapted to
the restrictions required under new COVID-19
protocols introduced during the year.
Exploration both in Chile and internationally
remains key to the sustainable long-term
growth of the Group´s copper business. In 2020,
all our exploration activities were conducted in
accordance with the new COVID-19 protocols,
which restricted activity is some areas. The
Group continued with its programme of early-
and intermediate-stage projects, managed in
South America by its team based in Santiago,
and in North America by its team based in
Toronto. In-house teams carried out these
programmes, maintaining a well-balanced
portfolio of exploration properties in Chile and
Peru and looking for opportunities to work with
third parties in the rest of the Americas, with the
aim of building a portfolio of high-quality
long-term copper projects.
The Group’s exploration and evaluation
expenditure in 2020, including expenditure on
pre-feasibility studies, dropped by 23% to $85
million compared with 2019, following a reduction
in expenditure triggered by the rapid weakening
of the copper market in the first half of the year
and restrictions on travel and other activities
required under the new COVID-19 protocols.
Chile
The Group’s exploration programmes are in the
copper belts of northern-central Chile,
particularly in areas with high prospectivity for
porphyry copper, as well as manto and IOCG
(Iron Ore Copper Gold)-type deposits. During
2020 the early-stage programmes completed
more than 40,000 metres of drilling, some 50%
less than in 2019.
Drilling evaluation was reduced at several of
the brownfield projects in the Centinela Mining
District with the focus continuing to be on
identifying new high-quality oxide leach targets.
As a result of the COVID-19 restrictions, more
desktop evaluations were carried out than in
2019 in order to generate new land acquisition
opportunities either by submitting exploration
licence applications or by entering into
agreements with third parties.
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, which were also
affected by COVID-19 restrictions.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
77
Strategic Report
Operating review continued
Key inputs and
cost base
In addition to reducing the cost of our electricity,
we are improving our energy consumption
efficiency. We have an Energy Management
System based on international standard
ISO 50.001 to manage energy efficiency
at our mining operations, from the design
stage to the construction of mining and
infrastructure projects.
During 2020, we implemented improvements
that reduced our energy consumption by
approximately 148 GWh and more than 1.9 million
litres of diesel, equivalent to emissions of 61,000
tonnes of CO2 and a significant step towards
achieving our target of reducing emissions
by 300,000 tonnes by 2022.
Water
Water is a strategic input for all our mining
operations. At Los Pelambres and Zaldívar
water is supplied from continental sources
while Centinela and Antucoya use sea water.
In 2020, sea water accounted for 43% of total
Group water use and our efficiency metric
(reuse and recycling, as defined by the ICMM)
ranges from 79% to 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.
In September 2020, the operation announced
that the desalination plant’s capacity would
double to 800 l/s by 2025, when Los Pelambres
would stop using continental water from
the Choapa River. In this way, desalinated,
recirculated and mine (from the open pit)
water would represent around 96% of its
total consumption.
Centinela is a pioneer in efficient water
management, becoming the world’s first
large-scale mining operation to use raw
Our mining operations depend on many inputs,
ranging from energy and water to labour
and fuel, the most important of which are
reviewed below.
Contractor services, maintenance and spare
parts account for 45% of the Mining division’s
total production costs, and energy and labour are
the largest direct costs, accounting for 12% and
14% respectively. 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) and each of
our operations sources power under medium-
and long-term contracts called Power Purchase
Agreements (PPAs).
In recent years, renewable technologies have
significantly reduced in cost and many new
renewable power plants are being built, mainly
in the north of Chile. At the end of 2020, 50% of
the SEN’s installed capacity was generated from
renewable sources and this will increase over
the coming years. We are benefiting from these
changes and in 2022 all of our mining operations
will be using power from renewable sources. As
at the end of 2020, 19% of the Mining division’s
power was from renewable sources.
In 2020, Centinela renegotiated its supply
contract and will be 100% renewable from 2022,
as will Antucoya. Zaldívar started operating on
100% renewable power in July 2020.
In addition, Los Pelambres increased its use of
renewable power in 2020, and during 2022
it should start being supplied entirely from
renewable sources.
Using energy only from renewable sources
reduces both our carbon footprint and our
power costs, as in Chile renewable power costs
substantially less than power from conventional
sources. As electricity makes up 12% of our
production costs, this is having a significant
impact on our total costs.
78
Antofagasta plc Annual Report 2020
antofagasta.co.uk
sea water and thickened tailings, which allow
more water to be recycled than conventional
thickening technology.
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 permit from 2025,
when it currently expires. The approval of the
EIA has been delayed by the pandemic and
we now expect approval by the end of 2021
or early 2022.
We report our water consumption according to
the ICMM´s Minimum Disclosure Standard and
the Carbon Disclosure Project´s (CDP) water
programme methodologies.
Labour
Antofagasta’s total workforce during 2020 was
approximately 23,200 employees and contractors.
Accessing a diverse and talented workforce is key
to our success.
Labour agreements are in place with each of the
11 unions at our mining operations and generally
last for a period of three years, when they are
renegotiated. However, we maintain good working
relationships with our employees and unions
throughout the contract periods, so that issues
are not left for discussion only during formal
negotiations. During 2020, negotiations were
successfully concluded with the workers’ unions
at Zaldívar, Centinela and the Transport division.
Contractors account for approximately 71% of
our workforce and contractor companies 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 maintain for our own employees,
particularly in the areas of safety and health.
Service contracts and key supplies
Negotiation of the main commercial contracts,
such as mining equipment, fuels, lubricants,
critical spares, tyres, reagents, grinding balls,
explosives, and mine maintenance are managed
centrally to generate synergies and economies of
scale. This allows us to obtain significant savings
and implement new controls that improve
performance, resulting in greater competitiveness
and productivity by our contractor companies.
We have implemented a challenging optimisation
programme at corporate and operations level
to improve the administration, control and risk
management of our service contracts. We have
also standardised our way of working, improved
the procurement team’s technical knowledge and
developed a long-term strategy.
With the global disruption of the supply
chain caused by COVID-19, we implemented
contingency plans to maintain the quality and
timely delivery of spare parts and materials,
ensuring operational continuity and
cost containment.
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 that provide
benefits for both parties.
As part of the Group’s Digital Transformation
Programme to capture value creation opportunities
by integrating new technologies into our business,
the procurement area implemented a purchasing
assistant robot to help some stages of the
purchase process. Approximately 93% of the
Group’s material stock purchases were done
through this automatic process.
In total we have some 3,250 suppliers of goods
and services, of which 93% are based in Chile.
Fuel and lubricants
Fuel and lubricants represent approximately 5% of
production 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 14% during 2020.
Sulphuric acid
Sulphuric acid is one of the main inputs for the
SX/EW leaching process to produce cathodes
and accounts for approximately 4% of the Group’s
production costs. Centinela, Antucoya and Zaldívar
use approximately 1.5 million tonnes of sulphuric
acid per year, mainly contracted under one-year
contracts to secure supply and prices.
During the first half of 2020, acid imports into Chile
were down 30% from the previous year while local
smelters ran at normal rates compared with 2019,
when several were shut down for environmental
upgrades. Also, acid demand from the fertiliser
industry fell during the first half of the year
because of the COVID-19 pandemic, while acid
production was less severely impacted. These
factors, combined with logistical constraints,
pushed prices to a decade low. However, the
market recovered in the second half of the year,
closing at about $75 per tonne in Chile, slightly
higher than agreed for the Group’s 2020 and
2021 annual contracts.
Exchange rate
The Chilean peso/US dollar exchange rate
correlates to the copper price, as copper exports
generate some 50% of Chile´s foreign exchange
earnings. This provides a natural hedge for the
Company as approximately 35–40% of our
operating costs are in Chilean pesos. During
2020 the Chilean peso strengthened by 4%,
from Ch$745/$1 at the beginning of the year
to Ch$711/$1 at the end.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
79
Strategic Report
Operating review continued
Operating excellence
and innovation
Operating excellence
During 2020, we updated the Group Operational
Excellence strategy, establishing a plan for the
next two years to strengthen our culture of
excellence by focusing on standard processes
and value capture. We also implemented a
process to strengthen the exchange of good
practices and innovative solutions among
our mining operations to capture synergies
and lessons learned, and foster continuous
improvement. As a key enabler towards
achieving operating excellence we introduced
LEAN continuous improvement during the year
as an additional tool to improve our operating
processes and productivity.
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. These
are the promotion of operating excellence,
the implementation of our Cost and
Competitiveness Programme and the
development of innovative solutions and ideas.
23%
through productivity improvements
77%
through more efficient contract and
input negotiations, consumption rates
and better use of maintenance resources
$197m
of savings achieved in 2020
Cost and Competitiveness Programme
The Cost and Competitiveness Programme (CCP)
was introduced in 2014 to reduce our cost base
and improve our competitiveness within the
industry. Six years later, the CCP’s scope has
evolved to reflect the greater maturity level
that has been achieved over this period.
During 2020, we have achieved savings of
$197 million, equivalent to $11c/lb for the year.
The target for 2021 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
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
driven by value creation. We seek to promote
a culture that fosters innovation, develops
skills and enables transformation.
80
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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.
integrating data to improve drill and blast
management, improving plant ore feed
characterisation, scanning the SAG mills
while they are operating and applying
robotics to clean the conveyor belts area.
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 embedding our digital
roadmap to significantly improve our operations’
safety and productivity, and are investigating the
use of new technologies to address our main
strategic challenges (transformational innovation).
At the heart of our innovation strategy is, firstly,
to fully understand our challenges and then to
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.
We also have a system called PITCH through
which suppliers can submit proposals to solve
the challenges we have presented. During 2020
we conducted 17 PITCH days which generated 13
active projects for co-development, four of which
were implemented during 2020. These included
Our portfolio of projects includes both technical
and non-technical initiatives across the entire
value chain and also reinforces critical safety
controls and environmental protection measures.
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. The primary leach process,
in particular, is generating encouraging results
and we will scale it up to an industrial-sized test
during 2021.
Additionally, we continue with the implementation
of our digital roadmap programmes. These include:
• The construction of an Integrated
Remote Operations Centre (IROC) in the
city of Antofagasta for Centinela, where a
visualisation room was already commissioned
• The introduction of autonomous trucks at
Centinela’s new Esperanza Sur pit
• The use of autonomous production drill rigs at
Los Pelambres, with significant improvements
in productivity
• Developing advanced data analytics to better
understand and predict the performance of
our operations. This includes strengthening
our team of specialists and validating a
governance framework for data management
• Continuing with the digital transformation,
which started at the end of 2019, to simplify
and streamline our support functions
• Evaluating the use of robotic arms to fully
automate the replacement of SAG mill liners
at Los Pelambres
• COVID-19 has accelerated our transition to
remote operations, building on the technology
platform introduced during the previous
two years
Key to the success of creating value from the
implementation of our digital roadmap is the
careful management of the changes that each of
these projects requires to be effectively adopted.
To build up the necessary skills and to support
our people through our digital transformation,
we have set up a Digital Academy which provides
on-line training support for our employees on
digital literacy and the basics of data analytics.
Some 1,500 supervisors trained using this
programme during the year.
Case study at Los Pelambres: Rock
falls prediction to improve safety
Los Pelambres developed a predictive model
using artificial intelligence to analyse data
from the mine in-pit radar that improves
the prediction of rock falls caused by ground
failure at the bench level from 42% to 89%.
Case study at Los Pelambres:
Autonomous drills
The two diesel production drill rigs retrofitted
at Los Pelambres at the end of 2019 were
successfully operated autonomously from
a control room over a mile away and drilled
nearly 160,000 metres during the year. This
programme will now be extended to the electric
drill rigs.
Case study at Centinela: Oversized
ore management at Encuentro
Oxides plant
During 2020 Centinela ran a project to better
manage the oversized ore at the Encuentro
Oxides crushing plant to reduce damage to the
plant and unplanned shutdowns. This initiative
improved the plant’s run time by 12%.
Case study: Cuprochlor-T® leaching
technology for primary sulphides
During 2020 we continued with our large-scale
pilot programme to validate our in-house
patent-protected chemical primary sulphides
leaching technology (Cuprochlor-T®), with very
encouraging results, achieving consistently
competitive recoveries on high content
chalcopyrite sulphide minerals from Centinela.
Digital Transformation Programme
During 2019, a special team was assembled to
implement a digital transformation programme
to capture opportunities for value creation
through the integration of new technologies
into our business.
By the end of 2020, 20 projects had moved
into production, including several on robotic
process automation (RPA), projects to improve
efficiency in the procurement, treasury and
accounting processes, projects to digitally
manage expense claims and create maintenance
work orders, a chatbot to support the help
desk on IT matters, and projects to improve
data-driven decision-making through better
reports and analytics.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
81
Strategic Report
Operating review continued
The copper market:
supplying metals for
a better future
As the world becomes ever more
environmentally aware, demand for copper
increases. We are responding by continuing
to supply the copper needed for a more
sustainable world in a sustainable way.
In November, Centinela and Zaldívar signed
letters of commitment to The Copper Mark, the
copper industry’s new responsible production
framework assessed by independent assurance
experts, and they will be followed by Los
Pelambres and Antucoya.
Copper consumption by region in 2020
7%
49%
17%
9%
18%
China
Other Asia
North America
Europe
Rest of world
Source: Wood Mackenzie, Copper Outlook December 2020
On the supply side, while production is expected
to grow as several projects are completed, the
risk of impact from COVID-19 remains, including
the consequences of past and ongoing reductions
in maintenance activity, sustaining capital
expenditure and waste rock stripping.
Overall, the copper market in 2021 is expected
to be in deficit before remaining tightly balanced
for the following years as several large projects
are completed.
Copper concentrate
Some 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
9% of our cash costs before by-product credits.
Most of the new copper production in the
world is in the form of concentrates and these
volumes are largely being absorbed by new
smelter capacity in China. In 2020 the copper
concentrate market was in deficit and spot TC/
RCs were significantly lower than the annual
contract TC/RCs negotiated towards the end of
2019. Spot TC/RCs fell sharply during the year,
reaching about $35 per dry tonne of concentrate
and 3.5c/lb of refined copper by the end of 2020.
Annual contract industry TC/RCs for 2021
were set in the fourth quarter of 2020 at $59.5
per dry tonne of concentrate and 5.95c/lb of
refined copper, a reduction of 4% on 2020’s
annual terms.
The concentrates market is expected to remain
tight during 2021 with TC/RCs remaining at low
levels as custom smelter demand continues to
be greater than mine supply.
Refined copper
2020 was an unusual year for the copper
market. At the beginning of the year the copper
price was $2.74/lb and fundamentals were
supportive at this level. However, by March, as
it became clear that the outbreak of COVID-19 in
China in late 2019 was escalating into a pandemic
impacting the world economy, the copper price
fell to $2.09/lb. From this low point, China’s
progress in controlling the disease and returning
to normality stimulated demand for refined
copper, elevating prices by the end of July
to $2.90/lb. In the second half of the year,
continued progress in key markets to control the
spread of the pandemic and support economic
recovery, together with encouraging progress
on vaccine development, further strengthened
demand so that the copper price ended the
year at just over $3.50/lb.
The pandemic not only impacted demand during
the year, it also affected copper supply with some
mining operations temporarily suspended or
operating at lower levels of activity. This meant
that for the full year there was a relatively small
surplus. In addition, visible copper stocks reduced
for a second year, this time by approximately
40,000 tonnes to historically low levels, while
stocks in Chinese bonded warehouses were
estimated to have increased by 120,000 tonnes,
reflecting the increased demand for refined
copper in China.
Over the year the LME copper price averaged
$2.80/lb, 3% higher than in 2019.
Market outlook
In early 2021, sentiment in the copper market
remained positive despite a second wave of the
pandemic in many countries, as markets took
encouragement from the successful development
of several vaccines and their accelerating rollout.
Demand is expected to recover the volumes lost
in 2020, and to grow further. There is, however,
some uncertainty about stimulus packages in
China continuing as strongly as in 2020, but the
economic recovery expected in the USA, Europe
and elsewhere in the world, supported by fiscal
stimulus packages will positively impact sectors
that use copper. In particular, growth is expected
from infrastructure investment and the growth
of the electric vehicles and renewable energies
sectors. Additionally, constraints on the scrap
trade due to restrictions in the Chinese market
and supply chain disruptions are also expected to
contribute to increased demand for refined copper.
82
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Gold
During 2020 the gold price increased by about
27%, peaking at $2,065/oz during the third
quarter. Demand for gold increased as people
sought financial protection from the uncertainties
created by COVID-19.
Molybdenum
Until mid-2020 the molybdenum price performed
weakly due to COVID-19, averaging $8.4/lb in the
second quarter, having started the year at $9.2/lb.
In the second half of the year the market
strengthened, closing the year at $10/lb.
The market price of gold averaged $1,770/oz
in 2020, compared with $1,393/oz in 2019, and
closed the year at $1,891/oz. If global economic
uncertainty continues in 2021, the gold price is
expected to remain strong.
Molybdenum is used mainly for making
specialist steel alloys and demand is linked to
steel production, particularly its use in the oil
and gas industry. Production is mainly as a
by-product of copper mining operations.
The market price averaged $8.7/lb for the
year compared with $11.4/lb in 2019 and the
consensus price for 2021, at the beginning of
the year, was between $9.0/lb and $11.0/lb.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
83
Strategic Report
Financial
review
The Group maintains a strong financial
position, to underpin its returns
to shareholders and its investment
in its future growth.
84
Antofagasta plc Annual Report 2020
antofagasta.co.uk
antofagasta.co.uk
Antofagasta plc Annual Report 2020
85
Strategic Report
Financial review
Increased earnings in
challenging conditions
“We were able to deliver a 12% growth in EBITDA, and the issue of our
inaugural bond helped further strengthen our robust financial position,
increasing our cash and liquid investments balance to $3.7bn.”
Mauricio Ortiz
Chief Financial Officer
Financial review for the year ended 31 December 2020
Revenue
EBITDA (including share of EBITDA from associates and joint ventures)
Total operating costs
Operating profit from subsidiaries
Net share of results from associates and joint ventures
Impairment of investment in associate
Total profit from operations, associates and joint ventures
Net finance expense
Profit before tax
Income tax expense
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Attributable to:
Non-controlling interests
Profit attributable to the owners of the parent
Basic earnings per share
From continuing operations
From discontinued operations
Total continuing and discontinued operations
Before exceptional
items
$m
Exceptional items
$m
5,129.3
2,739.2
(3,537.1)
1,592.2
5.1
–
1,597.3
(103.4)
1,493.9
(546.2)
947.7
7.3
955.0
408.4
546.6
cents
54.7
0.7
55.4
–
–
–
–
–
(80.8)
(80.8)
–
(80.8)
19.7
(61.1)
–
(61.1)
(20.9)
(40.2)
cents
(4.1)
–
(4.1)
Year ended
31.12.2020
Total
$m
5,129.3
2,739.2
(3,537.1)
1,592.2
5.1
(80.8)
1,516.5
(103.4)
1,413.1
(526.5)
886.6
7.3
893.9
387.5
506.4
cents
50.6
0.7
51.3
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
341.7
501.4
cents
50.9
–
50.9
86
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Net earnings
The profit for the financial year attributable to the owners of the parent (including exceptional items
and discontinued operations) increased from $501.4 million in 2019 to $506.4 million in the current
year. Excluding exceptional items and discontinued operations the profit attributable to the owners
of the parent increased by $37.9 million to $539.3 million. The full reconciliation between 2019 and
2020 is as follows:
164.8
51.6
(19.3)
(52.4)
(40.1)
(66.7)
501.4
539.3
(32.9)
506.4
Y
F
–
9
1
0
2
e
u
n
e
v
e
R
s
t
s
o
c
g
n
i
t
a
r
e
p
O
V
J
d
n
a
d
e
t
a
i
c
o
s
s
A
s
m
e
t
i
e
c
n
a
n
F
i
x
a
T
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
-
n
o
N
* Excluding exceptional items and discontinued operations.
*
Y
F
–
0
2
0
2
s
n
o
i
t
a
r
e
p
o
d
e
u
n
i
t
n
o
c
s
i
d
&
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
E
Y
F
–
0
2
0
2
COVID-19
The Group’s operations were all able to continue to operate without interruption throughout the year,
in part reflecting the strict COVID-19 related measures which the Group began to implement from
February 2020 onwards. As a result, the Group’s production was within the guidance range for the
year. The Group’s planning assumes that COVID-19 related measures will continue to be required
for the rest of 2021.
The Group incurred $40 million of operational expenses (including the 50% attributable share of
Zaldívar’s expenditure) during 2020 in respect of COVID-19 measures, including additional travel
costs for its employees travelling to and from the mine sites, hygiene supplies and additional costs
for third-party services. The Group also established a $6 million fund to provide COVID-19 related
support to local communities, of which $4 million has been spent during 2020.
Work on the Group’s growth projects at Los Pelambres, Centinela and Zaldívar was largely
suspended in March 2020, but activity was able to begin increasing during the third quarter of
the year. The Group has capitalised $31 million of additional project costs during 2020 which are
linked to the impact of the COVID-19 situation, mainly relating to additional costs for the third-party
contractors, increased travel costs for employees and project contractors travelling to the sites and
the purchase of hygiene supplies.
Revenue
The $164.8 million increase in revenue from $4,964.5 million in 2019 to $5,129.3 million in the
current year reflected the following factors:
348.4
(153.3)
69.7
(50.0)
(45.1)
6.2
(11.1)
5,129.3
4,964.5
Y
F
–
9
1
0
2
e
c
i
r
p
r
e
p
p
o
C
l
s
e
m
u
o
v
r
e
p
p
o
C
s
C
R
/
C
T
l
d
o
G
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
–
0
2
0
2
Revenue from the Mining division
Revenue from the Mining division increased
by $175.9 million, or 3.7%, to $4,979.9 million,
compared with $4,804.0 million in 2019. The
increase reflected a $264.8 million improvement
in copper sales partly offset by a $88.9 million
decrease in by-product revenue.
Revenue from copper sales
Revenue from copper concentrate and copper
cathode sales increased by $264.8 million,
or 6.5%, to $4,348.2 million, compared with
$4,083.4 million in 2019. The increase reflected
the impact of $348.4 million from higher realised
prices and $69.7 million from lower treatment
and refining charges, partly offset by $153.3
million from lower sales volumes.
(i) Realised copper price
The average realised price increased by 8.3% to
$2.98/lb in 2020 (2019 – $2.75/lb), resulting in a
$348.4 million increase in revenue. The increase
in the realised price reflected the higher LME
average market price, which increased by 2.8%
to $2.80/lb in 2020 (2019 – $2.72/lb), and
a positive provisional pricing adjustment
of $258.5 million. The provisional pricing
adjustment mainly reflected the increase in
the year-end mark-to-market copper price
to $3.52/lb at 31 December 2020, compared
with $2.81/lb at 31 December 2019.
Realised copper prices are determined by
comparing revenue (before 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 7 to the financial statements.
(ii) Copper volumes
Copper sales volumes reflected within revenue
decreased by 3.5% from 715,500 tonnes in 2019
to 690,200 tonnes in 2020, decreasing revenue
by $153.3 million. This decrease was due to lower
copper sales volumes at Centinela (40,100 tonnes
decrease) mainly as a result of its decreased
production volumes, partly offset by higher sales
volumes at Los Pelambres (9,900 tonnes increase)
and at Antucoya (4,900 tonnes increase).
antofagasta.co.uk
Antofagasta plc Annual Report 2020
87
Strategic Report
Financial review continued
(iii) Treatment and refining charges
Treatment and refining charges (TC/RCs) for
copper concentrate decreased by $69.7 million
to $182.4 million in 2020 from $252.1 million in
2019, reflecting the lower average TC/RC rates
as well as the decrease in the concentrate sales
volumes at Centinela. Treatment and refining
charges are deducted from concentrate sales
when reporting revenue and hence the decrease
in these charges has had a positive 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 decreased by $88.9 million or
12.3% to $631.7 million in 2020, compared
with $720.6 million in 2019.
Revenue from gold sales (net of treatment and
refining charges) was $357.7 million (2019 –
$407.7 million), a decrease of $50.0 million
which mainly reflected a decrease in volumes
partially offset by a higher realised price.
Gold sales volumes decreased by 30.9% from
288,800 ounces in 2019 to 199,600 ounces in
2020, mainly due to lower grades at Centinela.
The realised gold price was $1,796.8/oz in 2020
compared with $1,416.0/oz in 2019, reflecting the
average market price for 2020 of $1,770.1/oz
(2019 – $1,393,5/oz), plus a provisional pricing
adjustment of $3.1 million.
Revenue from molybdenum sales (net of roasting
charges) was $209.5 million (2019 – $254.6
million), a decrease of $45.1 million. The
decrease was due to the lower realised price
of $8.8/lb (2019 – $10.8/lb), partially offset
by increased sales volumes of 12,500 tonnes
(2019 – 12,100 tonnes).
Revenue from silver sales increased by $6.2
million to $64.5 million (2019 – $58.3 million).
The increase was due to a higher realised silver
price of $21.3/oz (2019 – $16.4/oz), partly offset
by lower sales volumes of 3.1 million ounces
(2019 – 3.6 million ounces).
Revenue from the Transport division
Revenue from the Transport division (FCAB)
decreased by $11.1 million or 6.9% to $149.4
million (2019 – $160.5 million), mainly due to
the effect of the weaker Chilean peso, and
lower sales volumes of freight transported
and industrial water.
Total operating costs
The $51.6 million decrease in total operating costs from $3,588.7 million in 2019 to $3,537.1 million in
the current year reflected the following factors:
3,588.7
(156.8)
128.0
3,537.1
24.0
(26.0)
(6.5)
(14.3)
Y
F
–
9
1
0
2
s
t
s
o
c
e
t
i
s
-
n
o
e
n
M
i
s
t
s
o
c
i
e
n
m
r
e
h
t
O
n
o
i
t
a
r
o
p
x
E
l
n
o
i
t
a
u
a
v
e
l
d
n
a
e
t
a
r
o
p
r
o
C
t
r
o
p
s
n
a
r
T
n
o
i
t
a
s
i
t
r
o
m
a
d
n
a
n
o
i
t
a
c
e
r
p
e
D
Y
F
–
0
2
0
2
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
decreased by $165.3 million to $2,390.7 million
in 2020, a reduction of 6.5%. Of this decrease,
$156.8 million is attributable to lower mine-site
operating costs. This decrease in mine-site costs
reflected lower key input prices, the weaker
Chilean peso, lower sale volumes and cost savings
from the Group’s Cost and Competitiveness
Programme, partly offset by the cost impact
of the expected lower ore grades at Centinela
and the $33.1 million of mine-site costs incurred
related to the COVID-19 pandemic. 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 $1.49/lb in 2019
to $1.43/lb in 2020.
The Cost and Competitiveness Programme
was implemented to reduce the Group’s cost
base and improve its competitiveness within the
industry. During 2020 the programme achieved
benefits of $197 million, of which $155 million
reflected cost savings and $42 million reflected
the value of productivity improvements. Of the
$155 million of cost savings, $125 million related
to Los Pelambres, Centinela and Antucoya, and
therefore impacted the Group’s operating costs,
and $30 million related to Zaldívar (on a 100%
basis) and therefore impacted the share of
results from associates and joint ventures.
Closure provisions and other mining expenses
increased by $24.0 million. Exploration and
evaluation costs decreased by $26.0 million to
$85.1 million (2019 – $111.1 million), reflecting
decreased exploration expenditure principally in
respect of the Encierro and Cachorro projects
and less drilling activity in relation to the
reserve and resource estimates at Centinela
and Antucoya. Corporate costs decreased by
$6.5 million.
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 $14.3 million
to $91.4 million (2019 – $105.7 million), mainly
due to the effect of the weaker Chilean peso
and the lower diesel price, as well as the lower
consumption of materials.
Depreciation, amortisation
and disposals
The depreciation and amortisation charge
increased by $128.7 million from $927.0 million
in 2019 to $1,055.7 million. This increase is
mainly due to higher amortisation of capitalised
stripping costs under IFRIC 20 Stripping Costs
in the Production Phase of a Surface Mine,
particularly at Centinela. The loss on disposal of
property, plant and equipment was $6.3 million,
a decrease of $6.4 million (2019 – $12.7 million).
88
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Operating profit from subsidiaries
As a result of the above factors, operating profit from subsidiaries increased by $216.4 million or 15.7% in 2020 to $1,592.2 million (2019 – $1,375.8 million).
Share of results from associates and joint ventures
The Group’s share of results from associates and joint ventures was a profit of $5.1 million in 2020, compared to $24.4 million in 2019. This was
principally due to the impact of the agreement on 31 March 2020 to dispose of the Group’s investment in Hornitos (as detailed below). In the 2019
full-year Hornitos had generated a net profit of $10.3 million, but in the first three months of 2020 prior to the disposal agreement Hornitos did not
generate a net profit. In addition, there was a $3.9 million higher loss from Tethyan Copper Company and profits from Zaldívar were $3.4 million lower.
EBITDA
EBITDA (earnings before interest, tax, depreciation and amortisation) increased by $300.3 million or 12.3% to $2,739.2 million (2019 – $2,438.9 million).
EBITDA includes the Group’s proportional share of EBITDA from associates and joint ventures.
EBITDA from the Mining division increased by 13.6% from $2,358.1 million in 2019 to $2,678.2 million this year. This reflected the higher revenue and
lower mine-site costs, decreased exploration and evaluation expenditure and lower corporate costs, partly offset by higher other mining expenses and
lower EBITDA from associates and joint ventures.
EBITDA at the Transport division decreased by $19.8 million to $61.0 million in 2020 ($80.8 million – 2019), reflecting the lower revenue and decreased
EBITDA from associates and joint ventures, partly offset by the lower operating costs.
Commodity price and exchange rate sensitivities
The following sensitivities show the estimated approximate impact on EBITDA for 2020 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 2020, 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 increased by $52.4 million to $103.4 million, compared with $51.0 million in 2019.
Investment income
Interest expense
Other finance items
Net finance expense
Average market commodity
price/average exchange rate
during the year ended
31.12.20
Impact of a 10% movement
in the commodity price/
exchange rate on EBITDA
for the year ended 31.12.20
$m
$2.80/lb
$8.7/lb
$1,770/oz
792
456
24
35
123
Year ended
31.12.20
$m
18.9
(77.1)
(45.2)
(103.4)
Year ended
31.12.19
$m
47.1
(111.1)
13.0
(51.0)
Interest income decreased from $47.1 million in 2019 to $18.9 million in 2020, mainly due to the decrease in average interest rates partly offset by the
higher average cash balance.
Interest expense decreased slightly from $111.1 million in 2019 to $77.1 million in 2020, reflecting both a decrease in the average LIBOR rate and also
a reduction in the average relevant debt balances.
Other finance items were a net loss of $45.2 million, compared with a net gain of $13.0 million in 2019, a variance of $58.2 million. This was mainly due
to the foreign exchange impact, which was a $28.9 million loss in 2020 compared with a $35.8 million gain in 2019, due to the retranslation of Chilean
peso denominated assets and liabilities.
Profit before tax
As a result of the factors set out above, profit before tax increased by 4.7% to $1,413.1 million (2019 – $1,349.2 million).
antofagasta.co.uk
Antofagasta plc Annual Report 2020
89
Strategic Report
Financial review continued
Income tax expense
The tax charge for 2020 excluding exceptional items was $546.2 million (2019 – $506.1 million) and the effective tax rate was 36.6% (2019 – 37.5%).
Including exceptional items the tax charge for 2020 was $526.5 million and the effective rate was 37.3%.
Profit before tax
Tax at the Chilean corporate rate tax of 27%
Exceptional items – impairment of investment in associate
Mining tax (royalty)
Deduction of mining royalty as an allowable expense in
determination of first category tax
Items not deductible from first category tax
Withholding taxes
Tax effect of share of results of associates and joint ventures
Reversal of previously unrecognised tax losses/(unrecognised
tax losses)
Adjustment in respect of prior years
Net other items
Tax expense and effective tax rate for the period
Year ended
31.12.2020
Excluding
exceptional
items
$m
1,493.9
(403.4)
–
(101.3)
28.1
(9.8)
(70.0)
1.4
10.5
(1.6)
(0.1)
(546.2)
Year ended
31.12.2020
Including
exceptional
items
$m
1,413.1
(381.5)
(2.2)
(101.3)
28.1
(9.8)
(70.0)
1.4
10.5
(1.6)
(0.1)
(526.5)
%
27.0
–
6.8
(1.9)
0.7
4.7
(0.1)
(0.7)
0.1
0.0
36.6
Year ended
31.12.2019
$m
1,349.2
(364.3)
–
(66.6)
19.1
(11.9)
(59.3)
4.7
(33.0)
4.3
0.9
(506.1)
%
27.0
0.2
7.2
(2.0)
0.6
5.0
(0.1)
(0.7)
0.1
0.0
37.3
%
27.0
–
4.9
(1.4)
0.9
4.4
(0.4)
2.5
(0.3)
(0.1)
37.5
The effective tax rate excluding exceptional items of 36.6% varied from the statutory rate principally due to the mining tax (royalty) (net impact of $73.2
million/4.9% 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 $70.0 million/4.7%), items not deductible for Chilean corporate tax purposes, principally the
funding of expenses outside of Chile (impact of $9.8 million/0.7%) and adjustments in respect of prior years (impact of $1.6 million/0.1%), partly offset
by the reversal of previously unrecognised tax losses (impact of $10.5 million/0.7%) 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 $1.4 million/0.1%).
The impact of the exceptional items on the effective tax rate including exceptional items was $2.2 million/0.2%.
Exceptional items
On 31 March 2020 the Group agreed to dispose of its 40% interest in the Hornitos coal-fired power station to ENGIE Energía Chile S.A. (“ENGIE”), the
owner of the remaining 60% holding. This was part of the value accretive renegotiation of Centinela’s power purchase agreement which as a result will
be wholly supplied from lower cost renewable sources from 2022. Under the terms of the agreement the Group will dispose of its investment to Engie
in 2021 for a nominal consideration and will not be entitled to receive any further dividend income from Hornitos from the date of the agreement.
Accordingly, the Group no longer has any effective economic interest in Hornitos from 31 March 2020 onwards and has therefore recognised an
impairment of $80.8 million in respect of its investment in associates and will no longer recognise any share of Hornitos’ results. The post-tax impact
of the impairment is $61.1 million, of which $40.2 million is attributable to the equity owners of the Company.
Non-controlling interests
Profit for 2020 attributable to non-controlling interests (excluding exceptional items) was $408.4 million, compared with $341.7 million in 2019, an
increase of $66.7 million. This reflected the increase in earnings analysed above.
90
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Earnings per share
Underlying earnings per share (excluding exceptional items and discontinued operations)
Earnings per share (exceptional items)
Earnings per share (discontinued operations)
Earnings per share (including exceptional items and discontinued operations)
Earnings per share calculations are based on 985,856,695 ordinary shares.
Year ended
31.12.20
$ cents
Year ended
31.12.19
$ cents
54.7
(4.1)
0.7
51.3
50.9
–
–
50.9
As a result of the factors set out above, the underlying profit attributable to equity shareholders of the Company (excluding exceptional items and
discontinued operations) was $539.3 million compared with $501.4 million in 2019, giving underlying earnings per share of 54.7 cents per share (2019
– 50.9 cents per share). The profit attributable to equity shareholders (including exceptional items and discontinued operations) was $506.4 million,
resulting in earnings per share of 51.3 cents per share (2019 – 50.9 cents per share).
Dividends
Dividends per share proposed in relation to the period are as follows:
Ordinary dividends:
Interim
Final
Total dividends to ordinary shareholders
Year ended
31.12.20
$ cents
Year ended
31.12.19
$ cents
6.2
48.5
54.7
10.7
7.1
17.8
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 proposed a final dividend for 2020 of 48.5 cents per ordinary share, which amounts to $478.2 million and will be paid on 14 May 2021
to shareholders on the share register at the close of business on 23 April 2021.
The Board declared an interim dividend for the first half of 2020 of 6.2 cents per ordinary share, which amounted to $61.1 million.
This gives total dividends proposed in relation to 2020 (including the interim dividend) of 54.7 cents per share or 539.3 million in total (2019 – 17.8 cents
per ordinary share or $175.7 million in total) equivalent to a payout ratio of 100%.
Capital expenditure
Capital expenditure increased by $228.6 million from $1,078.8 million in 2019 to $1,307.4 million in the current year, 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 2020 the derivative financial instruments in place
had a negative fair value of $36.0 million (2019 – negative $7.3 million).
antofagasta.co.uk
Antofagasta plc Annual Report 2020
91
Strategic Report
Financial review continued
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
Purchases of property, plant and equipment
Dividends paid to equity holders of the Company
Dividends paid to non-controlling interests
Capital increase from non-controlling interest
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
Cash flows from continuing operations were
$2,431.1 million in 2020 compared with $2,570.7
million in 2019. This reflected EBITDA from
subsidiaries for the year of $2,647.2 million
(2019 – $2,302.8 million) adjusted for the
negative impact of a net working capital increase
of $242.5 million (2019 – working capital
decrease of $291.9 million) and a non-cash
increase in provisions of $26.4 million (2019
– decrease of $24.0 million).
The working capital increase in 2020 was mainly
due to an increase in receivables, predominantly
due to the higher year-end mark-to-market
copper price of $3.52/lb at 31 December 2020,
compared with $2.81/lb at 31 December 2019.
The 2019 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 2020
was $319.7 million (2019 – $403.6 million).
This amount differs from the current tax charge
in the consolidated income statement (including
exceptional items) of $515.3 million (2019 –
$354.4 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 $8.0 million (2019 – $29.5 million),
withholding tax payments of $54.5 million,
payments on account for the current year based
on the prior year’s profit levels of $366.8 million,
as well as the recovery of $109.7 million in 2020
relating to prior years.
Contributions and loans to associates and joint
ventures of $7.2 million (2019 – $1.8 million)
relate to Tethyan Copper Company.
Capital expenditure in 2020 was $1,307.4 million
compared with $1,078.8 million in 2019. This
included expenditure of $782.6 million at Los
Pelambres (2019 – $493.8 million), $441.5 million
at Centinela (2019 – $457.6 million), $41.9 million
at Antucoya (2019 – $49.9 million), $8.3 million
at the corporate centre (2019 – $15.9 million)
and $33.1 million at the Transport divisions (2019
– $61.6 million). The increase at Los Pelambres
reflects expenditure on the Expansion project.
Year ended
31.12.20
$m
2,431.1
(319.7)
(40.1)
(7.2)
(1,307.4)
(131.1)
(280.0)
210.0
–
2.3
557.9
(68.0)
(8.5)
481.4
(563.4)
(82.0)
Year ended
31.12.19
$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)
Dividends paid to equity holders of the Company
were $131.1 million (2019 – $470.3 million) of
which $70.0 million related to the payment of the
final element of the previous year’s dividend and
$61.1 million to the interim dividend declared in
respect of the current year.
Dividends paid by subsidiaries to non-controlling
shareholders were $280.0 million (2019 –
$400.0 million).
Dividends received from associates and joint
ventures was nil for 2020 (2019 – $58.0 million).
A capital contribution of $210.0 million was
received from Marubeni, the minority partner
at Antucoya, in order to replace part of the
subordinated debt financing with equity.
92
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Financial position
Cash, cash equivalents
and liquid investments
Total borrowings
Net debt at the end of
the period
At 31.12.20
$m
At 31.12.19
$m
3,672.8
(3,754.8)
2,193.4
(2,756.8)
(82.0)
(563.4)
At 31 December 2020 the Group had combined
cash, cash equivalents and liquid investments of
$3,672.8 million (31 December 2019 – $2,193.4).
Excluding the non-controlling interest share
in each partly-owned operation, the Group’s
attributable share of cash, cash equivalents
and liquid investments was $3,046.9 million
(31 December 2019 – $1,849.7 million).
Total Group borrowings at 31 December 2020
were $3,754.8 million, an increase of $998.0
million on the prior year (31 December 2019 –
$2,756.8 million). The increase was mainly due
to a $814.8 million increase of the senior loan
at Los Pelambres and $495.6 million from the
bond issue, partly offset by the $210.0 million
repayment of the subordinated debt from
Antucoya to Marubeni which was replaced with
equity, a $66.0 million repayment of Antucoya’s
senior loan and a net decrease of lease liabilities
of $37.4 million.
Excluding the non-controlling interest share
in each partly-owned operation, the Group’s
attributable share of the borrowings was
$2,805.5 million (31 December 2019 –
$2,041.3 million).
This resulted in net debt at 31 December 2020
of $82.0 million (31 December 2019 – $563.4
million). Excluding the non-controlling interest
share in each partly-owned operation, the
Group had an attributable net cash position
of $241.4 million (31 December 2019 – net
debt $191.6 million).
Cautionary statement about
forward-looking statements
This preliminary results announcement
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
15 March 2021
Ollie Oliveira
Senior Independent
Director
antofagasta.co.uk
Antofagasta plc Annual Report 2020
93
Corporate Governance
Corporate
Governance
The Board is responsible for Antofagasta plc’s
long-term, sustainable success, generating
value for shareholders and contributing to
wider society.
The Board has established governance
structures that ensure independent oversight
and constructive challenge and promote the
Group’s culture and core values of respect,
responsibility for safety and health, a
commitment to sustainability, excellence
in daily work, innovation and forward thinking.
This reflects the Board’s commitment to
international best practice and continuing
success as an international mining company
based in Chile.
94
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Governance
Applying the Code in 2020
Board leadership and
company purpose
Chairman’s introduction
Senior Independent
Director’s introduction
Group corporate
governance overview
Board activities
Stakeholder engagement
Employee engagement
Division of responsibilities
Directors’ biographies
Board balance and skills
Roles in the boardroom
Executive Committee and
General Managers’ 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 Report
Implementation of the Directors’
and CEO’s remuneration policy
in 2021
Directors’ Report
Statement of Directors’
responsibilities
96
100
102
104
106
108
110
112
114
115
116
118
119
123
124
129
132
134
135
139
150
153
155
antofagasta.co.uk
Antofagasta plc Annual Report 2020
95
Corporate Governance
Applying the Code in 2020
How we
apply the Code
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 2020
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,
demonstrating how these principles have been
considered and applied to the Company’s
specific circumstances.
The Company complied with all the principles and
detailed provisions of the Code in 2020 except
for 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 Chilean,
mining and business experience coupled with
his knowledge of the Group’s business have
been, and continue to be, a cornerstone of the
Company’s continuing growth and success. The
Board considers that Mr Luksic continues to
demonstrate objective judgement and provides
constructive challenge and believes that his
continued appointment is appropriate without
fixing a limit to his service. Mr. Luksic is a
member of the family that is interested in
the E. Abaroa Foundation, a controlling
shareholder of the Company for the purposes
of the UK Listing Rules. The Company’s major
shareholders were invited by the Senior
Independent Director to discuss this subject
ahead of the 2020 AGM and unanimously
expressed their support for Mr Luksic’s
continued service as Chairman of the Board.
Further details on the role of the Senior
Independent Director are set out on
pages 102 and 115.
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, including gender,
and continual refreshment of the Board. Further
details are set out in the Nomination and
Governance Committee report on pages 119-123.
The UK Corporate Governance Code is available
on the Financial Reporting Council website
at www.frc.org.uk.
96
Antofagasta plc Annual Report 2020
antofagasta.co.uk
“We apply the Code’s principles
to our circumstances as an
international mining company
based in Chile.”
Jean-Paul Luksic
Chairman
antofagasta.co.uk
Antofagasta plc Annual Report 2020
97
Corporate Governance
Applying the Code in 2020 continued
Non-Executive Directors
• The Non-Executive Directors provide
constructive challenge and strategic guidance,
offer specialist advice and hold management
to account – pages 112-113 and 115.
Commitment
• All Directors have confirmed they are
able to allocate sufficient time to meet
the expectations of their role – page 112.
• Directors do not undertake additional external
appointments without the prior approval of
the Board – page 112.
• Time commitment is considered during
Board effectiveness reviews and when
electing and re-electing Directors – page 123.
• A review of the Directors’ external
directorships is carried out annually
– pages 103 and 154.
Information and support
• The Board is provided with appropriate
information, in form and quality, to discharge
its duties – page 105.
• The Board has access to independent
professional advice and to the advice
and services of the Company Secretary
– pages 115 and 120.
• The Board is regularly updated on the Group’s
performance between scheduled Board
meetings – page 105.
How the Code principles
were applied in 2020
Board leadership and Company purpose
The role of the Board
• The Company is led by an effective and
entrepreneurial Board, which is collectively
responsible for promoting 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, vision, values and strategy
and has satisfied itself that these and its
culture are aligned. This is explained further
in the Chairman’s introduction – page 100.
• The Board has ensured that the necessary
resources are in place for the Company to
meet its objectives and measure performance
against them. It has established a framework
of prudent and effective controls, which enable
risk to be appropriately assessed and managed
– pages 22-30 and 127-128.
• The Board ensures effective engagement
with, and encourages participation from,
shareholders and other stakeholders to ensure
that its responsibilities are met – pages 34-61,
102, 108-109, 110-111 and 138.
• The Board ensures that workforce policies and
practices are consistent with the Company’s
values and support its long-term sustainable
success and that the workforce is able to raise
any matters of concern anonymously through
the Group’s whistleblowing channels
– pages 31, 42-44, 110-111 and 128.
• 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 pages 108-109.
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 115.
• There is a clear division of responsibilities
between the Board and the executive
leadership of the Company’s business
– page 115.
• The division of responsibilities between
the Chairman, the CEO, and the Senior
Independent Director is recorded in writing
and is available on the Company’s website
at www.antofagasta.co.uk – page 115.
• 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 Board, supported by the Company
Secretary, has the policies, processes,
information, time and resources it needs in
order to function effectively and efficiently
– pages 105 and 120.
The Chairman
• The Chairman leads the Board and is
responsible for its overall effectiveness in
directing the Company. His responsibilities
are set out on page 115.
• The Board considers that the Chairman
demonstrates objective judgement and
promotes a culture of openness and
debate – pages 96 and 102.
• The Chairman facilitates constructive Board
relations and the effective contribution of all
Directors. He is responsible for setting the
Board’s agenda and ensures that Directors
receive accurate, timely and clear
information – pages 105, 115 and 120.
98
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Remuneration
Policy
• The Company has no executive directors,
however the CEO’s remuneration is disclosed
as if he were a director.
• The Directors’ and CEO’s Remuneration
Policy, approved at the 2020 AGM, 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 135-138.
• The Remuneration and Talent Management
Committee Chair, Francisca Castro, served
as a member of the Committee for more than
12 months before being appointed as Chair.
• The CEO’s remuneration includes transparent,
stretching and rigorously applied performance-
related elements designed to promote the
Company’s long-term sustainable success
– pages 139-152.
Procedure
• The Board has a formal and transparent
procedure for developing policy on executive
remuneration and determining Director
and senior management remuneration
– pages 134-152.
• No Director, nor the CEO, is involved in
deciding his or her own remuneration.
• Directors exercise independent judgement
and discretion when authorising remuneration
outcomes, taking account of Company
and individual performance, and wider
circumstances including internal and
external factors – pages 135-138.
Composition, succession,
and evaluation
Composition of the Board and Committees
• The Board has 10 Directors, comprising
a Non-Executive Chairman and nine other
Non-Executive Directors, six of whom
are independent – pages 112-115.
• All members of the Audit and Risk and
Remuneration and Talent Management
Committees are independent, and two
of the three 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 112-115.
• 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 – pages 114 and 120-122.
Appointments to the Board and
succession planning
• There is a formal, rigorous and transparent
procedure to identify and appoint new
Directors led by the Nomination and
Governance Committee – pages 120-122.
• An independent external search consultancy
was used for the appointment of Tony Jensen
to the Board as a Non-Executive Director
during the year – page 120.
• An effective succession plan is maintained for
Board and senior management appointments
– pages 120-122 and 138.
• Appointments and succession plans are based
on merit and objective criteria, and promote
diversity of gender, social and ethnic
backgrounds, cognitive and personal
strengths – pages 120-122.
Development
• New Directors receive a thorough induction
upon joining the Board – page 120.
• 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 120.
Evaluation
• Annual evaluation of the Board considers
composition, diversity and how effectively
members work together to achieve objectives
– page 123.
• Individual evaluation forms part of the annual
Board evaluation and assesses whether each
Director continues to contribute effectively
– page 123.
• The Board has agreed an action plan to close
gaps identified by Board and Committee
effectiveness reviews – page 123.
• An internally facilitated Board and Committee
effectiveness review was conducted in 2020
– page 123.
Re-election
• All Directors stand for annual re-election
– page 112.
Audit, risk, and internal control
Governance
• The Board has established formal and
transparent policies and procedures to ensure
the independence and effectiveness of internal
and external audit functions and to satisfy itself
on the integrity of financial and narrative
statements – pages 124-128 and 155.
Financial and business reporting
• The Board considers that the Annual Report
presents a fair, balanced, and understandable
assessment of the Company’s position and
prospects – page 155.
Risk and internal control
• The Board has established procedures to
manage risk, oversee the internal control
framework, and determine the nature and
extent of the principal risks that the Company
is willing to take in order to achieve its
long-term strategic objectives – pages 22-30
and 127-128.
Audit
• All Audit and Risk Committee members
are considered to have recent and relevant
financial experience and have competence
relevant to the mining industry – pages 112-114
and 124.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
99
Corporate Governance
Chairman’s introduction
Developing mining
for a better future
the medium and long term that will help us to
continue to Develop Mining for a Better Future.
These medium- and longer-term considerations
included the decision to adjust the scope of the
Los Pelambres Expansion project to enable Los
Pelambres to increase its sea and recirculated
water use to 95% of total consumption by 2025
(see page 109), and monitoring key innovations
for our long-term success including Zaldívar’s
Chloride Leach project, the implementation of
an autonomous haulage system at Centinela’s
Esperanza Sur pit and the opening of Centinela’s
remote operations centre in Antofagasta.
Stakeholder considerations and
workforce engagement
The Board’s ability to continue to deliver
long-term sustainable success relies on a
detailed understanding 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.
Mining is a long-term business and our
relationships with our employees and
contractors, 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 can
be seen on pages 108-109.
Boardroom deliberations are enhanced by an
understanding of the practical challenges that
exist on-site and I would normally, along with
my fellow Directors, regularly visit the Group’s
operations and projects. This year we sought
alternative ways of ensuring that these
perspectives were understood by the Board.
This included fortnightly meetings with the
management team between the months of April
and September. At these meetings we monitored
developments and supported the management
team in addressing challenges arising from the
COVID-19 pandemic paying particular attention
to safety and health, people, sustainability and
stakeholder management, project development
and operational continuity.
Jean-Paul Luksic
Chairman
Dear Shareholders,
As highlighted in my introduction to this
Annual Report, last year offered no shortage
of adversity. Few years have generated such
volatility alongside so many health, operational
and financial challenges.
As a Board, we have responded to this adversity
and volatility, ensuring that our deliberations and
decisions address the immediate issues at hand
while also taking into account the views of our
stakeholders to ensure the Company’s
long-term success.
The COVID-19 pandemic challenged our
governance arrangements during the year
and I am delighted to report they succeeded in
continuing to facilitate effective decision making
as we balanced flexibility in responding to the
most severe global health crisis of our lifetimes
with progressing important strategic initiatives.
Our purpose, strategy, culture
and vision
Following the adoption of our purpose statement
in 2018, we have overseen the implementation of
the Group’s strategic framework which defines
our strategy, culture and vision. We have continued
to align our activities with this framework
during the year as shown on pages 106-107.
The Board fully embraces the important role
that it has in setting the tone for the Group’s
culture and promoting our core values of
respect, responsibility for safety and health, a
commitment to sustainability, excellence in daily
work, innovation and forward-thinking.
Our response to the COVID-19 pandemic
demonstrated our focus on protecting the safety
and health of our employees, contract workers
and local communities during our day-to-day,
project and exploration activities during the year
while continuing to make important decisions for
100
Antofagasta plc Annual Report 2020
antofagasta.co.uk
“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 highlights the particular circumstances of our Group
and how this has influenced how we best apply the Code.”
Jean-Paul Luksic
Chairman
Regardless of the circumstances, we engage
constantly with our workforce, and not only
in the years when there are scheduled union
negotiations. This open dialogue is key to
maintaining good relations and maintaining
the trust that has been built up between the
Company and its employees. It is a testament to
these relationships that wage negotiations were
satisfactorily completed with unions at Centinela,
Zaldívar and the Group’s Transport division
during the year. Details of our workforce
engagement mechanisms are on pages 110-111.
Climate change
Addressing climate change is a global issue
and Chile is particularly vulnerable to its
consequences. The drought that we have been
experiencing in central Chile has affected our
operations and the local communities, and 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.
During the year, a climate change strategy was
approved by the Board. As part of this strategy,
we will take a multidisciplinary approach to
the challenges posed by climate change, better
co-ordinating the many initiatives, large and small,
undertaken by our operations and projects, and
taking advantage of the synergies between them.
Further information can be found in the
Sustainability and Stakeholder Management
Committee report on page 130.
During the year we also worked on the
implementation of a programme to comply
with the recommendations of the Task Force
on Climate-related Disclosures (TCFD) which
will allow us to report on the impact of climate
change on our operations and results. We have
reported on our progress to date on pages 54-56.
Risk management
The Board oversees 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 accept in achieving 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.
– external risks, and updates to the Company’s
Climate Change and Project Execution risk
appetite statements.
Further details can be found on pages 22-23
and 125-128.
Board changes and succession planning
Succession and diversity planning is a key area
of focus for the Board.
We were delighted to appoint Tony Jensen
to the Board on 13 March 2020 and he was
subsequently elected by shareholders at the
2020 AGM. Tony’s extensive industry experience
in the USA and Chile combined with his recent
and relevant financial experience has already
been, and will continue to be, of great benefit
to the Company. He joined the Audit and Risk
Committee from the date of his appointment
to the Board and also joined the Remuneration
and Talent Management, and Sustainability and
Stakeholder Management Committees during
the year.
In anticipation of the retirement of Tim Baker
from the Board at the 2020 AGM, Vivianne
Blanlot joined the Nomination and Governance
Committee in February and stood down from
the Audit and Risk Committee during the year in
line with the Board’s policy that Directors should
not serve concurrently on more than three
Committees except where this is a temporary
arrangement as part of the Board’s
succession plan.
Ramón Jara also joined the Sustainability and
Stakeholder Management Committee during
the year.
In monitoring the Board’s succession plans,
the Board has also carefully considered the
independence of all Directors and is satisfied
that Ollie Oliveira continues to be independent
notwithstanding that the ninth anniversary of his
appointment was in October 2020. In reaching
this conclusion, the Board has taken into account:
• the entirely Non-Executive composition of
the Board which is designed to promote
independent oversight and constructive
challenge of management;
• that there are no circumstances that are
likely to impair, or (other than his tenure)
circumstances that could appear to impair,
Mr Oliveira’s independence;
• that Mr Oliveira’s character and the manner
• that in accordance with the Board and
Committee succession plan, Mr. Oliveira will be
handing over the roles of Senior Independent
Director and Audit and Risk Committee
Chairman to an Independent Non-Executive
Director in the coming months – a transition
of roles that was due to take place before
the 2021 AGM but was delayed due to
the COVID-19 pandemic.
In the meantime, Mr Oliveira will continue in
these roles and will offer himself for re-election
as an Independent Non-Executive Director at the
2021 Annual General Meeting. No other factors
set out in Code Provision 10 apply to the
Company’s Independent Directors.
The Board has met the Parker Review target
and the Board’s Nomination and Governance
Committee continues to work with an
independent external search consultancy to
identify potential female candidates that could
provide an important contribution to the Board
in the future and the Board intends to make a
further appointment before the Company’s 2022
AGM. Further details on the Board’s diversity
policy can be found on pages 120-122.
Shareholder engagement
Our 2020 AGM was held behind closed doors to
ensure that the UK Government’s compulsory
measures at the time, which prohibited public
gatherings of more than two people, were
complied with. Nevertheless the Board and
Committee Chairs engaged with shareholders
through the Company Secretary in relation to
the Company’s AGM resolutions and governance
arrangements in the lead up to the 2020 AGM
and shareholders were provided the opportunity
to ask questions ahead of the 2020 AGM which
were responded to on our website. Nevertheless,
the circumstances at the time prevented
engagement between the Board and
shareholders in the usual way.
This year we will be implementing arrangements
to ensure that shareholders are provided with
an opportunity to engage with the Board
through electronic means and I encourage
all shareholders to take advantage of this
opportunity. Further details are included
in the Company’s 2021 Notice of Annual
General Meeting.
Along with my fellow Directors, I look forward to
engaging with you at the Annual General Meeting.
An update of the Company’s risk appetite
statements was approved by the Board during
the year and included one new risk category
in which he performs his role clearly
demonstrate independent thought and
judgement; and
Jean-Paul Luksic
Chairman
antofagasta.co.uk
Antofagasta plc Annual Report 2020
101
Corporate Governance
Senior Independent Director’s introduction
Ensuring balance
navigating the challenges arising from the
COVID-19 pandemic.
Q. What impact does the
controlling shareholding
have on Company decisions?
The Luksic family first acquired an interest in
the Company over 40 years ago. Since then,
the Company has demonstrated an excellent
track record in terms of safety, operational
expertise and financial strength.
First as an Independent Director and
now as the Senior Independent Director,
I have discussed the role of the controlling
shareholders 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 are
appreciative of the understanding of the
copper price cycle and market fundamentals
of the members of the Luksic family who
serve on the Board, long-term vision of the
industry, and the Company’s 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.
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 shareholders, and the
members of the Luksic family who serve
on the Board (including the Chairman), are
not just supportive of this framework but
also actively encourage the Independent
Directors to provide the independent input
and challenge that we are convinced proves
indispensable in Board decision-making.
Ollie Oliveira
Senior Independent Director
Ollie Oliveira
Senior Independent Director
Q. What are your responsibilities
“My role is to ensure that the
Chairman, the Board, and the
management team receive a
balanced view of issues that are
relevant and important for our
shareholders. This role has
been particularly important this
year when the Company has
had to carefully balance the
needs of all of the Company’s
stakeholders in navigating
the challenges arising from
the COVID-19 pandemic.”
as Senior Independent Director?
I am appointed by the Board to act as a
sounding board for the Chairman and to
ensure that the views of the other Directors
are conveyed to the Chairman and that the
views (and especially any concerns) of
shareholders are passed on to the Board.
My role is to support the Chairman on several
levels. I advise him on corporate governance
matters. I seek to ensure that the issues that
are especially important to the 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 and am based in the UK, 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 director of
a large global mining investment trust, which
help me ensure that the Chairman, the Board
and the management team receive a balanced
view of issues that are relevant and important
for our shareholders. This role has been
particularly important this year when the
Company has had to carefully balance the
needs of all the Company’s stakeholders in
102
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Related party governance in practice
There are several 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.
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 154.
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, during 2020,
each controlling shareholder and its associates
(including Metalinvest Establishment and
Kupferberg Establishment) also complied
with the mandatory independence
provisions throughout the year.
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 operations.
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 does not
take part in the decision on that transaction.
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 154 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 is a transaction to which the UK Listing Rules related party transaction
rules apply, 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 corresponding Relationship Agreement.
Responsibility
Company Secretary,
senior management and
the Executive Committee
Senior management and
the Executive Committee
and, if involving a
controlling shareholder,
Independent Directors
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.
Independent Directors
All other potential related party transactions over $25 million, whether or not in
the ordinary course of business, are approved by the Board. 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. All of the
operating company boards in the Mining Division have directors representing
third party shareholders.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
103
Corporate Governance
Group corporate governance overview
Our 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 its performance against defined measures.
The schedule of matters reserved for the Board is available on the
Company’s website at www.antofagasta.co.uk.
Key responsibilities
• Internal controls, risk
• Culture
• Strategy and management
• Governance
• Shareholder engagement
management, and compliance
• Financial and
performance reporting
• Structure and capital
• Approving material transactions
Board Committees
Nomination
and Governance
Audit
and Risk
Sustainability
and Stakeholder
Management
Projects
Remuneration and
Talent Management
The Board is assisted in discharging 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 are available on the
Company’s website at www.antofagasta.co.uk.
Key responsibilities
The key responsibilities of each Committee and their focus areas for
2020 are set out on page 118.
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 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 function.
Mr Arriagada chairs the Executive Committee.
The Executive Committee reviews significant matters and approves
expenditure within designated authority levels.
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, promoting
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.
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.
104
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Board and Committee information flows
1. Chairman agrees agenda
with Directors
The Chairman maintains 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.
3. Board and Committee meetings
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.
2. Papers circulated in advance
of meetings
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, 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.
1.
Chairman
agrees agenda
with Directors
2.
Papers circulated
in advance of meetings
6.
Information between
meetings
3.
Board and
Committee meetings
5.
Action lists prepared
and updated as key
actions are
implemented
4.
Minutes prepared,
circulated and
approved
4. Minutes prepared,
circulated and approved
The Company Secretary minutes all Board
and Committee meetings, which are circulated
and reviewed by the Board and management,
updated as necessary, and tabled for approval.
5. Action lists prepared and updated
as key actions are implemented
The Board and each Committee maintain their
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.
6. Information between meetings
Between Board meetings, Directors receive
flash reports with monthly and year-to-date
production and financial results, including
key metrics in respect of safety, health,
environmental and community relations
performance, ensuring that the Board is
regularly updated on the Group’s progress.
Occasionally, Directors may receive general
information on the commodity markets and
additional reports highlighting key developments
in the Group’s exploration, projects, business
development and innovation activities.
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 implementation of the Group’s
strategy and the Company’s performance.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
105
Corporate Governance
Board activities
Strategic vision
The Board’s activities in 2020 addressed the challenges posed by the COVID-19 pandemic, protecting
the health and safety of the workforce and local communities while ensuring operational continuity.
In addition, the Board provided oversight on the pursuit of the Group’s strategy, timely confronting
critical issues and advising management in the development of strategic priorities and plans, seeking
to align with the values of the Group and the best interests of our stakeholders.
Our strategic framework
The COVID-19 pandemic has tested not only the flexibility of our
organisation, but also the resilience of our strategy and governance
framework. As we have faced the daily challenges of the pandemic,
we have strengthened our commitment to Developing Mining for a
Better Future as the purpose that mobilises us and gives meaning to
everything we do.
We seek to continue as 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 and
reliable partner in the global mining industry.
We want to generate an inclusive culture, with key values shared by all. We
have a Code of Ethics and our own way of doing things, while managing
our risks. 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, as shown during the current COVID-19 pandemic.
Below are examples of how the Board’s activities in 2020 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
COVID-19 pandemic
• Met fortnightly between March and
September to monitor developments and
support management in addressing challenges
arising from the COVID-19 pandemic with
particular focus on safety and health, people,
sustainability and stakeholder management,
project development and operational continuity.
• Approved a $6 million fund to aid neighbouring
communities including the provision of health
infrastructure and medical equipment.
• Approved a special early retirement plan for
employees at high risk during the pandemic.
Culture
• Monitored the performance of the operations
and projects to understand the progress on
developing the Group’s culture, particularly
concerning safety and health.
• Oversaw the continued implementation of
the Group’s strategic framework, including
the Group’s culture.
• Monitored progress on the implementation of
the Group’s Diversity and Inclusion Strategy.
Reviewed the Group’s gender pay gap analysis.
• Monitored the implementation of behavioural
guidelines which connect specific expected
behaviours to the Group’s culture.
• Reviewed workforce engagement survey
results and meetings with representatives
of the Group’s labour unions.
Governance and engagement
• Reviewed Board and Executive Committee
succession plans. Each Director withdrew
from any meeting when his or her own
position was being considered.
• Appointed Tony Jensen to the Board.
• Approved changes to the membership
of several of the Board Committees.
• Reviewed Director independence.
• Reviewed Directors’ conflict of
interest declarations.
• Reviewed and approved requests by Directors
to undertake additional external appointments.
• Reviewed Committees’ terms of reference.
• Oversaw the implementation of key
recommendations arising from the 2019
external and 2020 internally facilitated Board
effectiveness reviews.
• Monitored feedback from investors and proxy
agencies regarding the Group’s corporate
governance arrangements.
• Reviewed the results of a perception study
on the views of existing and potential
shareholders, and bank equity
research analysts.
Internal controls, risk management
and compliance
• Reviewed the risk management system’s
maturity level.
• Reviewed principal and emerging risks and
updated the Group’s risk appetite statements,
which are aligned with the Group’s strategic
pillars, approving statements for three new
risk areas: climate change, tailings, and “black
swan” events such as the COVID-19 pandemic.
• Reviewed and updated the Group’s risk matrix,
materialised risks and risk mitigation.
• Reviewed budgets for initiatives designed to
mitigate material identified risks.
• Reviewed half-yearly compliance reports.
• Reviewed results of the Group’s
whistle-blowing processes and approved
adjustments to standardise investigations
and add additional resources.
• Approved changes to the Group’s compliance
and crime prevention models.
Financial and performance reporting
• Approved the Group’s 2019 full-year
and 2020 half-year results and
corresponding announcements.
• Reviewed and approved the Group’s Human
• Proposed the dividends paid to shareholders
Rights Policy.
during 2020.
• Reviewed and approved going concern and
viability statements.
106
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Our strategy is structured around five pillars each with defined
short- and medium-term goals to enable us to achieve our purpose.
People
People are central to 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. Our goal is to be the best
employer in the mining industry in Chile. To achieve this, we understand the importance of creating an environment of trust and collaboration that
looks to the long term.
• Approved a “New Ways of Working” project to facilitate flexible on-site,
home-based and hybrid working arrangements following the pandemic,
with the goal of creating a more flexible and adaptable organisation.
• Reviewed the annual talent management exercise, including succession
• Monitored labour relations at the Group’s mining and transport
operations and reviewed the results of collective bargaining negotiations.
• Monitored the implementation of behavioural guidelines which connect
specific expected behaviours to the Group’s culture.
plans for the Executive Committee.
• Monitored the impact of the civil unrest in Chile, including contingency
• Monitored progress on the implementation of the Group’s Diversity
measures to protect the Group’s workforce.
and Inclusion Strategy.
Safety and Sustainability
The safety and health of our employees and contractors 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. We view sustainability as a source of value
creation that is an integral part of our decision-making processes.
• Reviewed and approved the implementation of COVID-19
protocols aimed at protecting the Group’s workforce and
neighbouring communities.
• Continued to monitor the independent review of tailings dam
safety and assessed them versus the ICMM’s standard.
• Continued to monitor the progress of local community interactions
• Reviewed and monitored the Group’s safety and health performance.
• Reviewed the Group’s compliance with environmental commitments.
at Los Pelambres.
Competitiveness
Our key focus as regards competitiveness is to achieve productivity gains through cost control and streamlining our processes.
• Monitored results of the Group’s Cost and Competitiveness Programme,
• Reviewed and approved the Group’s copper concentrate and copper
including estimated future savings.
• Approved key procurement and sales contracts.
• Reviewed and monitored the Group’s financial and
operating performance.
cathode sales strategy.
• Reviewed and approved the Company’s inaugural $500 million
corporate bond issuance and the refinancing of its $500 million
corporate loan.
Growth
We have a portfolio of growth projects that allows us to remain competitive and develop sustainable operations in the long term.
• Reviewed execution progress on the Los Pelambres Expansion project.
• Reviewed execution progress on the Zaldívar Chloride Leaching and
• Reviewed and approved the acquisition and divestment of mining
properties in Chile.
Esperanza Sur projects.
• Reviewed and approved the Group’s budget and long-term
• Reviewed progress on the Centinela Second Concentrator project.
• Reviewed progress on the Twin Metals Minnesota project.
• Reviewed development and exploration activities, including business
development opportunities.
• Reviewed progress on the Group’s material Environmental
Impact Assessments.
price assumptions.
• Reviewed and approved the base case and development case for
the Group’s assets.
• Reviewed and approved the Group’s 2021 budget.
• Reviewed the Group’s reserves and resources statements.
• Reviewed the progress of proposed legislation which could
affect the Group.
Innovation
We innovate as a means of improving social, environmental and economic performance while, at the same time, delivering strong returns for
our shareholders. Innovation is key to improving productivity and efficiency and promoting growth, especially in the medium and longer term.
• Stewarded progress on the Group’s portfolio of innovation initiatives.
• Reviewed progress on the implementation of the Group’s digital
• Monitored construction progress for the Zaldívar Chloride
Leaching project.
transformation programme.
• Reviewed and approved the purchase of an autonomous haulage
• Reviewed and approved Centinela’s remote operations centre project.
system for Centinela’s Esperanza Sur pit.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
107
Corporate Governance
Stakeholder engagement
Engaging with stakeholders to
make decisions for a better future
The Group maintains ongoing dialogue with
stakeholders to understand their expectations
and concerns and these views are considered
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 34-61.
Further details on the Board’s workforce
engagement mechanisms are set out on
pages 110-111. Two principal 2020 Board
decisions are explained here with an explanation
of how the views of key stakeholders were
taken into account.
Principal Board Decision:
2019 Final Dividend
In May 2020, recognising the significant
challenges and uncertainties relating to the
spread of COVID-19 both globally and in Chile,
the Board took the decision to revise its original
March 2020 recommendation in respect
of the 2019 final dividend by reducing the
recommended dividend by 16.3 cents per share
(or a total of $160.7 million). Although the Group
entered the period of economic and operating
uncertainty brought about by the COVID-19
pandemic in a strong financial position, the Board
considered that revising the 2019 final dividend
recommendation would preserve cash within the
Company and balance its responsibilities towards
all stakeholders, including the Company’s
employees, contractors, communities, suppliers,
customers and broader Chilean civil society.
Although the total dividend payout for 2019 was
equal to a 35% payout of net earnings, in line
with the Company’s dividend policy, this decision
was not taken lightly given the Group’s long
history of returning surplus cash to shareholders.
Stakeholder considerations, and the factors set
out in section 172(1), were therefore at the heart
of the decision-making process. As part of its
decision-making the Board had regard to the
different interests of stakeholders but with an
overarching focus, as required by section 172(1),
on acting in the way that would be most likely to
promote the success of the Company for the
benefit of its members as a whole. Among other
things, the likely consequences in the longer
and near term of the decision to revise its
recommendation in respect of the 2019 final
dividend were key considerations for the Board.
How the Board considered, and
had regard to, the interests of key
stakeholders and the requirements
of section 172(1)
The decision to revise its recommendation in
respect of the 2019 final dividend was taken
following extensive discussions between the
Board and management.
• In advance of the decision, the Board was
regularly updated on discussions with the
Group’s employees, contractors, communities,
suppliers and customers to understand the
difficulties they were facing as well as the
impact and potential impact of the COVID-19
pandemic on broader Chilean civil society.
• The Board considered the rapid increase in
the number of new COVID-19 cases in Chile in
the period immediately preceding the Board’s
decision, the Chilean Government’s decision
to impose a total quarantine over the Greater
Santiago area two days before the dividend
was due to be approved and the additional
uncertainty this created around the impact on
the Company’s operations and the potential
restriction on the ability to move its
workforce to and from its operations.
• The uncertainty of the medium- and
longer-term impact of COVID-19 on the
global economy, economic outlook and
the Group were taken into consideration.
• The Board considered market developments
including the actions of other FTSE 350
companies across different sectors.
• The expectations of shareholders and the
impact of any decision on them were a key
consideration for the Board, with a view to
balancing investor priorities given the Group’s
strong track record of returning surplus cash to
shareholders, with maximising cash preservation
given the unprecedented uncertainty.
• The sentiment of, and matters of interest
to, employees, contract workers and local
communities were frequently communicated
to the Board given the paramount importance
of health, safety, well-being and morale and
their perception of the Company’s handling
of the COVID-19 pandemic.
• Updates on supplier performance were also
taken into consideration given their vital role
in enabling the Company to continue to
execute its business model.
Following discussion with the Board, the
Group also took the decision to support local
communities in the province of Choapa and the
Antofagasta region by establishing a $6 million
fund to buy medical supplies and equipment
needed by healthcare workers to fight the
COVID-19 virus, create facilities for people to
stay in if they needed to be quarantined, and to
sterilise public spaces and create safe places.
Further details can be found on pages 36 and 48.
Following the Group’s resilient performance
in the second half of the year, the Board has
subsequently recommended a 2020 final
dividend of $48.5 cents per share in respect
of the 2020 financial year. Further details
can be found on pages 91-92 and 153.
108
Antofagasta plc Annual Report 2020
antofagasta.co.uk
increase in the population and productive
activities, brought significant water stress
to the area.
• In making this decision, the Board had regard
to the need to foster the Group’s business
relationships with suppliers, employees and
contractors as the decision to adjust the scope
of the project formed part of a detailed review
of the project’s execution schedule and costs.
These costs included costs associated with
the restrictions due to COVID-19 following the
project’s original suspension and restart some
120 days later.
• The investments proposed by Los Pelambres
will be presented to the Chilean Environmental
Impact Assessment System (SEIA) and will
include consultations with local communities
and the authorities. The progress on these
consultations will be reported to the Board
as they progress.
• The planned initiatives will require significant
investment by the Group in the province of
Choapa over the next 10 years, estimated at
approximately $1 billion and creating up to
2,000 new jobs during construction. The
Board took into consideration that working
with the communities and authorities would
help the region and the country overcome
the social and economic crisis generated
by COVID-19.
• The expectations of shareholders and
the impact of any decision were key
considerations for the Board, in ensuring
that Los Pelambres will be able to secure the
water it requires while also advancing studies
to extend the life of the mine beyond 2035,
when its current environmental permits expire.
Further details can be found on pages 67 and 75.
Principal Board Decision:
Los Pelambres
Expansion project
During the year, consistent with the Company’s
purpose of Developing Mining for a Better Future,
the Board oversaw a decision to adjust the scope
of the Los Pelambres Expansion project to enable
the future expansion of the desalination plant
currently under construction to 800 l/s, double the
original 400 l/s design. After more than 20 years
of operating in the Choapa province, this change
will pave the way for Los Pelambres to stop using
water from the Choapa River and wells located
nearby and increase its sea and recirculated water
use to 95% of total consumption from 2025. Los
Pelambres, which currently has environmental
authorisation to extract water from the Choapa
River until 2035, has worked for years with its
neighbours and the authorities on the water
management of the Choapa Valley. This work will
continue with the aim of promoting the sustainable
use of available water, with priority being given to
strengthening rural drinking water systems for
human consumption.
Stakeholder considerations, and the factors set
out in section 172(1), were central to the decision-
making process. As part of its decision-making
the Board had regard to the different interests
of stakeholders but with an overarching focus,
as required by section 172(1), on acting in the way
that would be most likely to promote the success
of the Company for the benefit of its members
as a whole. Among other things, the likely
consequences of the decision in the long term
were key considerations for the Board.
How the Board considered, and
had regard to, the interests of key
stakeholders and the requirements
of section 172(1)
The decision to adjust the scope of the Los
Pelambres Expansion project to enable future
expansion of the desalination plant was taken
following extensive discussions between the
Board and management.
• In advance of the decision, the Board was
regularly updated on the views of the nearby
communities and authorities to understand
the difficulties that they were facing relating
to water availability in the Choapa Valley.
• The Board also considered the changes that
have occurred in the Choapa province and the
region over the last 20 years, and particularly
in the last 10 years when a persistent drought
caused by climate change, together with the
antofagasta.co.uk
Antofagasta plc Annual Report 2020
109
Corporate Governance
Employee engagement
Monitoring and understanding the
changing 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. 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 23,000
people. More than 99% are in Chile and more
than 50% come from communities in the
Antofagasta and Coquimbo regions, where all
of the Group’s operating companies are located.
Approximately 29% of the workforce are Group
employees and 71% 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:
• In ordinary circumstances, 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. Although site visits were not possible
during 2020 due to the COVID-19 pandemic,
the Board received fortnightly updates with
23,000
Total Group’s workforce
approximately
99%
Are based in Chile
50%
Come from communities in the
Antofagasta and Coquimbo regions
110
Antofagasta plc Annual Report 2020
antofagasta.co.uk
“Thanks to our employees’ and contract
workers’ resilience and innovation, the
past 12 months were defined not by the
unprecedented challenges we faced, but
our responses to them.”
Jean-Paul Luksic
Chairman
a focus on the safety of employees and
contractors between March and September
and site visits will recommence as soon as
conditions allow.
• 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.
• 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 response to the COVID-19
pandemic and employee wellbeing, the
Diversity and Inclusion Strategy and the
employee value proposition. The results of
these activities are overseen by the Executive
Committee and 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. In 2020 this resulted in the
Board approving the implementation of the
New Ways of Working project (see extract).
• Group-wide employee engagement surveys
• The Group’s workforce is encouraged to
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.
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.
New Ways of Working project
During 2019 the Remuneration and Talent
Management Committee and the Board
oversaw the development of a new employee
Total Rewards Programme which was
designed with the input of employees through
working groups and staff surveys to enable
the Group to provide the flexibility required
by a changing workforce. This includes a
flexitime system to allow 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.
As a consequence of the COVID-19 pandemic,
fully flexible working arrangements were
implemented simultaneously across
the Group to meet health and safety
requirements. The implementation of these
arrangements demonstrated not only that
remote and flexible working arrangements
are feasible for the Group, but demonstrated
increased productivity, while creating
stronger engagement as well as supporting
the Group’s Diversity and Inclusion Strategy,
attracting talent and allowing for better
work-life balance. The Board received
regular feedback on views and experiences
of employees during the pandemic through
regular staff surveys and town hall events
hosted by the CEO where questions were
asked and feedback provided directly by
employees. This feedback was used to design
the Group’s New Ways of Working Project
which will facilitate permanent flexible
on-site, home-based and hybrid working
arrangements following the pandemic,
with the goal of creating a more flexible
and adaptable organisation. The design
and subsequent approval of this project
was reviewed, overseen and approved by the
Board. The experience of our employees will
continue to be monitored through the use of
surveys and town hall events during 2021.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
111
Corporate Governance
Directors’ biographies
A diverse Board with
wide-ranging experience
Biographical details for each Director standing for re-election at the 2021 AGM are set out below. 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. The availability of Directors to attend the significant number of ad hoc informal meetings in response
to the challenges arising from the COVID-19 pandemic throughout the year demonstrated that all Directors are able to devote sufficient time to
fulfilling their roles. Ages are as at the date of the 2021 AGM.
NG
NG
Jean-Paul
Luksic
Chairman, 56
Independent: No
AR PC
NG
PC
ST
ST
NG
AR PC
Ollie
Oliveira
Senior Independent
Director, 69
Ramón
Jara
Non-Executive Director, 68
PC
ST
Juan
Claro
Non-Executive Director, 70
ST
Andrónico
Luksic C
Non-Executive Director, 67
Independent: No
Independent: No
Independent: No
Appointed to the Board: 1990
Independent: Yes
Appointed to the Board: 2003
Appointed to the Board: 2005
Appointed to the Board: 2013
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 Quiñenco
group listed companies Banco
de Chile and Sociedad Matriz
SAAM SA
• Member of the board of
Centro de Estudios Públicos,
a not-for-profit academic
foundation in Chile
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 and audit and
management engagement
committee member
of BlackRock World
Mining Trust plc
Lawyer with considerable legal
and commercial experience
in Chile
Previous roles
• Partner, Jara del Favero
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)
• Member of the Advisory
Council of Centro de Estudios
Públicos, not-for-profit
academic foundation in Chile
• Member of the board of the
Centre of Arbitration of the
Chilean Chamber of Commerce
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 Chile-China Business)
Current positions
• Chairman of Embotelladora
Andina SA (Coca Cola)
and Energía Coyanco SA
• Director of Melón SA
and Agrosuper SA
• Member of the board of
Centro de Estudios Públicos,
not-for-profit academic
foundation in Chile
• 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 Sociedad
de Fomento Fabril
(Chilean Industrial Council)
• 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
112
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Key to Committees
Antofagasta plc Directors’ Board meeting attendance1
NG
Nomination and
Governance
AR
Audit and Risk
ST
Sustainability and
Stakeholder Management
PC
Projects
RT
Remuneration and
Talent Management
Chairman
Number attended
Number attended
Number attended
Jean-Paul Luksic
Ollie Oliveira
Ramón Jara
Juan Claro
10/10
10/10
10/10
10/10
Tim Baker2
Andrónico Luksic C
Vivianne Blanlot
Jorge Bande
Francisca Castro
Michael Anglin
Tony Jensen3
4/4
8/10
10/10
10/10
10/10
10/10
9/9
1. In addition to scheduled Board meetings, the Board met fortnightly between March and September to monitor developments and
support management in addressing the challenges arising from the COVID-19 pandemic. All Directors attended a significant majority
of these meetings.
2. Tim Baker did not stand for re-election at the 2020 AGM.
3. Tony Jensen joined the Board on 13 March 2020.
ST
AR
RT
NG
AR ST PC
AR RT
RT PC
ST RT
Vivianne
Blanlot
Non-Executive Director, 66
NG
AR ST
Jorge
Bande
Non-Executive Director, 68
PC
Francisca
Castro
Non-Executive Director, 58
AR
RT
Michael
Anglin
Non-Executive Director, 65
RT
PC
RT
Tony
Jensen
Non-Executive Director, 59
ST
AR
Independent: Yes
Independent: Yes
Independent: Yes
Independent: Yes
Independent: Yes
Appointed to the Board: 2014
Appointed to the Board: 2014
Appointed to the Board: 2016
Appointed to the Board: 2019
Appointed to the Board: 2020
Commercial engineer with over
25 years’ experience in industry,
including mining, energy, finance
and public/private infrastructure
projects in the United States
and Chile
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
• Adviser to THEMAC Resources
Group Limited
• Director of Tulla
Resources, Australia
Previous roles
• Executive Vice-President
of Strategic Business
at Codelco
• General Co-ordinator of
Concessions at Chile’s
Ministry of Public Works
• Held various roles within
Chile’s Finance Ministry and the
World Bank, Washington DC
• Member of the independent
Technical Panel of Chile’s
Public Works Concessions
Current positions
• Member of the Chilean
Pension Funds Risk
Classification Committee
• Director of SalfaCorp SA
• Director of the Fraunhofer
Chile Research Foundation
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
• President, CEO and director of
Royal Gold Inc
• Mine General Manager of the
Cortez joint venture in Nevada
and in 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
• Member of the University
Advisory Board for the South
Dakota School of Mines
and Technology
Economist with extensive
experience in public and private
energy, mining, water and
environmental sectors in Chile
Previous roles
• Executive Director of the
Comisión Nacional de
Medio Ambiente (Chile’s
Environmental Agency)
• Undersecretary of the Comisión
Nacional de Energía (Chile’s
National Energy Commission)
• Chile’s Minister of Defence
• Director of Scotiabank Chile
• Member of 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, paper and
packaging company listed
in Chile
• Director of Colbún SA,
an energy company
listed in Chile
• Director of Instituto Chileno
de Administración Racional de
Empresas (ICARE), a business
think tank 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
• Vice President of 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 Chile’s Ministry of Finance
Current positions
• Director of CESCO
• Director of NextMinerals SA
• Director of Circular Mining
Company
• 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
antofagasta.co.uk
Antofagasta plc Annual Report 2020
113
Corporate Governance
Board balance and skills
A well-balanced
Board
The Board comprises 10 Directors with a broad and complementary set
of technical skills, educational and professional experience, nationalities,
personalities, cultures and perspectives.
Board balance
Independence1
Gender diversity2
Tenure
Nationality3
1
6
8
3
7
1
3
Chairman
Independent
Non-Independent
2
Male
Female
3
2
4
1-5 years
6-10 years
10+ years
Chile
USA
UK
1. The Board reviews the independence of Directors annually. The Board has carefully
considered the independence of all Directors and is satisfied that Ollie Oliveira continues
to be independent notwithstanding that the ninth anniversary of his appointment was in
October 2020. In reaching this conclusion, the Board has taken into account:
• the entirely Non-Executive composition of the Board which is designed to promote
independent oversight, and constructive challenge, of management;
• that there are no circumstances that are likely to impair, or (other than his tenure)
circumstances that could appear to impair, Mr Oliveira’s independence;
• that Mr Oliveira’s character and the manner in which he performs his role clearly
demonstrate independent thought and judgement; and
• that in accordance with the Board and Committee succession plan, Mr Oliveira will be
handing over the roles of Senior Independent Director and Audit and Risk Committee
Chairman to an Independent Non-Executive Director in the coming months – a
transition of roles that was due to take place before the 2021 AGM but that was
delayed due to the COVID-19 pandemic.
In the meantime, Mr Oliveira will continue as Senior Independent Director and Audit
and Risk Committee Chair and will offer himself for re-election as an Independent
Non-Executive Director at the 2021 Annual General Meeting. No other factors set out
in Code Provision 10 apply to the Company’s Independent Directors.
2. The Board’s Nomination and Governance Committee continues to work with an
independent external search consultancy to identify potential female candidates that
could provide an important contribution to the Board in the future and the Board intends
to make a further appointment before the Company’s 2022 AGM. Further details on the
Board’s diversity policy can be found on pages 120-122.
3. The Company has met the Parker Review target and in 2020, more than half the Board
identified as being from an ethnic minority background according to the criteria in the
Parker Review survey. As noted throughout this Annual Report, the Group’s footprint is
primarily in Chile where ethnicity profiles and representation in society differ significantly
from those in the UK. Nevertheless, the Board recognises that the mining industry is
international and the Board therefore includes several 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
Tony Jensen
e
c
n
e
d
n
e
p
e
d
n
I
ü
ü
ü
ü
ü
ü
e
c
n
e
i
r
e
p
x
e
O
E
C
ü
ü
ü
ü
ü
ü
ü
s
n
o
i
t
a
r
e
p
o
i
g
n
n
M
i
e
c
n
e
i
r
e
p
x
e
e
c
n
e
i
r
e
p
x
e
y
r
t
s
u
d
n
i
i
g
n
n
M
i
ü
ü
ü
ü
ü
ü
ü
ü
ü
e
c
n
a
n
r
e
v
o
g
d
r
a
o
B
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
l
a
g
e
L
ü
n
o
i
t
a
s
n
e
p
m
o
c
e
v
i
t
u
c
e
x
E
n
a
c
i
r
e
m
A
n
i
t
a
L
e
c
n
e
i
r
e
p
x
e
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
t
e
k
r
a
m
K
U
ü
ü
t
n
e
m
e
g
a
n
a
m
t
c
e
j
o
r
P
ü
ü
ü
ü
ü
ü
y
t
i
l
i
b
a
n
i
a
t
s
u
S
ü
ü
ü
ü
ü
ü
l
a
i
c
n
a
n
F
i
ü
ü
ü
ü
ü
ü
ü
e
c
n
e
i
r
e
p
x
e
y
g
r
e
n
E
ü
ü
ü
ü
ü
ü
ü
t
n
e
m
n
r
e
v
o
G
s
n
o
i
t
a
e
r
l
ü
ü
ü
ü
ü
ü
ü
ü
ü
n
o
i
t
a
c
i
n
u
m
m
o
C
ü
ü
ü
ü
ü
ü
ü
114
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Roles in the boardroom
Board roles
and responsibilities
The Group’s CEO, Iván Arriagada, is not a Director, which reflects law and practice in Chile1. Despite this, interaction between the Board and
executive management is as expected between Non-Executive Directors and management in a typical UK-listed company. 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.
Non-Executive Chairman
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 reviews.
• Leads relations with shareholders.
Senior Independent Director
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.
Independent Non-Executive Directors
Ollie Oliveira
Michael Anglin
Jorge Bande
Vivianne Blanlot
Francisca Castro
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.2
• 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.
Non-Executive Directors
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.
• 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.3
• Ensure that no individual or small group
of individuals can dominate the Board’s
decision-making.
CEO
Iván Arriagada
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 and makes
recommendations to the Board regarding
the Group’s day-to-day activities and
long-term plans.
Executive Committee members
+ See pages 116-117 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.
Company Secretary
Julian Anderson
Ensures that Directors have access to
the information they need to perform
their roles.
• Provides a conduit between Board
and Committee communications and
a link between the Board and management.
• Advises the Board on corporate
governance and supports the Board in
applying the Code and complying with
the UK listing regime and obligations.
The division of responsibilities between the Chairman, the CEO, and the Senior Independent Director is recorded in writing and is available on the
Company’s website at www.antofagasta.co.uk.
1. This is consistent with practice in Chile where local law prohibits CEOs of listed companies from being directors of those companies. 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.
2. The Board has carefully considered the independence of all Directors and is satisfied that Ollie Oliveira continues to be independent notwithstanding that the ninth anniversary of
his appointment was in October 2020. The factors taken into account by the Board in reaching this conclusion are set out on page 114.
3. 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
Antofagasta plc Annual Report 2020
115
Corporate Governance
Executive Committee and General Managers’ biographies
A strong and effective
management team
Iván Arriagada
CEO appointed in 2016
BD
D
P
Mauricio Ortiz
CFO appointed in 2020
BD
E
D
P
Hernán Menares
Vice President of Operations
appointed in 2011
OP
P
Ana María Rabagliati
Vice President of Human Resources
appointed in 2013
E
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 at 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
• Almost 20 years’ experience with
Shell in Chile, the United Kingdom,
Argentina and the United States
Joined the Group in 2015
• Electrical engineer and two Master
of Science degrees (Metals and Energy
Finance and Electrical Engineering)
with 15 years’ experience in the energy,
mining and railway industries
Previous roles
• General Manager at FCAB
(Transport division)
• Business Development Manager
at Antofagasta Minerals
• Finance Manager at
Codelco – Chuquicamata
• Business Development Principal
at Rio Tinto plc, London
• Various operating project roles
at BHP Billiton
Joined the Group in 2008
• Mining engineer and mineral economist
with over 35 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
Joined the Group in 2013
• Human resources specialist with a degree
in Business Administration, with more than
25 years’ experience in international
companies across a range of industries,
including financial services, industrial,
and oil and gas
Previous roles
• Corporate Human Resources Manager
at Masisa SA
• Country Human Resources
Vice President at Citigroup Chile
• Human Resources Manager at Lafarge
Group in Chile
• Various positions across several
divisions and areas at Shell, including
Human Resources Manager at Shell Oil
Latin America’s lubricants business
Gonzalo Sánchez
Vice President of Sales appointed
in 2004
Francisco Walther
Vice President of Projects
appointed in 2018
P
René Aguilar
Vice President of External
Affairs and Sustainability
appointed in 2017
E
P
Patricio Enei
Vice President of Legal
appointed in 2014
E
D
P
Joined the Group in 1996
• Civil engineer with over 25 years’
experience in marketing and
metals hedging
Previous roles
• Deputy Commercial Director,
Antofagasta Minerals SA
• Copper sales at Codelco
Joined the Group in 2007
• Mining engineer with over 25 years’
experience in mining operations
and engineering at open pit and
underground mines
Previous roles
• Corporate Project Manager
at Antofagasta Minerals SA
• Project Director of Reko Diq
• Director of Codelco’s Chuquicamata
underground mine project
• Head of engineering for Codelco’s Mansa
Mina (Ministro Hales) project
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
• Health and Safety Director at the
International Council on Mining
and Metals (ICMM), London
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
• Senior lawyer at BHP Billiton in Chile
• Chief Legal Counsel at Minera Doña Inés
de Collahuasi
• Lawyer at the Instituto de Normalización
Previsional and in private practice
116
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Key to Committees
OP Operating Performance
Review Committee
BD Business Development
Committee
E Ethics Committee
D Disclosure Committee
P Project Steering Committees
Andrónico Luksic L
Vice President of Development
appointed in 2015
BD
Andrés Hevia
Vice President of Strategy and
Innovation appointed in 2020
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
Joined the Group in 2006
• Civil mining engineer and MBA with
over 35 years’ experience in mining
Previous roles
• Consultant and director of various
mining companies
• Positions at Minera Escondida including
Head of Planning and Development and
Vice President of Mining
• Various positions at Banco de Chile
• General Manager of São Bento
Mineração in Brazil and Vilacollo in Chile
Katherina Jenny
General Manager –
FCAB (Transport division) appointed
in 2019
Joined the Group in 2016
• Mining engineer and MBA, with over
15 years’ experience in mining
Previous roles
• Safety and Health Manager
at Antofagasta Minerals
• Productivity and Costs Manager
and Safety Manager at Codelco
• Various roles at BHP Billiton, including
mine planning, safety and health
and environment
Mauricio Larrain
General Manager – Los Pelambres
appointed in 2017
Carlos Espinoza
General Manager – Centinela
appointed in 2020
Leonardo Gonzalez
General Manager – Antucoya
appointed in 2015
Julio César Castillo
General Manager – Zaldívar
appointed in 2020
Joined the Group in 2017
• Civil mining engineer and Master of
Science (Mineral Economics) with
over 25 years’ experience in mining
Previous roles
• General Manager at Codelco’s
El Teniente Division
• Operations Manager at El Teniente
• Mine Planning Corporate Manager
at Codelco
• Various positions at Codelco and
Los Pelambres
Joined the Group in 2010
• Civil mining engineer and MBA, with
over 25 years’ experience in mining
Joined the Group in 2015
• Civil mining engineer and MBA, with
Joined the Group in 2016
• Civil metallurgic engineer, with 25 years’
25 years’ experience in mining
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
Previous roles
• Operations Manager at Los Pelambres
• Planning and Development Manager
at Los Pelambres
Inés de Collahuasi
• Planning positions at Codelco
antofagasta.co.uk
Antofagasta plc Annual Report 2020
117
Corporate Governance
Introduction to the Committees
Board committees that
ensure focus
The Board’s Committees ensure that Board
deliberations are focused on key issues and that
proposals are submitted after specialist review,
thorough debate, and rigorous challenge.
Each Committee provides a forum to allow the
views and perspectives of stakeholders to be
discussed, so that they are represented in the
Board’s deliberations.
Nomination and Governance Committee
Key responsibilities
Focus areas for 2020
• Corporate governance framework
• Succession planning for the CEO
and the Board
• Board and Committee composition
• Nomination to the Board
• Board effectiveness reviews
• Succession planning for Board
and Committee roles
• Board Committee composition
• Monitoring shareholder feedback
on Governance
+ See page 119
for more
information
Audit and Risk Committee
Key responsibilities
Focus areas for 2020
• Financial reporting
• External audit
• Internal audit
• Risk and internal control
• Compliance
• Monitoring the impact of the COVID-19
pandemic on the Group’s internal controls,
audit and risk management capabilities.
• Managing the transition to a new PwC
lead audit partner from 2020 onwards.
• Assisting the Board with updates to
the Group’s risk appetite assessment.
+ See page 124
for more
information
Sustainability and Stakeholder Management Committee
Key responsibilities
Focus areas for 2020
• Policies and commitments
• Safety and health
• Community relations
• Environmental and social matters
• Stakeholder engagement
Projects Committee
• Overseeing measures to protect the health
and safety of employees, contract workers
and local communities in response to the
COVID-19 pandemic.
• Endorsing key policies for the Group’s
long-term sustainable success relating to
tailings management, climate change, human
rights, environmental and social matters.
+ See page 129
for more
information
Key responsibilities
Focus areas for 2020
• Oversight of project standards, guidelines,
• Monitored progress in the execution of
and best practices
• Project development lifecycle matters
• Project reviews
• Lessons learned from completed projects
the Los Pelambres Expansion and Zaldívar
Chloride Leach projects, including revisions
due to the COVID-19 pandemic.
• Reviewed an updated water strategy for Los
Pelambres including a proposal to double
desalinated water capacity to 800 l/s.
+ See page 132
for more
information
Remuneration and Talent Management Committee
Key responsibilities
Focus areas for 2020
• Remuneration governance
• Directors’ remuneration
• Executive remuneration
• Group pay structures
• Talent management and succession planning
for the Executive Committee
• Employee engagement
• Talent retention
• Diversity and inclusion
• Determining the application of the Group’s
executive remuneration framework in
response to the COVID-19 pandemic.
• Considering feedback from shareholders
in relation to the 2020 Directors’ and CEO
Remuneration Policy that was approved
at the 2020 AGM.
• Monitoring the development and endorsing
for Board approval, the New Ways of
Working project.
+ See page 134
for more
information
118
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Nomination and Governance Committee report
Preparing for the future
“ 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 effectively respond
to the challenges of the future.”
Jean-Paul Luksic
Chair of the Nomination and Governance Committee
• Other regular attendees included 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.
2020 Membership and meeting attendance
Jean-Paul Luksic (Chair)
Tim Baker1
Vivianne Blanlot2
Ollie Oliveira
1. Tim Baker did not stand for re-election at the 2020 AGM.
2. Vivianne Blanlot joined the Committee on 1 February 2020.
Number attended
3/3
2/2
2/2
3/3
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
• overseeing and facilitating annual reviews
of the Chairman, the Board, its Committees
and individual Directors, including externally
facilitated reviews
• evaluating and overseeing the balance of
skills, knowledge and experience on the
Board and its Committees
• monitoring the independence of Directors
• overseeing Board succession plans and
leading the process to identify 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 the induction of new Directors
• overseeing CEO succession plans
Key activities in 2020
Corporate governance
• Monitored the fulfilment of the
new requirements, principles
and expectations of the Code.
Succession planning
• Reviewed and endorsed
detailed succession plans for
the Board and its Committees.
• Reviewed Directors’
• Reviewed and endorsed
declarations on potential
conflicts of interest.
• Reviewed requests by
Directors to undertake
additional appointments.
• Reviewed the Governance
section of the 2019 Annual
Report and recommended
it to the Board for approval.
• Reviewed the 2020 Notice
of AGM.
• Reviewed arrangements for
the 2020 AGM in response
to the COVID-19 pandemic.
• Reviewed feedback
from investors and proxy
advisers on the shareholder
resolutions tabled at the
2020 AGM.
• Reviewed the effectiveness
of the Group’s workforce
engagement mechanisms.
the succession plan for the
Senior Independent Director.
• 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.
Board and Committee
composition
• Reviewed the independence
of all Directors, making
recommendations to
the Board.
• Monitored the global search
carried out by Spencer
Stuart for an Independent
Non-Executive Director.
• Interviewed and considered
potential Board candidates.
• Recommended that Tony
Jensen be appointed to
the Board and to the
Audit and Risk Committee,
and subsequently to
the Remuneration and
Talent Management and
Sustainability and Stakeholder
Management Committees.
• Recommended that Vivianne
Blanlot join the Nomination
and Governance Committee
and step down from the
Audit and Risk Committee.
• Recommended that Ramón
Jara join the Sustainability
and Stakeholder
Management Committee.
• Reviewed and endorsed
updates to the Board’s
skills matrix.
Board effectiveness reviews
• Oversaw the implementation
of recommendations arising
from the 2019 external
evaluation of Board and
Committees’ performance.
• Carried out the 2020 internal
evaluation of the Board and
Committees’ performance.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
119
Corporate Governance
Nomination and Governance Committee report continued
Diversity, inclusion
and succession planning
Q. What is the scope of the Board’s
succession planning?
The Board’s succession plan is reviewed
formally at least once per 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 individual 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 123,
the Group’s vision and strategy, as shown
on pages 18-19 and 106-107, the Board’s
diversity policy (below) and the core
competencies and areas of expertise on the
Board, as shown on page 114. 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 and 2020 the Committee appointed
Spencer Stuart to assist with the search for
new independent Non-Executive Directors.
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, leadership
capabilities, 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 Tony Jensen to
be recommended to the Board for
appointment in 2020.
Q. What support does the Company
provide to facilitate induction and
assist with professional
development?
Induction
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.
Continuing personal development
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.
Resources
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.
Q. What is the Board’s position in
relation to diversity?
The Board’s Diversity and Inclusion Policy
reflects the Board’s belief in the benefits of
diversity and that more diverse companies
attract and maintain 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.
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 noted throughout this Annual Report, the
Group’s current activities are focused in Chile.
The Company has met the Parker Review
target and in 2020, more than half the Board
identified as being from an ethnic minority
background according to the criteria in the
Parker Review survey. As noted throughout
this Annual Report, the Group’s footprint is
primarily in Chile where ethnicity profiles and
representation in society differ significantly
from those in the UK. Nevertheless the
Board recognises that the mining industry
is international and the Board therefore
includes several Directors from outside
Chile in support of its vision and strategy.
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.
Gender diversity is a fundamental pillar of
the Group’s diversity and inclusion strategy
and the Board recognises and supports the
important work performed by the Hampton-
Alexander Review in pursuing a 33% target
for women, on FTSE 350 boards and on
executive committees and their direct
reports by the end of 2020.
120
Antofagasta plc Annual Report 2020
antofagasta.co.uk
“The Board believes in the benefits of diversity and that
more diverse companies attract and maintain the best
talent and achieve stronger overall performance.”
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.
As at the date of this report, there are
two women on our Board of ten Directors.
Vivianne Blanlot joined the Board in 2014 and
has chaired the Board’s Sustainability and
Stakeholder Management Committee since
January 2017. Francisca Castro joined the
Board in 2016 and has chaired the Board’s
Remuneration and Talent Management
Committee since May 2019.
The two most recent searches performed
in 2019 and 2020 were targeted towards
identifying candidates with mining operations
experience (to cover the valuable skill set of
a departing Director) and recent and relevant
financial experience (to succession plan
for the role of chair of the Audit and Risk
Committee in the future). Searches were
instructed to access the widest possible
talent pool and as has been the case for many
years, instructions were given to specifically
identify potential female candidate. By way
of example, for the most recent appointment
in March 2020, several hundred potential
candidates were considered as part of a
global search, from which a short list of seven
were interviewed, four of whom were female.
Although it was not possible to appoint a
female candidate for this or the previous
appointment, the Group is committed to
developing a pipeline of diverse talent for
the future.
The Board’s Nomination and Governance
Committee continues to work with an
independent external search consultancy to
identify potential female candidates that could
provide an important contribution to the Board
in the future and the Board intends to make a
further appointment before the Company’s
2022 AGM.
Although we were unable to meet the
33% target by the end of the year, we are
committed to increasing the percentage of
women on our Board, in senior management
positions and importantly, in the Group’s
workforce. We believe that this will support
the Group, the industry and Chile in achieving
a better position to be able to increase the
percentage of women in leadership roles.
Q. What policies are in place to
promote a diverse pipeline
of talent for the future?
The Group is committed to developing a
pipeline of female talent that will serve to
widen the pool of female candidates for Board
and leadership positions in the future. This is
a responsibility that the Group is leading in
Chile, where female participation in the
workforce remains well behind more
developed economies such as the
United Kingdom.
In 2019, we sponsored the creation of
a Chilean chapter of the 30% Club, the
campaign launched in the UK in 2010 to foster
gender balance on companies’ boards and
in senior management positions. To further
promote diversity at the Executive Committee
level and below, the current diversity and
inclusion strategy was approved following
an in-depth exercise to assess whether the
Group’s then existing diversity and inclusion
model was appropriate, which included
interviews with stakeholders, a benchmarking
exercise and a comprehensive review of the
Group’s policies and processes. This review
identified structural impediments that needed
to be addressed to achieve a sustained
improvement in the Group’s diversity and
inclusion model and these issues were
addressed in the first years following
approval of the new strategy.
Metrics associated with the development of
the diversity and inclusion strategy form part
of the Group’s annual bonus plan and formal
talent management and succession planning
exercise and performance is assessed by
the Remuneration and Talent Management
Committee at the end of each year. The
Remuneration and Talent Management
Committee is responsible for succession
planning for the Executive Committee 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 part of the Diversity and Inclusion strategy,
female senior executives have been appointed
to the boards of all our operating companies
and we have two women in the wider
15-member Senior Management team; the
General Manager of our Transport division
and our Vice President of Human Resources.
Historically it has been difficult for the mining
industry to attract female talent and this has
also been the case in Chile. However, we are
pleased to report that this is beginning to
change and the Group has committed to
doubling the percentage of women in the
Group’s workforce by 2022, compared with
the 2018 baseline and for these improvements
to be embedded, sustained and improved
upon from that point. The gender balance of
the Group’s Executive Committee and direct
reports is set out on page 43. In 2018, 8.6%
of the Mining division’s workforce were
women and by the end of 2020 this figure
had increased to 14.7%, compared with 8.5%
on average for the Chilean mining industry,
with women in supervisory roles (the level
immediately below management) now at
23.4%. To track this metric, progress is
reported monthly to the Executive Committee
and in order to achieve this goal, we have
antofagasta.co.uk
Antofagasta plc Annual Report 2020
121
Corporate Governance
Nomination and Governance Committee report continued
50%
of new recruits into the Mining Division in 2020
were female
19/20
places were filled by women on the Group’s
‘Young Graduates’ programme to develop
future executives
taken steps to create more opportunities for
women to work at our operating companies
which are our largest employers but where
the challenge of attracting female talent has
been particularly acute.
In our Mining division, female recruitment has
included apprentice programmes specifically
for women and the launch of a relief workers
programme under which residents of local
communities are employed to cover breaks
during mining shift work, such as lunch
periods. This programme provides
opportunities mainly for women, but
also for other residents who, for family
reasons, are unable to work a full shift.
In our Transport division, we launched a
programme in 2018 to incorporate women
into maintenance roles, and this has now
been expanded to other parts of the division.
These initiatives are producing the desired
results. In 2020, a record 50% of new
recruits into the Group’s Mining division were
female, adding 356 women to our workforce.
Apprentices account for a large share of
this success. Of the 91 apprentices hired by
Centinela during 2020, 87 were women and
at Los Pelambres, all 35 apprentices in the
mine and concentrate areas are women.
As part of their induction, gender-specific
coaching is being provided to the apprentices
as well as operators and line managers at
the sites.
A total of 19 female candidates out of 20
places were also selected to take part in the
Group’s Young Graduates programme, which
is aimed at people with the potential to take on
executive roles.
The Board will continue to monitor
developments in 2021.
Jean-Paul Luksic
Chair of the Nomination and
Governance Committee
We are also promoting the professional
development of women currently working
in both our Mining and Transport divisions.
This has led to, for example, a 61% increase
in the number of women in the talent pool
since 2018, inviting more than 120 women
to participate in coaching, leadership and
mentoring programmes and enrolling 23
women in the “Promociona” programme,
a local initiative that supports women in
reaching senior leadership positions. Similarly,
we have also sponsored the participation of
four of our women in the Inter-American
Development Bank Programme that
empowers, makes visible and strengthens
the leadership skills of women with high
potential in the mining industry.
Importantly, we acknowledge that culture is
equally important in this matter and we have
therefore implemented a set of actions and
programmes to strengthen an inclusive
culture that encompasses unconscious bias
training, work-life balance measures, and
sexual harassment and domestic violence
prevention and information campaigns. To
assure their inclusiveness and “no bias”,
human resources processes, such as
recruitment and the individual performance
management system have been reviewed
and adjusted.
122
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Board effectiveness
Board effectiveness
review
During 2020, the Committee oversaw
an internal evaluation of the Board and its
Committees, focusing on the areas identified
in the 2019 externally facilitated evaluation.
Led by the Senior Independent Director,
the other Directors also met without the
Chairman present to evaluate the Chairman’s
performance. The Chairman evaluated the
performance of Directors and, facilitated by
the Company Secretary, the Chairman and the
Senior Independent Director also monitored the
gap closure plan addressing the improvement
areas identified in the 2019 external review.
In accordance with the Code, the Board
undertakes 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. Ms Chalmers interviewed Directors
and Executive Committee members who
regularly attend Board and Committee meetings.
She 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.
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 which
formed the basis for a gap closure plan facilitated
by the Company Secretary and monitored by the
Chairman and the Senior Independent Director.
At the end of 2020 an internal evaluation of
the Board and its Committees was carried
out to monitor progress and identify further
opportunities for improvement using a
targeted anonymous survey of Directors.
The COVID-19 pandemic had a significant impact
on the Board’s activities and processes in 2020
as meetings were held virtually from April. The
Board and Committee meeting schedule was also
adjusted to accommodate fortnightly Board
update calls with management to monitor
developments and support management in
addressing the challenges arising from the
COVID-19 pandemic.
In the 2020 internal Board and Committee
effectiveness review, Directors highlighted how
recommendations made in the 2019 external
review had been addressed in spite of the
challenges associated with the pandemic. They
recommended adjustments to the standing Board
and Committee meetings schedule to allow for
some Board and Committee meetings to be held
virtually following the pandemic and highlighted
strategic topics that should be tabled for
discussion in 2021. They also suggested
prioritising activities such as site visits
that should be undertaken as soon as
circumstances allow.
A further internal Board and Committee
effectiveness review will be undertaken in 2021
to monitor progress, identify further opportunities
for improvement and prepare for an externally
facilitated review in 2022.
Jean-Paul Luksic
Chair of the Nomination and
Governance Committee
2019
The external review focused
on evaluating the following
key areas:
• Board focus and prioritisation
• alignment of the Company’s purpose,
strategy, values, and culture with
its vision
• the nature and quality of the
information and support provided
by management to the Board
• 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 Chairman’s leadership
2020
The Board focused 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 diversity targets
in mind regarding the appointment
of women to Board and Executive
Committee positions
• paying special attention to
emerging risks
2021
The Board will focus on a
number of areas to improve
its, and its Committees’,
effectiveness:
• increase knowledge of market
developments and peers’ initiatives
• continue to keep diversity targets in
mind regarding the appointment of
women to Board and Executive
Committee positions
• the need for Directors to visit each of
the Group’s operations at least once
a year after the lifting of COVID-19
travel restrictions
• complete the formal induction process
for Tony Jensen after the lifting of
COVID-19 travel restrictions
• maintain some dedicated virtual
meetings during the year
• maintain the practice of co-ordinating
ad hoc sessions to cover specific key
issues that are under discussion
during the year
antofagasta.co.uk
Antofagasta plc Annual Report 2020
123
Corporate Governance
Audit and Risk Committee report
Focusing on controls
“ The Audit and Risk Committee is focused on ensuring the
Group has strong financial controls and risk management.
This was particularly important in 2020 as we monitored
the impact of the COVID-19 pandemic.”
Ollie Oliveira
Chair of the Audit and Risk Committee
2020 Membership and meeting attendance
Ollie Oliveira (Chair)
Jorge Bande
Vivianne Blanlot1
Francisca Castro
Tony Jensen2
1. Vivianne Blanlot stepped down from the Committee on 18 August 2020.
2. Tony Jensen joined the Committee on 13 March 2020.
Number attended
• Other regular attendees included representatives from
6/6
6/6
5/5
6/6
5/5
PricewaterhouseCoopers (PwC), the Group’s external auditor,
the CEO, the CFO, the Group Financial Controller, the Head of Internal
Audit, the Head of Risk, Compliance and Internal Control, and the
Company Secretary.
• Committee members participate in the other Board Committees, allowing
the Committee to consider 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.
• All Committee members are 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:
• monitoring the overall financial reporting
process, which includes responsibility for
reviewing the year-end and half-year
financial reports
• overseeing the external audit process
and managing the relationship with PwC,
the Group’s external auditor
• reviewing and monitoring PwC’s
independence and objectivity
• overseeing internal audit, including
monitoring and reviewing the effectiveness
of the Group’s internal audit function, plans,
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 Group’s
compliance and crime prevention models
Key activities in 2020
Financial reporting
• Reviewed the 2019 year-end and
2020 half-year financial reports,
focusing on significant accounting
issues relating to the Group’s results.
• Reviewed the Group’s 2019
reserves and resources statement
and corresponding audits. Reviewed
highlights of the 2020 statement.
• Assisted the Board in ensuring that
the 2019 Annual Report was fair,
balanced and understandable.
• Reviewed the 2020 going concern
and long-term viability statements.
• Reviewed the Group’s tax position,
including the effective tax rate,
recovery of tax refunds and
tax-disallowed expenses.
External audit
• Reviewed and approved the
2020 audit plan, including fees.
• Assessed the effectiveness
of the external audit process.
• Approved an update to the policy
on the independence of the Group’s
external auditors and reviewed
PwC’s independence.
• Monitored PwC’s audit partner
transition plan.
• Reviewed the key audit findings
in respect of the 2019 audit and
reviewed PwC’s progress reports.
Internal audit
• Reviewed key findings from the
internal audit reviews conducted
during 2020.
• Reviewed the quality, experience
and expertise of the internal audit
function, confirming its suitability
to the business.
• Agreed the scope and focus areas
for the 2021 internal audit plan.
Risk and internal control
• 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 a
new risk area.
• Conducted detailed reviews with
General Managers of each of the
Group’s operations, covering the
operations’ key risks.
• Reviewed the activities undertaken
during the year to further develop
the maturity of the Group’s
risk management processes.
• Reviewed the Group’s
insurance strategy.
• Reviewed an action plan to address
the requirements of the Task Force
on Climate-related Financial
Disclosures (TCFD).
Compliance
• Reviewed the Group’s
whistleblowing arrangements,
including details of the most
significant reports and actions
taken, along with plans to
strengthen the function.
• Reviewed the process to identify
and manage Group employees’
potential conflicts of interest.
• Reviewed the due diligence process
conducted in respect of the
Group’s suppliers.
• Reviewed the Group’s Compliance
model, crime prevention manual
and reporting structure.
• Monitored the functioning of the
Group’s crime prevention model,
in accordance with Chilean and
UK anti-corruption legislation.
• Reviewed the Committee’s terms
of reference.
124
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Ensuring effective
risk management
Q. What were the key areas of focus for
the Committee in 2020?
As noted throughout this Annual Report, the
COVID-19 pandemic generated a range of
health, operational and financial challenges for
the Group during the year. As a Committee,
we sought to ensure that the travel and social
distancing restrictions due to the COVID-19
pandemic and ensuing remote working
arrangements did not reduce the robustness
of the external and internal audit functions,
internal control and risk management
capabilities and results.
In terms of financial reporting, given the
copper price volatility during 2020, we have
monitored the potential impact on the carrying
value of the Group’s assets. We have also
worked closely with PwC during the
transition to our new lead audit partner.
With risk management, we assisted the
Board with updating the Group’s risk appetite
assessment, including the incorporation of a
new risk area covering external threats with
low probability and high consequence (the
so called “black swan” events), 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-year financial reports,
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 and procedures are appropriate and
clearly communicated, and that the Group’s
accounting and consolidation systems
operate effectively.
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 Company,
its financial results and the key accounting
judgements applied in the financial statements
to ensure that the tone and content of
the narrative reporting fairly reflect
the financial results for the year.
The Committee reviews the ore reserves and
mineral resources statement included in the
Annual Report and reviews the corresponding
reserve and resource independent audits.
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.
The Committee reviews the Group’s tax
position, including the effective tax rate,
the status of the recovery of tax refunds,
tax-disallowed expenses and the impact
of any regulatory changes.
Q. What were the significant accounting
issues in relation to the financial
statements considered by the
Committee during 2020?
The main accounting issues we
considered were:
• Asset valuations: we have considered
and concluded that there are no indicators
of impairment (or reversal of previous
impairments) at the Group’s operations.
Accordingly, we have not performed any
impairment reviews in respect of the
Group’s assets at the 2020 year end.
However, in order to assess the sensitivities
of the indicative valuations of the Group’s
mining operations, and to make appropriate
disclosures within the financial statements
in respect of this, an indicative valuation
and sensitivity analysis has been performed.
As part of this analysis, we considered the
appropriate copper price forecasts to use
in these indicative valuation models, with
reference to the forward curve as at
31 December 2020 and consensus analyst
forecasts of the long-term copper price.
We have also reviewed the key operating
assumptions in the indicative valuation
models. We also reviewed the additional
sensitivity disclosures specifically
considering the potential impact of
climate change on the Group’s assets.
• Hornitos disposal: we reviewed the impact
of the Group’s agreement to dispose of its
40% interest in the Hornitos coal-fired
power station, which resulted in an
impairment of the investment in
associates’ balance.
• COVID-19 costs: we have reviewed the
impact of COVID-19 on the Group’s
operating and capital expenditure.
• Provision for decommissioning and
restoration costs at the Group’s mining
operations: we have reviewed updated 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 the restoration
activities which will be required, and the
future cost of those activities. We have
also reviewed changes to the financial
parameters used in calculating the
provision balance.
• Inventories: we have reviewed relevant
aspects of the valuation and control over
the Group’s inventory balances in close
co-ordination with PwC considering the
restrictions on travel due to COVID-19.
External audit
Q. What are the Committee’s
activities in respect of the
external audit process?
The Committee is responsible for overseeing
the Company’s relationship with PwC, the
Group’s external auditor. The Committee
approved Simon Morley as the new lead audit
partner and monitored the transition from
Jason Burkitt, the previous lead audit partner,
which has been seamless. I have been able to
establish an effective direct relationship with
Simon Morley.
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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
125
Corporate Governance
Audit and Risk Committee report continued
“The Group’s integrated risk management framework
is a key tool in ensuring and measuring optimal
performance and driving appropriate behaviour
across the Group.”
During 2020 we discussed in detail with PwC
how to manage the external audit process
considering the COVID-19 related restrictions.
We are satisfied that PwC implemented an
appropriate mix of remote checks and on-site
reviews, preserving the robustness of the
audit process.
Q. How long has PwC been the
Group’s auditor?
PwC has been our external auditor for six
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 ten years
which would see us complete a competitive
tender process in 2024. This will allow the
Committee to understand the capabilities
and coverage that external audit firms can
offer the Company and further promote the
independence and objectivity of the external
auditor by establishing a fixed date for tender
which the Committee considers to be in the
best interests of shareholders. As noted
above, Jason Burkitt was the lead audit
partner for five years from 2015 to 2019, and,
in line with normal regulatory requirements
has now rotated off the engagement, with
Simon Morley assuming the role 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.
• the review of the FRC’s annual Quality
Inspection Report for PwC.
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 was updated
in 2020.
New regulatory requirements apply from
2020 onwards in respect of prohibited
non-audit services. The FRC issued an
updated Ethical Standard which introduces a
“white list” of specifically-permitted services,
with all other services prohibited. Permitted
services relate to specific activities which are
required by law or regulation and a limited
number of types of review or verification
work, such as half-year reviews, verification
of additional information contained within
the Annual Report or cross-referenced from
the Annual Report and work as a reporting
accountant on transactions or debt issues.
The provision of non-audit services is also
subject to a cap such that the total annual
fees from non-audit services may not exceed
70% of the average audit fee over the prior
three years.
The issue of the $500 million bond in October
2020 required the Group to engage PwC
to act as the reporting accountant for this
transaction, work which is effectively
required to be performed by the Group’s
auditor. The fees for this work were expected
to exceed 70% of PwC UK’s average audit
fees over the past three years (although
it was not expected to exceed 70% of the
average total audit fees paid to PwC in total
over this period). Accordingly PwC requested
a waiver from the Financial Reporting Council
in respect of this work prior to performing
this work, which was granted.
A breakdown of the audit and non-audit
fees is disclosed in Note 8 to the financial
statements. PwC has provided non-audit
services (excluding audit-related services)
which amounted to $352,000, or 25% of the
fees for audit and audit-related services. This
related to the reporting accounting work for
the bond issuance.
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 are 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 2020.
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 complied
with the provisions of the Order during 2020.
Internal audit
Q. What are the Committee’s main
activities in relation 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 work plan for the coming
year, including its focus areas as well as
budget, headcount and other resources.
We ensure the plan has sufficient resources
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 an
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
126
Antofagasta plc Annual Report 2020
antofagasta.co.uk
experience, IT, risk, compliance, 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, when finalised,
are distributed to Committee members.
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 effective and timely sharing
of findings.
During 2020, Internal Audit performed most
of its work remotely due to the COVID-19
pandemic. The Committee monitored the
quality of the audit work and is comfortable
that an appropriate controls environment
has been maintained.
Risk management and internal control
Q. What are the Committee’s main
activities in relation to 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 emerging and
principal risks and its risk appetite, as well as
maintaining adequate control systems which
were in place throughout the year and up to
the date of this report. The Committee’s terms
of reference incorporate the FRC’s Guidance
on Risk Management and Internal control and
the Board is satisfied that the Company’s risk
management and internal control systems
accord with this guidance. In order to achieve
our business objectives, internal control
systems are designed to identify and manage,
rather than eliminate, the risk of failure, but
can only provide reasonable, not absolute,
assurance against material misstatement
or loss.
Q. What were the Committee’s main
activities in 2020 relating to risk?
We assisted the Board with its annual update
of the Group’s risk appetite assessment and
assessment of emerging and principal risks.
Emerging risks are identified through the
reporting of events that have had an impact
on the Group’s operations and budgets during
the year and whether and by how much the
risk has impeded the budget for each risk
mitigation objective and through a bench-
marking review of emerging and principal
risks that have been identified by our peers.
During 2020 the Board added an additional
risk category, covering external threats
with low probability and high consequence
(so-called “black swan” events) and approved
updates to the risk appetite statements for
Climate Change and Tailings.
The Committee reviewed the ongoing
activities undertaken by the Group during
the year to further develop the maturity of its
risk management processes and to identify
emerging risks. Key risks were updated and
a consistency exercise was carried out at
each of the operations. A new Enterprise Risk
Management (ERM) system was implemented.
Training on risk methodology and risk
management was also carried out.
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, trends,
residual risks and any significant materialised
risks as well as operational opportunities.
The analysis of emerging and principal 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. 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 examine
whether those risks have been increasing
or decreasing in significance and the budget
for each risk mitigation objective to assist
with the identification of emerging risks. 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.
The Committee closely monitored the
assessments relating to the COVID-19
pandemic during the year.
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 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
emerging and 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 2020 review
confirmed the effectiveness of the Group’s
risk management and internal control systems
with no significant failures or weaknesses
being identified.
Members of the Audit and Risk Committee
participate 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 in considering the full
spectrum of risks faced by the Group.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
127
Corporate Governance
Audit and Risk Committee report continued
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. The Board also provides feedback
on the analysis of emerging and principal risks for Board agenda items which
is incorporated into the Board’s review of the effectiveness of the Group’s
risk management and internal control systems.
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.
The risk management function provides
regular presentations covering changes in
the Group’s emerging and principal risks,
major materialised risks, and updates on
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.
General Managers of the operations
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 emerging, principal and materialised risks.
Q. What were the Committee’s
main activities in 2020 relating
to compliance?
The Committee reviewed the Group’s
whistleblowing arrangements, which
encourage employees and contractors to
raise concerns in confidence about possible
improprieties or non-compliance with the
Group’s Code of Ethics. We received regular
reports on reported whistleblowing incidents,
detailing the number and type of incidents,
along with details of the most significant
issues and the actions resulting from
their investigation.
The Committee reviewed proposed
adjustments to standardise investigations,
consolidate the centralised investigation
model by adding specialists and external
resources, and strengthening each
operation’s ethics committee.
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
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 Mining division’s
holding company, Antofagasta Minerals S.A.
and each of the operations to appoint a
Crime Prevention Officer and the Committee
makes recommendations regarding these
appointments as well as monitoring and
overseeing the performance of these roles.
The Crime Prevention Officer for Antofagasta
Minerals S.A. is currently Patricio Enei, the
Legal Vice President.
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.
We reviewed the process to identify
and manage Group employees’ potential
conflicts of interest 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 employees during the
year. Additionally, updates to the Crime
Prevention Manual were recommended
to the Board for approval.
Ollie Oliveira
Chair of the Audit and Risk Committee
128
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Sustainability and Stakeholder Management Committee report
Helping ensure the Group’s
policies support long-term
sustainable success
2020 membership and meeting attendance
Vivianne Blanlot (Chair)
Jorge Bande
Juan Claro
Ramón Jara1
Tony Jensen2
1. Ramón Jara joined the Committee on 1 February 2020.
2. Tony Jensen joined the Committee on 18 August 2020.
Key responsibilities
• The Sustainability and Stakeholder
Management Committee supports
the Board in the stewardship of the
Group’s safety, health, environmental
and social responsibility programmes
and makes recommendations to the Board
to ensure the views and interests of the
Group’s stakeholders are considered in
the Board’s deliberations
• The Committee reviews the Group’s
framework of safety, health, environmental,
human rights and social policies, monitors
the Group’s performance in setting and
meeting environmental, social, safety, and
occupational health commitments and
provides guidance on how the Company
should reflect the views and interests
of stakeholders in relation to potential
projects and other business matters
“ We have maintained continuous dialogue with our
stakeholders during this difficult year, closely monitoring
the safety and health of our workforce and local
communities and responding to the specific challenges
of the pandemic as well as long-term issues such as
climate change and ensuring that we continue to
create social value.”
Vivianne Blanlot
Chair of the Sustainability and Stakeholder Management Committee
Number attended
• Other regular attendees included the CEO, the Vice President
of External Affairs and Sustainability and the Company Secretary.
• Sessions were also regularly attended by Directors who were not
Committee members.
• The Committee meets as necessary and at least twice per year.
7/7
7/7
6/7
6/6
4/4
Key activities in 2020
Policies and commitments
• Reviewed the Group’s 2019
Sustainability Reports.
• Reviewed the environmental
and social aspects of the
Group’s expansion projects
at Los Pelambres and
Centinela, including plans
for Environmental Impact
Assessments and citizen
participation processes.
• Reviewed environmental
matters relating to the
Twin Metals project.
• Endorsed a Human Rights
Policy, which was approved
by the Board, and reviewed
the results of the Human
Rights due diligence exercise.
• Reviewed the Group’s
Tailings Management Policy
which is aligned with ICMM’s
global tailings standard.
• Reviewed a proposal for the
Group’s mining operations
to register with The Copper
Mark, an assurance process
for environmental, social
and governance matters.
• Reviewed the Committee’s
terms of reference.
Safety and health
• Reviewed the Group’s 2020
safety and occupational
health performance and
strategy and plans for 2021.
• Reviewed the Group’s
strategy and monitored
the effectiveness of
protocols in response to
the COVID-19 pandemic.
• Monitored Group safety
performance, including
high-potential incidents.
• Reviewed the 2020 report
issued by the independent
technical review board
appointed to advise the
Group on the operation of
its tailings storage facilities.
Community relations
• Reviewed the Group’s
Social Management Model.
• Monitored the implementation
of a $6 million community
support fund designed to
provide healthcare equipment,
community initiatives and
economic support to local
entrepreneurs and businesses
during the COVID-19 pandemic.
• Reviewed the Group’s
Communications strategy
and monitored results
from the Group’s
communications activities.
Environment
• Reviewed environmental
management reports.
• Reviewed environmental
events and monitored
mitigation steps.
• Reviewed environmental
commitments related to
the historical ownership
of the Michilla mine.
• Reviewed and endorsed for
Board approval the Board’s
climate change strategy.
• Reviewed jointly with the
Projects Committee the
environmental reviews
required to address changes
in the scope of the Los
Pelambres Expansion project.
• Reviewed and endorsed a
proposal to participate in the
XPRIZE initiative to develop
technology to minimise
tailings generation.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
129
Corporate Governance
Sustainability and Stakeholder Management Committee report continued
Safeguarding the interests
of our stakeholders
Q. What was the Committee’s role in
relation to the COVID-19 pandemic?
Along with the Board, the Committee
played an important role in overseeing
the development and implementation of the
Group’s strategy and protocols in response to
the pandemic and monitored results regularly.
The protocols that were implemented were
designed to protect the safety and health of
our employees, contract workers and local
communities while facilitating operational
continuity to support the livelihoods of some
of our key stakeholders. Procedures that
were implemented included office staff
working from home, designated air and land
transport services to and from the operations,
the implementation of social distancing
measures, strict personal and facilities
hygiene measures, mandatory self-
evaluations before entering the Group’s
facilities, thorough cleaning, physical
separation in lodging facilities, a flu
vaccination campaign and the provision
of safe places to stay for members of the
workforce requiring isolation or who needed
to be cared for. Agreements were signed
to support PCR testing and the evolution of
COVID-19 cases in the communities close
to the Group’s operations continues to be
closely monitored.
The Committee also monitored the
implementation of a $6 million community
support fund set up by the Group to address
needs related to the COVID-19 pandemic.
This fund has been used to deliver medical
supplies, X-ray equipment, COVID-19
detection machines, ventilators, personal
protective equipment and a healthcare
programme with 1,500 beneficiaries. It
has also been used to fund programmes
to support educational initiatives and on-line
digital training for over 360 teachers and to
provide humanitarian aid to support local
communities. The fund has also supported
local entrepreneurs and local businesses.
Further details are set out on pages 36 and 48.
Q. Did the pandemic compromise safety?
No, it did not. The robust processes in
place to ensure safe operations, including
the systematic and thorough application
of safety standards and high levels of
near-miss reporting for the full spectrum of
risks continued throughout the year, resulting
in the Group’s strongest ever safety
performance. The Group has operated for
over two years without a fatality. In 2020,
the Group had 86 high-potential near miss
incidents, 60% fewer than in 2019. The Lost
Time Injury Frequency Rate was 0.86, 15%
lower than in 2019. The Total Recordable
Injury Frequency Rate was 0.63, unchanged
compared to 2019.
Q. How does the Committee ensure
that the Board considers the views
and interests of stakeholders?
Committee meetings provide a forum for the
detailed discussion of many of the key issues
that matter to our workforce (such as safety
and health), local communities, national and
local governments, regulators and other
stakeholders. These issues are identified as
part of the risk management and community
engagement processes and are submitted by
management to the Committee for review.
Communicating with our stakeholders during
difficult times has been key to strengthening
mutual trust and understanding. We work
hard to understand their interests and ensure
that they understand our ambitious safety,
occupational health, environmental, and social
commitments. 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?
The Board places safety and health at
the centre of its decision-making. The
Committee has devoted a significant part of
the year overseeing the development and
implementation of a strategy and protocols
in response to the pandemic and the further
development of the Group’s safety and
occupational health programme and
monitoring results as described above.
In addition, the Committee also:
• oversaw the development of the Group’s
Human Rights Policy which was approved
by the Board in 2020, and included a
review of the results of the associated due
diligence process. Having implemented
this policy, the Group has fulfilled a
commitment made when the Group
joined the ICMM
• reviewed a Tailings Management
Policy, aligned with ICMM’s global
tailings standard
• reviewed and endorsed a proposal to
participate in the XPRIZE initiative with
peers to develop technology to allow
for zero waste mining in the future
• monitored the performance of the
Social Management Model implemented
in 2019 at both the Mining and Transport
divisions, which introduced standards for
engagement, management of initiatives,
management of social risks and
impact measurement of projects
and programmes
• oversaw the management of
environmental matters related to the
Group’s projects, including the Los
Pelambres Expansion project, Zaldívar’s
Chloride Leach project, the Twin Metals
project in Minnesota, and other expansion
projects at Los Pelambres and Centinela
• reviewed the Group’s communications
strategy, which included the results of a
perception study on the views of existing
and potential shareholders, and bank
equity research analysts
All of these subjects will further strengthen
our ability to achieve long-term sustainable
success and our purpose of developing
mining for a better future.
Q. How did the Committee consider
climate change during the year?
As noted by the Chairman on page 101,
climate change is a global issue and Chile is
particularly vulnerable to its consequences.
The Committee assisted the Board in
considering various climate change related
initiatives during the year, including reviewing
and endorsing the Group’s climate change
strategy which takes a multidisciplinary
approach to the challenges posed by climate
change, better coordinating the many
initiatives, large and small, undertaken by our
operations and projects, and taking advantage
of the synergies between them. The strategy
is based on five pillars: climate resilience
development, greenhouse gas (GHG)
emissions management, strategic resources,
environmental and biodiversity management
and integration of stakeholders, and addresses
the sustainable development goals as set out
on pages 38-39.
130
Antofagasta plc Annual Report 2020
antofagasta.co.uk
“The Committee plays a key role in monitoring the
Group’s safety, occupational health, environmental and
social responsibility programmes, while ensuring that
stakeholders’ views and interests are considered as
part of the Board’s deliberations.”
A number of the initiatives reviewed and
endorsed by the Committee during the year
included commitments and activities in
support of the Group’s climate change
strategy including the decision of the
Group’s mining operations to register
with The Copper Mark, an assurance
process for environmental, social, and
governance matters.
This year Zaldivar became the Group’s first
operation to be supplied by 100% renewable
sources of energy and from 2022 the
remaining operations will follow. This is
a key step in our roadmap to reduce our
CO2 emissions.
Q. How does the Committee ensure that
the Group’s tailings facilities are safe?
The stability and safety of tailings storage
facilities is a primary concern for many of
our stakeholders and the Committee and
the Board are focused on ensuring that the
appropriate monitoring and management are
in place to ensure that they continue to be
stable and safe.
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 storage facilities
where tailings are deposited. Chilean
standards have prohibited the construction of
tailings storage facilities using the upstream
method, which is commonly used in other
countries but can pose 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.
During the year, the Committee and the
Board reviewed the 2020 report issued by
the independent tailings review board, which
was presented to the Committee by one of the
members of the independent tailings review
board, and confirmed that the Group is
operating state of the art modern tailings
storage facilities in accordance with
international best practices.
The Committee and the Board receive regular
reports on the operation of the Group’s
tailings storage facilities and following the
Group’s adoption of a tailings management
policy aligned with the ICMM’s global tailings
standard during the year, the Committee will
monitor the implementation and compliance
with this policy along with reports from
management and the independent
tailings review board from now on.
Further information on our tailings facilities,
including the risks and the governance
measures in place, can be found on page 51.
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
conversations with members of the
community, round tables, community
meetings, participatory environmental
monitoring with the community and site
visits to the Group’s operations, as well
as communicating through the media,
and on websites and social networks.
The subjects and results of this engagement
are reported to the Committee periodically
through standalone reports and as integrated
inputs into broader Committee discussions.
Q. What are the Committee’s priorities
in 2021?
Our number one priority continues to be
the safety and health of our employees,
contractors and local communities as we
continue to respond to the COVID-19
pandemic. As noted above, 2020 saw
our strongest ever safety performance,
including no fatal accidents. We will strive
to achieve a similar record in 2021.
The Group responded to the challenges posed
by the COVID-19 pandemic during 2020 and
the Committee will continue to ensure that
lessons learned will continue to be applied
in 2021.
The Committee will continue to monitor the
implementation of the Group’s environmental
management system at the Group’s operations.
Work is under way to achieve our greenhouse
gases target for reduced carbon dioxide
emissions. As I have already noted, Zaldivar
became the Group’s first operation to be
supplied by 100% renewable sources of
energy during 2020 and the Group has
contracted power supply agreements that in
2022 will provide all of the Mining division’s
power requirements from renewable sources
and the Committee will continue to oversee
the implementation of the Group’s climate
change strategy during the year.
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
Antofagasta plc Annual Report 2020
131
Corporate Governance
Projects Committee report
Robust project oversight
“ The Committee oversees the full project lifecycle,
monitoring development and construction progress and
ensuring lessons learned are applied to future proposals.”
Ollie Oliveira
Chair of the Projects Committee
2020 Membership and meeting attendance
Ollie Oliveira (Chair)
Michael Anglin
Tim Baker1
Jorge Bande
Ramón Jara
1. Tim Baker did not stand for re-election at the 2020 AGM.
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
oversight 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
Number attended
6/6
6/6
2/2
6/6
6/6
• Other regular attendees included the CEO, the CFO, the Vice President
of Projects, the Vice President of Operations, the Projects Finance
Manager and the Company Secretary.
• Sessions were also regularly attended by Directors who were not
Committee members.
• The Committee meets as necessary and at least twice per year.
Key activities in 2020
Policies and commitments
• Reviewed the Group’s
projects portfolio, including
budgets and schedules.
• Reviewed the Committee’s
terms of reference.
Project reviews –
studies phase
• Reviewed an updated water
strategy for Los Pelambres
including a proposal to double
desalinated water capacity
to 800 l/s and incorporating
works to allow for this
future expansion in the Los
Pelambres Expansion project.
• Reviewed the draft feasibility
study for Centinela’s Second
Concentrator project and
reviewed progress with
the commitment phase
and activities in the
2020 work plan.
• Reviewed studies to evaluate
the benefits of outsourcing
Centinela’s existing seawater
pumping and supply system
and to facilitate its expansion
through a Build Own Operate
and Transfer (BOOT) contract
and water supply agreement.
• Reviewed the Polo Sur
project’s pre-feasibility study.
Project reviews –
execution phase
• Monitored progress in
• Reviewed jointly with the
Sustainability and Stakeholder
Management Committee
the environmental reviews
required to address changes
in the scope of the Los
Pelambres Expansion project.
• Reviewed lessons
learned from the execution
of Centinela’s tailings
deposit expansion project.
• Reviewed the performance of
Centinela’s molybdenum plant.
the execution of the Los
Pelambres Expansion and
Zaldívar Chloride Leach
projects, including the
temporary suspension due
to the COVID-19 pandemic
and subsequent restart in
accordance with strict health
protocols, and revised capital
expenditure and project
timeline estimates.
132
Antofagasta plc Annual Report 2020
antofagasta.co.uk
“The Committee supports the Board by ensuring that
the Group’s projects portfolio follows approved and
consistent guidelines and that project execution
decisions have been thoroughly vetted before
being proposed for Board approval.”
Q. What is the Projects Committee’s
Q. What were the Committee’s key
approval authority?
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 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 development and construction
progress, and ensuring lessons learned are
applied to future proposals. The Committee
invites management to consider different
perspectives, ideas and improvements to
enhance the value of the Group’s projects,
enabling a focused deliberation when 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 has standards and
common criteria, including governance by
a steering committee, functional quality
assurance reviews and risk management.
In some cases, the Committee may
recommend additional measures including
independent peer reviews, trade-off
studies or further analysis in relation
to the incorporation of potential new
technologies or processes.
activities in 2020?
COVID-19 pandemic
Responsibility for safety and health is one of
the Group’s core values and our number one
priority. As the COVID-19 pandemic reached
Chile, the Group decided to suspend execution
of the Los Pelambres Expansion project and
delay the start of Zaldívar’s Chloride Leach
project. Work restarted in August following
the introduction of strict safety and health
protocols including reducing the size of the
workforce on-site. The Committee oversaw
the redesign of the projects and proposed
protocols in detail, considering the impact
of the process on the Group’s stakeholders
including employees, contract workers and
local communities, The Committee also
considered the impact on the Group’s long-term
production profile and projects pipeline.
Los Pelambres
The Committee reviewed progress made on
the execution of the Los Pelambres Expansion
project including the suspension due to the
COVID-19 pandemic and the subsequent
restart. The Committee reviewed a revised
capital expenditure estimate and project
timeline including revised key risks and
mitigations, performance against budget
and the interaction between the project team
and the operating team at Los Pelambres.
The Committee reviewed an update on
Los Pelambres’ water strategy to double
capacity in the desalinating plant to 800 l/s,
incorporating enabling works in the Los
Pelambres Expansion project. The Committee
also reviewed, jointly with the Sustainability
and Stakeholder Management Committee, the
environmental reviews required to address
changes in the scope of the Los Pelambres
Expansion project.
+ See pages 74-75 for more information on the
Los Pelambres Expansion project
Centinela
The Committee reviewed the draft results of
the feasibility study for Centinela’s Second
Concentrator project. The Board approved
proceeding with the next phase of the
evaluation during the year and the Committee
monitored its progress, including proposals
to optimise capital expenditure. One of the
potential opportunities would be to outsource
Centinela’s existing sea water pumping and
supply system with a third party to perform
its expansion through a Build Own Operate
and Transfer (BOOT) contract and water
supply agreement. The Committee endorsed
proceeding with the corresponding studies.
+ See page 76 for more information on
Centinela’s Second Concentrator project
The Committee reviewed progress on the
pre-feasibility study for the Polo Sur Project,
an ore body in the Centinela Mining District.
The Committee reviewed the performance
of Centinela’s molybdenum plant, which
started up in 2018. Payback and economics
will be analysed in 2021.
The Committee reviewed lessons learned
from the execution of Centinela’s tailings
deposit expansion.
Zaldívar
The Committee monitored the execution
progress of Zaldívar’s Chloride Leach
project including the delayed start due to the
COVID-19 pandemic. The Committee reviewed
a revised capital expenditure estimate and
project timeline including revised key risks
and mitigations, performance against budget
and the interaction between the project team
and the operating team at Zaldívar.
+ See page 76 for more information on
Zaldívar’s Chloride Leach project
Q. What are the Committee’s priorities
in 2021?
• To ensure that project activity continues
in accordance with strict safety and
health protocols.
• To oversee progress in the construction
of the Los Pelambres Expansion project
and Zaldívar’s Chloride Leach project.
• To monitor progress in Centinela’s
Second Concentrator project.
• To oversee the permitting process for
the Twin Metals project.
• To monitor the progress of studies on the
future expansion and supply of 800l/s of
desalinated water to Los Pelambres.
• 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
Antofagasta plc Annual Report 2020
133
Corporate Governance
Remuneration and Talent Management Committee report
Ensuring our employee value
proposition supports long-term
sustainable success
“The Committee ensures that the Group’s remuneration
arrangements support our purpose and the effective
implementation of strategy.”
Francisca Castro
Chair of the Remuneration and Talent Management Committee
2020 Membership and meeting attendance1
Number attended
• Other regular attendees include the CEO, the Vice President of
Francisca Castro (Chair)
Michael Anglin
Vivianne Blanlot
Tim Baker2
Tony Jensen3
5/5
5/5
5/5
3/3
1/1
1. The Committee also met with independent remuneration consultants Willis Towers
Watson during the year to receive an update on global remuneration and talent
management strategies and implementation in response to the COVID-19 pandemic
and investor and proxy adviser feedback from the 2020 AGM.
2. Tim Baker did not stand for re-election at the 2020 AGM.
3. Tony Jensen joined the Committee from 18 August 2020.
Human Resources and the Company Secretary.
• At least one Committee member serves on each of the other
Board Committees which allows the Committee to consider 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 Committee ensures that the
Group’s remuneration arrangements
support the Group’s purpose, the
effective implementation of strategy
and enable the recruitment,
motivation, reward and retention
of talent.
• 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 actively participates
in the Group’s talent management
strategy, including the review,
consideration and implementation of
succession plans for the Executive
Committee (excluding the CEO).
• The Committee also reviews
workforce remuneration and
related policies, including the
diversity and inclusion policy, the
alignment of incentives and rewards
with the Group’s culture and the
implementation of policy changes
that affect the workforce as
a whole.
Key activities in 2020
Governance
• Reviewed the Directors’ and CEO
Remuneration Policy and feedback
from shareholders prior to submitting
the Policy for approval at the
Company’s 2020 AGM.
• Reviewed the 2019 Directors’ and
CEO Remuneration Report.
• Reviewed Gender Pay Gap and
CEO Pay Ratio figures for the
Group (although not mandatory for
the Group to disclose due to the
Group’s few UK-based employees).
• Reviewed the Committee’s terms
of reference.
Directors’ remuneration
• Evaluated Chairman, Director and
Committee fees, recommending
no changes in 2020.
• Reviewed Ramón Jara’s service
contract with Antofagasta Minerals
SA, recommending no changes
in 2020.
Executive remuneration
• Reviewed Annual Bonus Plan and
LTIP KPIs, including the impact of
the COVID-19 pandemic.
• Evaluated the CEO’s performance and
determined the variable compensation
payable under the 2019 Annual
Bonus Plan.
• Reviewed LTIP eligibility, participants
and criteria and approved the grant of
the 2020 awards.
• Reviewed performance for LTIP
awards granted in 2017 and approved
the vesting level.
• Reviewed Group performance
against the 2019 Annual Bonus Plan
performance metrics and reviewed the
metrics to apply to the 2020 Annual
Bonus Plan.
• Reviewed and approved the individual
performance of Executive Committee
members under the 2019 Annual
Bonus Plan.
Human resources and policy
• Reviewed and monitored the
implementation of the 2020
Human Resources plan.
• Reviewed results from the Group’s
workforce surveys including pulse
surveys focused on measures
implemented to address the
workforce challenges arising
from the COVID-19 pandemic.
• Reviewed progress with the
implementation of the Diversity
and Inclusion Strategy.
• Monitored collective
bargaining negotiations.
• Reviewed a “New Ways of Working”
project to identify on-site, home-
based, and hybrid working
arrangements applicable to corporate
office and operating companies’
employees following the COVID-19
pandemic, in order to generate a more
flexible and adaptable organisation.
• 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
succession plans for members
of the Executive Committee.
• Approved the implementation of
succession plans and revisions
to the composition of the Executive
Committee and the appointment
of new directors at the
Group’s operations.
134
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Committee Chair’s introduction
Aligning pay with performance
Dear Shareholders,
I am delighted to present the 2020 Directors’
and CEO Remuneration Report.
2020 Directors’ and CEO
Remuneration Policy
The 2020 Directors’ and CEO Remuneration
Policy was approved by shareholders at the
2020 Annual General Meeting on 20 May 2020
and is available on the Company’s website at
www.antofagasta.co.uk/media/3910/2020-
directors-and-ceo-remuneration-policy.pdf.
The CEO receives a base salary and benefits
in line with market conditions in Chile, taking
into consideration international comparators,
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.
Local regulations, market practice and
remuneration structures available in Chile are a
central consideration when structuring 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 our Long Term Incentive Plan
(LTIP) and the delivery of both the LTIP and
annual bonus in cash. Real share awards have
not been part of the executive remuneration
structure for employees since the LTIP was
first implemented a decade ago as, until recently,
they were taxable in full at grant in Chile. Despite
recent changes to Chilean tax laws that have
removed this disincentive for using real shares,
these awards continue to be uncommon in Chile.
Our variable remuneration arrangements are
simple, understandable and work effectively
for our circumstances, thereby supporting
our strategy, values and culture.
During the approval process last year, I met with
the Company’s major shareholders and proxy
advisers to engage and discuss the proposed
Policy during the planning phase. It is clear that,
above all else, the remuneration of our CEO
is reasonable relative to his 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. For
the 2020 Annual Bonus Plan KPIs, we included
CO2 emission targets within the environmental
performance KPIs, and for safety performance
we moved away from the lost time injury
frequency rate to a safety performance KPI
that focuses on reducing high potential incidents
which is a leading indicator for fatality risk.
From 2021 we will be adjusting the LTIP total
shareholder return KPI so that shareholder
returns are measured against the Global X
Copper Miners ETF instead of the EMIX Global
Mining Index. This KPI constitutes 50% of the
LTIP and this adjustment allows for performance
to be measured against global copper mining
peers rather than the more general mining
index which is biased towards bulk and
precious metals mining companies.
The Committee will continue to take
shareholders’ perspectives into account
as we apply the Policy in the coming years.
As a Committee we continue to set remuneration
policy and practices that are designed to support
strategy and promote the long-term sustainable
success of the Group while following the
below principles:
• Clarity – remuneration arrangements are
transparent and promote effective engagement
with shareholders and the workforce.
• Simplicity – remuneration structures
are uncomplicated, and their rationale and
operation are easy to understand and consistent
with those applicable to all employees ensuring
they are well understood.
• Risk – reputational and other risks from
excessive rewards, and behavioural risks that
can arise from target-based incentive plans,
are identified and mitigated. The Committee
retains discretion to adjust formulaic outcomes
under the plans for variable remuneration.
• Predictability – the range of possible values
of rewards for the CEO are identified and
explained at the time of approving the policy.
• Proportionality – the link between individual
awards, the delivery of strategy and the
long-term performance of the Company
is clear. Outcomes do not reward
poor performance.
• Alignment to culture – incentive schemes
drive behaviours consistent with the
Company’s purpose, values and strategy
through individual performance measures
under the Annual Bonus Plan and the KPIs
set by the Committee for all variable incentive
plan participants.
2020 Directors’ and CEO
Remuneration Report
Although our CEO is not a Director of the
Company, for a number of years we have
voluntarily disclosed his remuneration as if
he were and provided details throughout the
Remuneration Report on the Group’s executive
pay structures to allow shareholders to
understand how these structures support
strategy and promote long-term sustainable
success. This year, following implementation
of the European Shareholders’ Rights Directive II
in 2019, these disclosures became mandatory
and our 2020 Directors’ and CEO Remuneration
Report describes 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 despite the significant
and unforeseen challenges of operating during
a global pandemic, with the Group’s strongest
safety performance to date, and achieving full
year production guidance and lower cash costs
than in 2019. Echoing the comments of our
Chairman and CEO, the Group’s performance
this year has been particularly impressive given
the challenges associated with the COVID-19
pandemic. I believe our employees and senior
management team have worked extremely hard
and delivered outstanding results in the face of
this challenge.
Although the Board made a prudent decision to
preserve cash and balance its responsibilities
towards all stakeholders by reducing the
recommended level of the 2019 final dividend
(see page 108 for further information), the total
dividend payout for 2019 remained in line with
the Company’s dividend policy. No employees
were furloughed during the year, there were no
lay-offs and when the Los Pelambres Expansion
and Zaldívar Chloride Leach projects were
suspended during the year, the Group ensured
that contractors’ workers received at least the
minimum wage that the Company sets for on-site
contractors in Chile during this period, which is
approximately two-thirds higher than the national
living wage in Chile. The Group did not receive
governmental COVID-19 support offered to
businesses facing financial challenges arising
from the COVID-19 pandemic during the year.
The challenges raised during this year 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
Antofagasta plc Annual Report 2020
135
Corporate Governance
Committee Chair’s introduction continued
Key:
Link to strategy
People
Safety &
sustainability
Competitiveness
Growth
Innovation
Performance and incentive
outcomes for the year
As well as recording its strongest safety
performance to date, the Group also achieved
outstanding 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
personal objectives which are described on
page 146. An illustration of the outcomes is
shown opposite.
EBITDA –
Mining division (15%)
Copper production
(25%)
Costs (20%)
Growth projects –
construction execution (12%)
Exploration
programme (4%)
Innovation (4%)
Safety – High potential
accidents (5%)
People – Diversity and
Inclusion strategy (5%)
Environmental
performance (5%)
Social Performance (5%)
80%
50%
80%
45%
75%
75%
100%
90%
65%
100%
Group annual bonus outcomes
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 90% of maximum, taking into
account the Group annual bonus outcomes as
shown opposite and the adjustment applied by
the Committee explained on page 137.
Forecast LTIP performance
award outcomes
The Performance Awards granted under the
LTIP in 2018 will vest following the publication
of the Group’s full-year results. It is currently
anticipated that these will pay out at 98.8%
of the maximum based on total shareholder
return, mineral resources increase, projects
performance and social and environmental
performance over the three-year performance
period. An illustration of the anticipated outcomes
is shown opposite.
+ See page 145 for more information
The CEO’s 2020 annual bonus outcome was 93% of maximum.
Objective
Overall Group annual
bonus score (70%)
Personal annual
bonus score (30%)
CEO’s overall annual
bonus score
+ See pages 145-146 for more information
Threshold
(0% vesting)
Target
(50% vesting)
Maximum
(100% vesting)
90%
100%
93%
Link to strategy
Objective
Threshold
(0% vesting)
Target
(50% vesting)
Maximum
(100% vesting)
Relative total shareholder
return (50%)
Mineral resources
increase (25%)
Projects
performance (12.5%)
Social and environmental
performance (12.5%)
100%
100%
90.5%
100%
+ See page 149 for more information
136
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Committee decisions on outcomes
Annual Bonus
Safety and health is one of the Group’s core
values and for a number of years the Committee
has maintained an automatic 15% adjustment
to the Group’s formulaic performance score
outcome 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 this
automatic upward adjustment for the year.
As mentioned by the Chairman, the Group also
faced significant unforeseen circumstances
during the year arising from the COVID-19
pandemic. The Board believes that the Group’s
employees, led by the CEO, handled these
circumstances in an exceptional manner, and
therefore exercised its discretion to increase the
formulaic outcome of the Group’s annual bonus
performance score under the Annual Bonus
Plan from 79.5% of the maximum to 90%.
This upward discretion was also applied to
the formulaic performance score outcomes for
each of the operations, reflecting the Board’s
appreciation of the contribution and teamwork
of all employees in achieving this exceptional
outcome for the year.
This is the third time in the last six years that
the Committee has applied discretion in relation
to the formulaic Group annual bonus outcome. In
2015, the Committee applied discretion to reduce
the outcome for the CEO and the Executive
Committee due to its production substantially
missing budget resulting in a decrease from
35.5% of the maximum to 25%. In 2019, the
Committee applied discretion to increase the
Group annual bonus outcome for all employees
including the CEO and the Executive Committee
in recognition of their exceptional handling of
the unforeseen civil unrest in Chile during 2019,
resulting in an increase from 73.5% of the
maximum to 75%.
Long-Term Incentive Plan
The anticipated level of vesting of the LTIP is
considered appropriate in light of the Group’s
performance over the three-year performance
period. However, the total shareholder return
KPI, which accounts for 50% of the LTIP
performance award KPIs, will not vest until after
the date of this report. Full details of the KPIs and
anticipated vesting levels are set out on page 149.
Incentive Plan KPIs and COVID-19
As noted in the Chairman’s introduction on page 7,
projects in execution during the year were
suspended to protect the health and safety of our
employees and contractors, and the communities
near our operations and to redesign project
execution plans to allow for the resumption of
works in accordance with appropriate health
protocols. The Committee adjusted the Growth
Projects – construction execution KPIs in the
2020 Annual Bonus Plan and the Los Pelambres
and Zaldívar priority projects KPIs in the 2018
LTIP Plan, which are all project milestone KPIs,
to take into account the specific impact on the
KPI milestones caused by the COVID-19
pandemic.
Apart from these adjustments, which the
Committee considered to be aligned with the
best interests of employees, contract workers
and local communities, and as outlined above,
no discretion has been applied to the formulaic
vesting outcomes under these plans.
The Committee considered that the
remuneration policy approved by shareholders
in 2020 operated as intended in terms of Group
performance and quantum, taking into account
the flexibility afforded to the Committee to apply
its discretion.
+ See page 145 for more information
Minimum
Target
Maximum
Actual
100%
$0.61m
25%
27%
48%
$2.48m
15%
33%
52%
16%
31%
53%
$4.05m
$3.94m
FIXED PAY
ANNUAL BONUS
LTIP
+ See page 143 for more information
Single total figure outcome
The chart opposite shows the 2020 single figure
of remuneration for the CEO compared with the
potential level of remuneration for the CEO for
the year applying the share price, exchange rate
and single figure remuneration figures from the
single figure total remuneration table on page 143.
As noted in the single figure total remuneration
table, Mr Arriagada received an exceptional LTIP
grant of 325% of base salary in 2018. The
Performance Awards granted pursuant to the
plan are included in the amounts in the single
figure table which has resulted in higher
total figure scenarios compared with 2019.
Mr Arriagada received ordinary LTIP grants
of 200% of base salary in 2019 and 2020.
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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
137
Corporate Governance
Committee Chair’s introduction continued
Pay for performance
We are committed to ensuring that the
remuneration received by our CEO aligns with
the performance of the Company and reflects the
achievement against the Group’s strategic goals.
The graph opposite compares the total
shareholder return performance of the Company
against the FTSE All-Share Index and the EMIX
Global Mining Index, over the last 10 years.
+ See page 143 for more information
The Company’s total shareholder return
performance has outperformed the EMIX Global
Mining Index over the last 10 years, including for
the period since the appointment of our CEO, and
we are comfortable that he is competitively and
appropriately 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 is
subject to a three-year vesting period. In addition,
relative total shareholder return is a core
performance measure for our LTIP, accounting
for 50% of the total performance score, which
means that our CEO is rewarded based on
shareholders’ relative outperformance.
Strategic Rationale for CEO
Remuneration Policy and
Engagement with the Workforce
When the Committee reviews remuneration of the
Directors and the 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 Company does not have any executive
directors and the executive pay policy that applies
to the CEO (who is not a Director) is the same
as the Group’s wider pay policy. This pay policy
includes access to the same benefits and pension
arrangements (no pension contributions are
payable to or for employees in Chile), participation
in the same annual bonus plan and the same merit
based reviews of base salary on an annual basis.
Only certain employees participate in the LTI plan,
however this plan is the same for the CEO as for
employee participants. As explained on page 110,
approximately 75% of the Group’s employees are
unionised and the number is close to 100% at the
operator level. As a consequence, employees’ views
are well represented. The Committee reviews
gender pay gap and CEO pay ratio figures and a
range of other internal and external remuneration
comparison metrics and benchmarks when
determining the quantum and structure of the CEO’s
remuneration. This includes feedback received
from shareholders and more general feedback
received from employees on the Group’s
31 December 2010 to 31 December 2020
200
150
100
50
0
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Dec 20
Antofagasta
FTSE All-Share
EMIX Global Mining
pay policies. Further detail on the Group’s
workforce engagement mechanisms is set out
on pages 110-111.
During 2020 the Committee oversaw an exercise
performed by the HR team and management to
review the reward and remuneration structure
of the business to review 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. As a consequence
of this engagement, the Committee endorsed,
for Board approval, the Group’s New Ways of
Working project which will facilitate permanent
flexible on-site, home-based and hybrid working
arrangements following the pandemic with the
goal of creating a more flexible and adaptable
organisation. This initiative is in response to
the demands of our office-based workforce
and allows the Group to take advantage of the
positive elements of the working arrangements
that were implemented on a temporary basis
during the year to provide a more flexible
working pattern which will allow us to attract,
recruit, motivate, reward and retain diverse talent
for the future. This applies to the CEO, executives
and employees. Further details on the project are
set out on page 111.
Review of CEO base salary in 2021
At the beginning of 2021, the Committee and
the Board reviewed the operation of the CEO’s
remuneration policy taking into account the
internal and external factors described above, the
Group’s performance under the CEO’s leadership
over the last five years, the Board’s current
strategy and vision and external benchmarks,
deciding to increase the CEO’s base salary
(which is paid in Chilean pesos) from April 2021.
Further information is set out on page 150.
Corporate governance
Building on the work in 2019 to align the
Committee’s terms of reference (available on
the Company’s website) with the 2018 Corporate
Governance Code, the Committee received
feedback from shareholders ahead of the 2020
AGM and sought specialist external advice on the
impact of COVID-19 on executive pay decisions
during the year. The Committee has a broad
remit, covering the Executive Committee and the
key HR policies for the Group and the decisions
made by the Committee during the year are
aligned with the Company’s share price
performance during the year.
Talent management and
succession planning
Oversight of talent management and
succession planning are an important part of
the Committee’s responsibilities and directly
relate to the Group’s ability to achieve long-term
sustainable success. As well as reviewing
succession plans for the Executive Committee
during the year, with its advisers, the Committee
reviewed market practice and considered the
developing environment for talent and the needs
of the business before making proposals to the
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.
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, even if only virtually, when I will be
available to answer questions.
Francisca Castro
Chair of the Remuneration and Talent
Management Committee
138
Antofagasta plc Annual Report 2020
antofagasta.co.uk
2020 Directors’ and CEO Remuneration Report
2020 Directors’ and CEO
Remuneration Report
Statement of shareholder voting
The tables below show the voting results on the
2019 Directors’ and CEO Remuneration Report
and 2020 Directors’ and CEO Remuneration
Policy at the 2020 AGM:
Resolution to approve
the 2019 Directors’ and
CEO Remuneration Report
Votes for
Votes against
Votes cast as a percentage
of issued share capital
Votes withheld
1,066,559,474
98.64%
14,695,976
1.36%
91.18%
1,344,538
Resolution to approve the 2020
Directors’ and CEO Remuneration Policy
Votes for
Votes against
Votes cast as a percentage
of issued share capital
Votes withheld
1,062,750,494
98.17%
19,832,684
1.83%
91.29%
16,811
The considerable vote in favour of both the
2019 Directors’ Remuneration Report and
2020 Directors’ and CEO Remuneration
Policy confirms the strong support received
from shareholders for the Group’s
remuneration arrangements.
Review of remuneration ahead of
the 2021 AGM
As noted in the Chair of the Remuneration and
Talent Management Committee’s statement, the
implementation of the European Shareholders’
Rights Directive II required disclosure of
the remuneration policy for the CEO for the
first time in 2019. This policy was approved
by shareholders at the 2020 Annual General
Meeting on 20 May 2020 and is available on the
Company’s website at www.antofagasta.co.uk/
media/3910/2020-directors-and-ceo-
remuneration-policy.pdf.
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 remuneration on a
voluntary basis for a number of years prior to it
becoming mandatory from this year.
This section of the Report therefore provides
information on:
The CEO’s pay comprises the following
main elements:
• Fixed pay – base salary of $663,908 (as at
31 December 2020) 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.
As noted in the Chair’s introduction, the
Committee and the Board decided to increase
the CEO’s base salary from April 2021. Further
information is set out on page 150.
• 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. This is 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.
ii. Restricted Awards (30% of overall
award) – one-third vest each year over
a three-year period following grant.
Until recently, share awards were taxed in full at
grant in Chile with the consequence that awards
have been 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 considers practices 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.
• how we propose to implement our
Remuneration Policy for 2021 for
Directors and the CEO; and
• how Directors and the CEO were remunerated
for the year ending 31 December 2020.
As noted in the Chair’s introduction, ahead of
the Policy being tabled for shareholder approval
at the 2020 AGM, a review of the Group’s
remuneration structures was conducted
considering a number of reference points
including strategy, Group performance, external
market practice, peer practices and the evolving
UK regulatory and governance landscape. The
review covered Directors, all of whom are
Non-Executive, the CEO and the executive team.
As a Remuneration and Talent Management
Committee, the Committee also has oversight
of the approach to remuneration for the wider
workforce and receives regular updates on
workforce policies and practices. Further
details on the specific activities undertaken
by the Committee in 2020 are on page 134.
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 pages 110-111.
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. Fee levels were reviewed in 2021
and although there was no change to Non-
Executive Director base fees, fees for additional
Board responsibilities such as Committee roles
have been increased with effect from 1 April
2021 to reflect the considerable additional time
commitments and responsibilities attached to
those roles, which have continued to grow in
recent years. Further information is provided
on page 152.
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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
139
Corporate Governance
2020 Directors’ and CEO Remuneration Report continued
We appreciate that share-based awards are
common in the UK and considered this during
our Policy review in 2019. Due to the taxation
laws that have applied in Chile until recently, 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 the Company’s share price movement
prior to vesting. As such, we do not operate a
shareholding guideline for our CEO, who is
based in Chile.
As part of the Policy review in 2019, 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 and ensures that
the CEO continues to focus on the delivery
of sustained value for our shareholders.
No changes are therefore proposed.
The Company’s approach results in remuneration
which continues to be positioned in the lower
quartile of the FTSE 100 and global mining peers
while ensuring we can maintain competitiveness
in both local Chilean and international markets
and attract the talent needed to successfully
implement our strategy.
The remuneration arrangements in place for
the CEO are consistent with those in place
for employees. The positioning and policy
for the payment of base salary is consistent
with conditions in Chile and aligned with the
workforce. 70% of the CEO’s annual bonus is
attributable to Group performance. All Group
employees bonuses are linked to this measure.
The LTI KPIs that apply to the CEO apply to all
LTIP participants. As noted on page 138, the
Committee reviews gender pay gap and CEO
pay ratio figures for the Group in determining
that the CEO’s pay is appropriate.
Implementation of the Directors’
Remuneration Policy in 2020
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 were proposed.
Chairman
Jean-Paul Luksic’s total fee in 2020 was
$1,005,000, (2019 – $1,005,000) 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 paid for additional Board responsibilities in 2020 are as set out in the table below:
Additional Director fees payable in 2020
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
140
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Audited single figure Directors’ total remuneration table
The remuneration of the Directors for 2020 (and 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
Ramón Jara1
Juan Claro
Tim Baker (retired 20 May 2020)
Andrónico Luksic
Vivianne Blanlot
Jorge Bande
Francisca Castro
Michael Anglin (appointed 1 May 2019)
Tony Jensen (appointed 13 March 2020)
Total Board
Fees
2020
$000
2019
$000
Benefits2,3
2020
$000
2019
$000
Total4
2020
$000
2019
$000
1,005
1,005
332
904
272
116
260
306
296
293
284
198
4,266
332
945
272
293
260
305
296
290
181
–
4,180
12
7
5
4
4
4
4
4
9
10
–
61
9
1,017
1,014
73
5
10
69
3
7
10
13
41
–
239
339
910
276
120
264
309
300
302
294
198
4,327
405
950
282
362
263
312
306
303
222
–
4,418
1. During 2020, remuneration of $597,335 (2019 – $649,000) for the provision of services by Ramón Jara was paid to Asesorías Ramón F Jara Ltda. The reported decrease in 2020
is due to a decrease in the Ch$/USD exchange rate, partially offset by an annual adjustment for inflation in Chile. This amount is included in the amount attributable to Ramón Jara of
$904,000 (2019 – $945,000).
2. 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.
3. 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 in the UK for the Non-Executive Directors as well as
the costs of attending board meetings in Santiago, Chile with associated travel, hotel and subsistence expenses, along with any additional expenses occurred in the Non-Executive
director’s home location. Given these expenses are incurred by Directors in connection with the fulfilment of their director 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.
4. Totals reflect the total fixed remuneration for each Director. Directors did not receive any variable remuneration in 2019 or 2020.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
141
Corporate Governance
2020 Directors’ and CEO Remuneration Report continued
Audited statement of Directors’ and
CEO’s shareholding and share interests
The Directors who held office at 31 December
2020 had the following interests in the ordinary
shares of the Company:
Ordinary shares of 5p each
31 December 2020
1 January 2020
Jean-Paul
Luksic1
Ollie Oliveira
Ramón Jara2
Juan Claro
Andrónico Luksic
C
Vivianne Blanlot
Jorge Bande
Francisca Castro
Michael Anglin
Tony Jensen
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 2020 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 154.
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 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.
CEO shareholding guidelines
Until recently, share awards have been taxed in
full at grant in Chile, making it unattractive for the
Company to operate a share-based LTIP. Instead,
awards are granted as phantom shares which
are linked to the share price and are 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 the
CEO’s incentives are sufficiently aligned with the
long-term interests of shareholders. However, as
the Company has a majority shareholder who is
represented on the Board, 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 for Executives
The Board would 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.
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.
Payments to past Directors (audited)
No payments were made to past Directors,
however the Company paid professional fees for
Gonzalo Menendez and William Hayes in 2020
to complete tax returns in relation to fees paid to
them in their roles as Directors of the Company
in 2019 as well as the actual tax incurred in
relation to these professional fees resulting
in 2020 benefits (as calculated in accordance
with footnote 3 of the audited single figure total
remuneration table on page 141) in an amount
of $3,500 for Mr Menendez and $3,500
for Mr Hayes.
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 2020.
No payments were made to past Directors.
142
Antofagasta plc Annual Report 2020
antofagasta.co.uk
2020 CEO Remuneration Report
Audited CEO single figure total remuneration table
CEO (not on the Board)
Iván Arriagada1 2020 $000
Iván Arriagada1 2019 $000
Salary
589
640
Benefits2
Annual bonus3
24
67
1,235
890
LTIP
Restricted
Awards4,5
Performance
Awards5,6
372
405
1,720
456
Total
3,939
2,458
Total fixed
remuneration
Total variable
remuneration
613
707
3,326
1,751
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 apart from these insurances all “benefits” amounts have been based on what the Company believes
would be deemed by HMRC to be taxable benefits in the UK. Given these expenses are incurred by Mr Arriagada in connection with the fulfilment of his duties, the Company also pays
the professional fees incurred to complete individual tax returns and the actual tax incurred by him on these expenses. Figures are reported in the year that they are paid, or would be
payable, by the Company. 2019 amounts have been re-stated in accordance with this methodology.
3. The annual bonus paid to Iván Arriagada in 2019 is reported based on the exchange rate as at 1 April 2020. In the 2019 Remuneration Report a higher figure of $1,012,000 was
reported, which reflected the anticipated exchange rate at the date the 2019 Remuneration Report was published. Iván Arriagada’s 2020 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 4 January 2021 and is calculated as shown on page 146. As noted in the Committee Chair’s
introduction on page 137 and on page 145, the Committee exercised its discretion to adjust the 2020 annual bonus outcome related to the Group’s performance which accounts for
$97,595 in respect of Mr. Arriagada’s 2020 annual bonus. This adjustment was unrelated to share price movements.
4. As explained on page 147, 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 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 vested on 30 March 2020. In the 2019 Remuneration Report, a higher figure of $669,000
was reported because the Performance Awards granted in 2017 had not yet vested and were estimated using the exchange rate and KPI outcome assumptions set out in the 2019
Remuneration Report. Specifically, it was estimated that the total shareholder return KPI for the Performance Awards granted in 2017 would vest at 33%, however the eventual
outcome was below the benchmark with the consequence that the vesting for this KPI was 0. The 2019 Performance Award amount therefore reflects the actual amount paid to
Iván Arriagada and the share price of £7.46 and the USD/GBP exchange rate of 1.24 at the vesting date.
6. The 2020 amounts payable to Iván Arriagada under the LTIP relate to Restricted Awards granted in 2020 and Performance Awards granted in 2018. The performance period for
three of the four KPIs for the Performance Awards granted in 2018 concluded on 31 December 2020, however the Total Sharholder Return KPI, which accounts for 50% of the
performance score, vests three years after the grant date. Therefore the Performance Awards will not vest until on or after 29 March 2021 and the figure included in the table is an
estimate as at the date of this report. Because the Performance Awards granted in 2018 have not yet vested, the amounts attributable to these awards have been estimated by applying
the 98.8% of maximum overall performance score at vesting as described in more detail on page 149, using the average share price in US dollars for the last three months of 2020
of $15.90. The value of the amounts payable under the LTIP for 2020 attributable to an increase in the Company’s share price is $267,273. This figure has been calculated using
the market value on the date of grant of the award versus the average share price in US dollars for the last three months of 2020. As noted on page 147, 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. As explained on page 147, Mr Arriagada received an exceptional LTI grant of 325% of base salary in 2018 which is
reflected in the increased amount reported in respect of 2020 Performance Awards versus 2019.
Indexed Total Shareholder Return
The following graph shows the Company’s performance compared with the performance of the FTSE All-Share Index and the EMIX 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 EMIX 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 EMIX Global Mining Index,
is one of the performance criteria in the Group’s LTIP as set out on page 149.
200
150
100
50
0
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Dec 20
Antofagasta
FTSE All-Share
EMIX 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 EMIX
Global Mining Index are calculated by aggregating the returns of all individual constituents of those indices over a 10-year period.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
143
Corporate Governance
2020 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 CEO5
2011
3,521
–
–
3,521
–
–
2012
3,598
–
–
3,598
–
–
2013
3,615
–
–
3,615
–
–
201411,2
2,196
688
–
2,884
2015
–
2,445
–
2,445
20163
–
1,525
681
2,206
2017
–
–
1,790
1,790
2018
–
–
2,513
2,513
20194
–
–
2,458
2,458
2020
–
–
3,939
3,939
69%
39%
61%
79%
66%
83%
93%
76%
16%
–
85%
60%
65%
99%
1. The single figure 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 to the CEO.
3. The single figure 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. 2019 figures have been restated to reflect actual 2019 outcomes as explained in the CEO single figure remuneration table on page 143.
5. No Performance Awards vested to 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 distributions
to shareholders and the tax expense in 2019
and 2020.
Employee
remuneration1
Distributions to
shareholders2
Taxation3
2019
2020
Percentage
change
439.8
453.8
3.2%
175.5
354.4
539.3
515.3
207.3%
45.4%
1. Employee remuneration includes salaries and
social security costs, as set out in Note 9 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 14 to the financial statements.
3. Tax 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 tax expense represents the current
tax charge in respect of corporate tax, mining tax
(royalty) and withholding tax, as set out in Note 11
to the financial statements.
Relative change in remuneration
Almost all 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 2020 was 60.2% higher than in 2019. This
included a 8% decrease in base salary (due to
exchange rate fluctuation when reporting in
$US), a 64.7% decrease in benefits and a
38.8% increase in annual bonus.
The equivalent average percentage increase in
total remuneration for Mining Division employees
as a whole in 2020 was 1.7%. This comprised a
9.8% decrease in salaries, a 10.1% decrease in
benefits and a 7.0% increase in annual bonus.
It is common for employment contracts in Chile
to include a quarterly adjustment for Chilean
inflation and most Chilean employees’ base
salaries are adjusted in this way.
The table opposite compares the changes
from 2019 to 2020 in base salary, benefits
and annual bonus paid to Directors, the CEO
and Group employees in US dollars. The
underlying elements of Directors’ remuneration
are calculated using the values reported in the
single figure remuneration table on page 141
and the underlying elements of the CEO’s
pay are calculated using the values reported in
the single figure remuneration table on page 143.
Percentage
change in
fees/base
salary
Percentage
change in
benefits
Percentage
change in
annual
bonus
–
–
-4.3%
–
-0.4%
–
0.2%
–
1.0%
Non-Executive Directors1
Jean-Paul Luksic
Ollie Oliveira
Ramón Jara
Juan Claro
Tim Baker (retired
20 May 2020)
Andrónico Luksic
Vivianne Blanlot
Jorge Bande
Francisca Castro
Michael Anglin
(appointed
1 May 2019)
Tony Jensen
(appointed 13
March 2020)
CEO
Company
Employees2
Mining Division
Employees3
–
-8.0%
0.6%
1.8%
28%
-91%
17%
-64%
-94%
23%
-45%
-63%
-29%
-75%
–
–
–
–
–
–
–
–
–
–
–
–
-65% 38.8%
19.9%
7.5%
-9.8% -10.1%
7.0%4
1. The percentage change in fees for Directors who served
for only part of a comparator year has been annualised.
2. The Company has fewer than 10 employees. The
reporting of these figures is mandatory and the
Company does not consider this to be an appropriate
comparator group.
3. Mining division employees are considered to be a
relevant comparator group because the Mining division
accounts for more than 97% 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.
4. This figure relates to the percentage change in the
average annual bonus for Mining division employees and
does not include any one-off bonuses paid to employees
as a result of the conclusion of collective bargaining
agreements with labour unions at Los Pelambres,
Antucoya and Zaldívar in 2019 and at Zaldívar and
Centinela in 2020.
144
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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.
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 2020, 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 criteria for
the Annual Bonus Plan and the individual
performance criteria for the CEO are set
annually by the Committee and the Board. The
personal performance criteria for the Executive
Committee are set by the CEO and reviewed by
the Committee.
Group performance under the 2020 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
2020
Threshold 90
(0% vesting)
2020
Target 100
(50% vesting)
2020
Maximum 110
(100% vesting)
2020
Outcome
2020
Performance
score1
2020
vesting
(% of maximum)
Measure
60%
15%
25%
20%
20%
12%
4%
4%
Core business
EBITDA – Mining division2
$m
2,272
kt
Copper production3
Costs4
Cash costs before by-product credits (17%)
Corporate expenditure (3%)
Business development – Growth and innovation projects execution
Growth projects – construction execution5
Exploration programme6
Innovation and Digital Transformation Projects7
$/lb
$m
2,524
720.4-
742.7
1.61
109.3
2,777
2,676
765.0
733.9
1.51
103.9
1.56
104.6
698.0
1.71
114.8
Measured according to the schedule and budget
as described in more detail in the footnotes
Sustainability and organisational capabilities
Safety – Mining division8
People – Diversity and Inclusion Strategy9
Environmental performance10
Social performance11
20%
5%
5%
5%
5%
Total – pre-adjustments
Adjustment for meeting zero fatality target12
Board discretion applied13
Total – post-adjustments
Measured according to the KPIs and milestones
as described in more detail in the footnotes
103
106
100
106
105
109
101
99
105
105
108
110
108
103
110
103.8
2.1
2.1
108.0
65%
80%
50%
80%
75%
95%
55%
45%
75%
75%
90%
100%
90%
65%
100%
69%
10.5%
10.5%
90%
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, the impact of hedging arrangements, diesel price fluctuations, expenses relating to the
Group’s response to the COVID-19 pandemic and the impact of one-off bonuses paid as part of labour negotiations at Centinela and Zaldívar, which were not included in the Group’s budget and were not included in the
figures disclosed in the 2019 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, diesel price fluctuations, expenses relating to the Group’s response to the COVID-19 pandemic and the
impact of one-off bonuses paid as part of labour negotiations at Centinela and Zaldívar. These were not included in the Group’s budget and were not included in the figures disclosed in the 2019 Annual Report due to their
commercial sensitivity. The figures for corporate expenditure were adjusted for the exchange rate fluctuations and the difference between budget annual bonus payments and actual bonus payments made to employees.
5. Split between the Los Pelambres Expansion project (8%) and the Zaldívar Chloride Leach project (4%). Targets for the Los Pelambres Expansion project related to execution progress and ensuring that there were no
material environmental incidents. Targets for the Zaldívar Chloride Leach project were based on execution progress and the cost of the project versus budget. The outcome was 99 (45% of maximum) comprising 98
(40% of maximum) for the Los Pelambres Expansion project, and 100 (50% of maximum) for the Zaldívar Chloride Leach project. The specific threshold, target and maximum KPIs continue to be commercially sensitive.
6. Maximum and target were defined according to the progress of execution of planned exploration programmes for two targets previously discovered to have potential mineralisation and the consolidation of exploration
ownership interests, including infill drilling campaigns, increasing the potential mineral inventory against three specific KPIs for each target with a weighting of 70% for the first target and 30% for the second target.
The specific threshold, target and maximum KPIs continue to be commercially sensitive. The outcome was 105 (75% of maximum) comprising 105 for the KPIs for the first target (75% of maximum) and 105 for the
KPIs for the second target (75% of maximum).
7. Split between implementation of the Group’s Digital Transformation Programme (70%) and the implementation of the Group’s Digital Academy (30%). Targets for the Group’s Digital Transformation Programme related
to implementation progress with threshold at 60% progress, target at 100% progress and maximum for 100% progress plus the implementation of key change management milestones for each initiative that improves
adoption of technologies in each business unit. Targets for the Group’s Digital Academy related to the implementation progress with threshold at 70% implementation, target at 90% implementation and maximum at
95% implementation. The outcome was 105 (75% of maximum) comprising 105 (75% of maximum) for the Group’s Digital Transformation Programme and 105 (75% of maximum) for the Group’ Digital Academy.
8. Performance against a target for reducing high potential accidents versus the recorded high potential accidents in 2019, with threshold at no reduction, target a 10% reduction and maximum a 15% reduction. Outcome
was 110 (100% of maximum) based on a 63% reduction versus 2019.
9. Performance against targets set at the beginning of 2020 for implementation of the Diversity and Inclusion Strategy. Split between the results of an evaluation of the Group culture in supporting the expected maturity of
the Group’s Diversity and Inclusion Strategy (50%) with threshold at no improvement in culture, target of an expected improvement in culture and maximum for an improvement in culture above expectations based on the
Committee’s approval of an evaluation overseen by the the CEO and Vice President of Operations and an increase in the percentage of female employees (50%) with threshold at 10.3%, target at 13.2% and maximum at
13.9% at 31 December 2020. The outcome was 108 (90% of maximum) compromising 105 (75% of maximum) for the cultural evaluation and 110 (100% of maximum) for the percentage of female employees which stood
at 14.7% at 31 December 2020.
10. The control of risks relating to environmental performance across all companies measured against KPIs relating to compliance with an internal plan for the implementation of controls for high and moderate environmental
risks and a reduction in the Group’s overall consumption of CO2 emissions versus budget for the year with threshold at 70% implementation of the internal plan and or any environmental incident with an impact on
production or reputation, target at 100% implementation of the plan and no environmental incident with an impact on production or reputation, with a negative adjustment of 15% for failure to achieve the CO2 emission
budget for the year and maximum at compliance with the target KPIs plus a 5% reduction in CO2 emissions versus budget for the year. The outcome was 103 (65% of maximum) based on the achievement of KPIs and
a 1.63% reduction in CO2 emissions versus budget.
11. Performance against the planned execution of social initiatives (50%) and a planned programme to measure the impact of initiatives (50%) with threshold at 70% implementation for each plan, target at 95-100%
implementation for each plan and maximum at full implementation of the execution plans plus a 3% saving versus budget and an agreed action plan defined to address any gaps in the impact measurement plan.
The outcome was 110 (100% of maximum).
12. A standalone adjustment trigger amounting to 15% of the formulaic performance score outcome 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 2.1 points (ie 15% of 103.8 – 90) to the final Group performance score for 2020.
13. As noted in the Committee Chair’s introduction on page 137, the Group faced unforeseen circumstances arising from the COVID-19 pandemic during the year. The Board believes that the Group’s employees, led by the
CEO, handled these circumstances in an exceptional manner, and exercised its discretion to increase by 2.1 points the formulaic outcome of the Group’s performance scores, at each of the individual operations, as well as
at the Group level, resulting in an increase under the Group’s 2020 Annual Bonus Plan score from 105.9 to 108 (from 80% of maximum to 90%). This decision confirmed alignment between the discretion applied to the
performance scores for the individual operations and at Group level, which impacts senior management and the CEO’s pay, recognising the significant difficulty of successfully continuing operating during the COVID-19
pandemic as well as the outstanding management performance in the face of such unprecedented challenges.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
145
Corporate Governance
2020 Directors’ and CEO Remuneration Report continued
Annual bonus payout – individual performance (30%)
The Committee, based on individual feedback received from each DIrector, 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:
Key Goals
Performance
Maintaining a strong relationship with
the Board throughout the year in
communication and implementing
strategic initiatives
• Strong communication throughout the year through fortnightly Board update meetings during the
pandemic and ensuring regular communication 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
Demonstration of leadership in relation to
the Group’s core values and development
of a culture of excellence
Demonstration of a well defined strategy for
environment, social and governance (ESG)
matters and strategic vision for the Group’s
long-term sustainable success
Implementation of succession planning
and talent development initiatives and
performance management
Evaluation of business development
opportunities and successful
implementation of the Group’s
exploration programme during the year
Ensuring the Group has the requisite
expertise and ability to work with
stakeholders and local communities and
improvement of the Group’s reputation
with external stakeholders during the year
Effective management of the business
challenges arising from the COVID-19
pandemic, improvements relating to the
Group’s diversity and inclusion strategy and
environmental performance for the year
shared and implemented throughout the Group.
• Strong leadership and behaviour representative of the Group’s core values before all stakeholders.
• Leadership continued to develop a corporate culture of excellence.
• Demonstrated strong strategic alignment and planning, leading the management team in prioritising
work in accordance with the Group’s long-term strategy.
• Presentation and development of a well defined strategy on ESG matters.
• Progressed the Group’s digital transformation and innovation initiatives to ensure the long-term
success of the Group.
• Strong progress on the development of internal talent evidenced by the internal promotion of Zaldívar
General Manager Julio César Castillo.
• Led the development of the New Ways of Working project.
• Progress of the Group’s exploration programme despite the COVID-19 pandemic.
• Business development opportunities thoroughly evaluated throughout the year.
• Outstanding Group health and safety performance.
• Outstanding stakeholders management in response to the COVID-19 pandemic.
• Outstanding leadership during the COVID-19 pandemic demonstrated by the Group’s outstanding results.
• Diversity and inclusion performance above stretch targets for the year.
• Strong environmental performance.
Total bonus in respect of 2020 (audited)
For 2020, Iván Arriagada’s actual bonus was 186% of base salary and the average bonus for the Executive Committee members (excluding
Mr Arriagada) was approximately 55% of base salary.
A critical issue for a mining company is the copper price and the impact of changes in the price on our long-term and annual performance targets is
carefully reviewed to ensure there is a fair opportunity for achievement under each metric.
Based on performance achieved against targets during the 2020 financial year, the Committee determined that Mr Arriagada would receive a bonus
payment of $1,234,869 for 2020. This figure was determined as follows:
Overall performance score
(as a percentage of Maximum)
Gross annual bonus
(70% x 90) + (30% x 100) = 93% of maximum
93% of $1,327,816
= $1,234,869
Calculated in US dollars using the exchange rate as at 4 January 2021 of $1 = Ch$711.
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.
146
Antofagasta plc Annual Report 2020
antofagasta.co.uk
LTIP awards
Eligibility to participate in the LTIP is determined
by the Committee each year on an individual
basis and the CEO 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 they have been used for a
number of years and are well understood by plan
participants. 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 in 2019. On balance, the Committee
determined that it remains appropriate to
continue to use cash-based awards, 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 (audited)
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
20184
Award type
Number of
shares to
which the
grant relates
Performance Awards
Restricted Awards
109,397
46,885
Performance Awards
Restricted Awards
77,516
33,222
2019
2020
Date of
grant
Vesting
dates
28–Mar–18 28–Mar–21
28–Mar–18 28–Mar–19
28–Mar–20
28–Mar–21
29–Mar–19
29–Mar–19 29–Mar–20
29–Mar–21
29–Mar–22
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
achieved2
% of award
receivable
if Target
performance
achieved3
% of award
receivable
if Maximum
performance
achieved
1,470
630
13.44 31–Dec–20
N/A
13.44
945
405
868
372
12.19 31–Dec–21
N/A
12.19
8.24 31–Dec–22
N/A
8.24
0%
100%
0%
100%
0%
100%
48%
100%
48%
100%
48%
100%
100%
100%
100%
100%
100%
100%
Performance Awards
Restricted Awards
105,295 27–Mar–20
45,126 27–Mar–20 27–Mar–21
27–Mar–22
27–Mar–23
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. Restricted Awards are subject to continued employment at the vesting date. Upon cessation of employment, any Restricted Awards which have not then vested shall lapse immediately.
3. The % of Performance Awards receivable if Target performance is achieved is calculated as the weighted average of the amount receivable for Target performance for each of the
KPIs in the applicable plan.
4. Mr Arriagada received an exceptional LTIP grant of 325% of base salary in 2018. This is explained in more detail in the 2018 Directors’ Remuneration Report.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
147
Corporate Governance
2020 Directors’ and CEO Remuneration Report continued
Performance measures for 2020
The performance measures and targets applying to the Performance Awards granted in 2020 are as follows:
Weighting
Objective
Measure
50%
Relative total shareholder return Comparison against EMIX Global Mining Index with 0% vesting at performance below the index during
25%
Mineral resources increase
12.5%
Projects’ performance
12.5%
Environmental and
Social performance
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 from the date of grant.
Tonnes of contained copper at the end of 2022 with 100% vesting if mineral resources of 87.4 million
tonnes of contained copper is achieved, 50% vesting if mineral resources of 86.0 million tonnes of
contained copper is achieved and 0% vesting if mineral resources of 84.6 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
commissioning has been achieved for the Los Pelambres Expansion project (70%) and the Zaldívar
Chloride Leach project (20%) before the end of 2022 and the Environmental Impact Study for Phase 2 of
the Los Pelambres Expansion project has been submitted 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.
Maximum is achievable if 85% of agreed actions under agreements with communities surrounding all
of the Group’s operations have been implemented (80%) and achieving a Mining division CO2 emission
reduction target of 300,000t CO2e and transitioning mining operating companies away from coal-based
long-term power purchase agreements (20%).
Performance measures for 2019
The performance measures and targets applying to the Performance Awards granted in 2019 are as follows:
Weighting
Objective
Measure
50%
Relative total shareholder return Comparison against EMIX Global Mining Index with 0% vesting at performance below the index during
25%
Mineral resources increase
12.5%
Project portfolio progress
12.5%
Social and environmental
performance
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 from the date of grant.
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 CO2e 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.
148
Antofagasta plc Annual Report 2020
antofagasta.co.uk
LTIP awards vesting in respect of 2020 – anticipated Group performance under the 2018 LTIP
As noted in the single figure remuneration table on page 143, performance against the Performance Awards granted in 2018 will not be finally
determined by the Committee until after the date of this report, once the Group’s 2020 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
0% vesting at
performance below
the index during the
three-year period
from the date
of grant
0% vesting at
82.7 million tonnes
of contained copper
or below as at
31 December 2020
0% vesting if
50% progress
or less against the
maximum objective
for each goal.
50%
Relative total
shareholder return2
25%
Mineral resources
increase
12.5%
Los Pelambres and
Zaldívar priority
projects portfolio
progress2
12.5%
Environmental
performance
33% vesting at performance
equal to the index during
the three-year period
from the date of grant
100% vesting at performance
equal to or greater than the
index plus 5% during the
three-year period from
the date of grant
50% vesting at 84.7 million
tonnes of contained copper
as at 31 December 2020
100% vesting at 85.7 million
tonnes of contained copper
as at 31 December 2020
75% vesting if progress
against the maximum
objective for each goal. 0%
vesting if 50% progress or
less against the maximum
objective for each goal.
0% vesting where
non-compliance
with a plan to meet
commitments
for the Group’s
environmental
permits connected
with environmental
impact assessments.
75% vesting where 100%
compliance with a plan to
meet commitments for the
Group’s environmental
permits connected with
environmental impact
assessments is achieved.
100% vesting if construction
of each of the Los Pelambres
Expansion project (77%) and
the Zaldívar Chloride Leach
project (23%) meet their
respective construction plans
approved by the Board at the
time of approving execution
of the project.
100% vesting where 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.
Anticipated
achievement1
100%
100%
90.5%
This KPI will vest on or
after 29 March 2021.
The anticipated
achievement is based
on performance of
25% greater than
the index as of
1 March 2021.
Resources
increased to
86.7 million tonnes
of contained copper as
at 31 December 2020
Performance for
the Los Pelambres
Expansion project is
anticipated to be 88%.
Performance for the
Zaldívar Chloride
Leach project is
anticipated to be 99%.
All goals achieved.
100%
Total
98.8%3
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 2020 results have been released to the market.
2. The Company’s 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 EMIX 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. The impact of this vesting level on the CEO’s 2020 remuneration is set out in footnote 6 of the CEO single figure total remuneration table on page 143.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
149
Corporate Governance
2020 Directors’ and CEO Remuneration Report continued
Implementation of the Directors’
and CEO’s remuneration policy
in 2021
A significant proportion of the remuneration
available to the CEO is dependent on the
performance of the Group and in 2021 his
total remuneration will consist of the same
elements as it did in 2020.
The chart opposite outlines the CEO’s total
potential remuneration in 2021 under different
performance scenarios.
The figures are based on the assumptions below.
Minimum
Target
Maximum
Max + 50% share
price growth
100%
$0.67m
29%
29%
42%
$2.32m
18%
37%
17%
35%
45%
48%
$3.63m
$3.82m
FIXED PAY
ANNUAL BONUS
LTIP
Description
Minimum
Target
Maximum
LTIP awards of 200% of salary, 325% in exceptional circumstances
(30% Restricted Awards, 70% Performance Awards)
No payout
Annual bonus, maximum opportunity of 200% of base salary
No payout
100% of Restricted
Awards, 48% of maximum
Performance Awards
50% of maximum
bonus opportunity
100% of Restricted Awards, 100%
of maximum Performance Awards
100% of maximum bonus opportunity
Annual base salary of Ch$472,005,528 ($663,908) as at
1 January 2021, plus benefits
Base salary plus benefits only. Excludes adjustments for inflation and the base salary increase from
April 2021 described in more detail below. Restricted Awards are not included on the basis that they
are subject to continued employment at the vesting date and lapse immediately upon the cessation of
employment prior to vesting.
All elements are estimated using an exchange
rate of $1 = Ch$711 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
The CEO’s salary as at 1 January 2021 was
$663,908 (2020: $613,629). The difference
between the 2020 and 2021 figures is due to
appreciation of the Chilean peso versus the
US dollar during 2020 and to a lesser extent,
inflation adjustments which automatically apply
to the CEO’s and employees’ base salaries in
line with the wider workforce.
As noted in the Chair’s introduction, at the
beginning of 2021, the Committee and the Board
reviewed the operation of the CEO’s pay policy
using internal and external measures, deciding to
increase the CEO’s base salary from April 2021.
The specific factors that were taken into account
in this decision included:
• the Group’s performance under the
CEO’s leadership over the last five years:
the CEO has provided outstanding leadership,
implementing the Group’s culture and values,
attracting and retaining key talent that works
together effectively as a team, delivering on
environmental, social and sustainability goals
and delivering robust financial performance.
• the position of the Group and the Board’s
current strategy and vision: the organisation
faces challenging operational and strategic
goals that need to be delivered at a time when
agility and continuity of leadership are required
to meet the challenges of the continuing
COVID-19 pandemic and social reform in Chile.
Our CEO has a fundamental role in supporting
the Group through that process.
• external benchmarking exercises showed
the CEO’s remuneration to be below the
appropriate positioning determined by the
Committee and the Board: The CEO’s relative
pay position has been consistently below global
and FTSE 100/FTSE 100 mining benchmark
packages and given the recent depreciation of
the Chilean peso, this positioning has moved
away from the Committee and the Board’s
desired positioning. The Committee and the
Board also considered the relative position
in Chile to ensure that this decision reflects
the appropriate position for the CEO in Chile.
• structural depreciation in the Chilean peso/
US dollar exchange rate: there has been a
structural depreciation in the long term Chilean
peso/US dollar exchange rate over the last
five years. The Chilean peso has depreciated
versus the US dollar leading to a decrease
in the CEO’s total US dollar pay and relative
competitiveness in recent years. For example,
the value of the Chilean peso to the US dollar
in 2020 compared with 2017 has devalued
by around 20%. While the Chilean peso to
US dollar exchange rate will continue to be
volatile, the effective increase in base pay for
the CEO in US dollar terms compared with
2017 is approximately 5%. All employees are
subject to annual merit reviews and similar
merit increases have been made throughout
the Group in recent years to ensure levels
of remuneration remain competitive.
Consequently, the Committee and the Board
have decided to increase base salary payments
in Chilean pesos under the CEO’s Chilean
employment contract by 25%. The impact of
this increase in US dollar terms will be reported
in the Company’s 2021 Remuneration Report.
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.
Annual bonus
The maximum bonus opportunity for the CEO for
2021 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 2021
plan as set out in the table below.
The number of KPIs and weightings attributable
to each component of the 2021 Annual Bonus
Plan is the same as in 2020 and reflects the
Committee’s view of the balance required to
successfully implement the Group’s strategy in
2021. 70% of the CEO and Executive Committee’s
2021 annual bonus will be calculated based on
the Group’s performance against these criteria
in 2021, with the remaining 30% based on
personal performance.
150
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Weighting Objective
Measure
Threshold
Target
60%
15%
Core business
EBITDA – Mining division1
$m ≤–10%
25%
20%
20%
13%
3%
4%
20%
5%
5%
5%
5%
kt
699.9
$/lb
$m
172.9
128.5
Copper production2
Costs3
Cash costs before by-product credits3 (17%)
Corporate expenditure4 (3%)
Business development – Growth and innovation projects execution
Growth projects5
Exploration programmes6
Innovation and Digital Transformation projects7
Sustainability and organisational capabilities
Safety – Mining division8
People – Diversity and Inclusion Strategy9
Environmental performance10
Social performance11
Maximum
≥+10%
766.9
153.3
116.3
The Group’s future metals price assumptions are commercially
sensitive and therefore the target for EBITDA will not be disclosed
in advance. However, the Company will disclose the 2021 target
and outcome in the 2021 Annual Report.
722.2 – 744.6
163.1
122.4
Measured according to the schedule and budget as described
in more detail in the footnotes.
Measured according to the KPIs and milestones as described
in more detail in the footnotes.
1. The threshold, target and maximum target figures for EBITDA will be adjusted for exchange rate fluctuations, the impact of hedging arrangements, copper price fluctuations and the
impact of any one-off bonuses paid as part of labour negotiations during the year.
2. 100% basis, except for Zaldívar (50%).
3. The threshold, target and maximum target figures for cash costs will be adjusted for exchange rate fluctuations, key input price deviations above 20% during the year and the impact
of any one-off bonuses paid as part of labour negotiations.
4. The figures for corporate expenditure will be adjusted for exchange rate fluctuations and the difference between budget annual bonus payments and actual bonus payments made
to employees for the year.
5. Split between the Los Pelambres Expansion project (6%) and the Zaldívar Chloride Leach project (1.5%), Zaldívar Environmental Impact Assessment (1.5%) and Centinela Second
Concentrator project (4%).
6. Maximum and target are defined according to the progress of execution of a planned exploration programme one target previously discovered to have potential mineralisation
and the consolidation of exploration ownership interests, including infill drilling campaigns, increasing the potential mineral inventory against three specific KPIs for each target.
7. Split between KPIs for the implementation of the autonomous truck fleet for Centinela (33.3%), the implementation of Centinela’s Remote Operations Centre (33.3%) and
implementation of the New Ways of Working project (33.3%).
8. Performance against a target for reducing high potential accidents versus the recorded high potential accidents in 2020, with threshold at no reduction, target of a 10% reduction
and maximum of a 15% reduction.
9. Performance against targets set at the beginning of 2021 for implementation of the Diversity and Inclusion Strategy. Split between the results of an evaluation of the Group culture
in supporting the expected maturity of the Group’s Diversity and Inclusion Strategy (50%) with threshold at no improvement in culture, target of an expected improvement in culture
and maximum for an improvement in culture above expectations based on the Committee’s approval of an evaluation overseen by the CEO and Vice President of Operations and an
increase in the percentage of female employees (50%) with threshold at 14.7%, target at 16.4% and maximum of 17.2% at 31 December 2021.
10. The control of risks relating to environmental performance across all companies measured against KPIs relating to compliance with an internal plan for the implementation of
controls for high and moderate environmental risks, a reduction in the Group’s overall CO2 emissions with threshold at 80% implementation of the internal plan for the control of high
and moderate environmental risks and no reduction in CO2 emissions, target at 100% implementation of the internal plan for the implementation of controls for high and moderate
environmental risks and 100% achievement of the CO2 emissions budget for scope 1 and scope 2 emissions for the year and Centinela and Zaldívar registered with The Copper Mark
before the end of the year and maximum at compliance with the target KPIs plus more than a 3.5% reduction in CO2 emissions versus budget for the year, the establishment of a goal
in 2022 for a reduction in scope 3 emissions and Centinela and Zaldívar registered with The Copper Mark before 30 September 2021.
11. Performance against the planned execution of social initiatives, improvements in measured social programmes and the control of risks relating to social incidents performance within
the budget across all companies where maximum is achievable with the implementation of all planned initiatives and no social incidents impacting production or the Group’s reputation
and with costs incurred 3% below budget.
Full disclosure on the targets and performance against them will be provided in the 2021 Remuneration Report.
Performance adjustments and discretion
As has been the case for a number of years, the
final performance score under the 2021 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 2021.
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 2021 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 2021.
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.
Following the Committee’s review, the
maximum opportunity for 2021 will remain
unchanged at 200% of salary (325% of salary
in exceptional circumstances).
2021 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.
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 2021 awards are shown at the top of the
following page.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
151
Corporate Governance
2020 Directors’ and CEO Remuneration Report continued
Weighting Objective
Measure
50%
Relative total
shareholder return
25%
Mineral resources
increase
12.5% Project’s
performance
12.5% Environmental and
social commitments
Comparison against Global X Copper Miners ETF (CopX 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 from the date of grant.
Maximum is expected to be 86.6 million tonnes of contained copper, with target and threshold of 85.6 and 82.6 million
tonnes of contained copper respectively as at 31 December 2023.
Maximum is achievable if the feasibility studies for the Concentrate Transportation System (35%) and Desalination Plant
Expansion (30%) projects are completed, and Centinela’s Second Concentrator project meets its respective budget and
construction plans approved by the Board (35%).
This KPI comprises two parts:
1. Social Management Plan (40%)
Maximum is achievable for 100% compliance with initiatives included in the Group’s social management plan, including
initiatives existing as of 31 March 2021 and added thereafter until 31 December 2023, on time and on budget with target
(0% vesting) at 85% compliance with the initiatives. The final score is calculated as the average score of all initiatives.
2. Climate change and environment (60%)
Maximum is achievable for compliance with the Group’s emissions budget according to the emissions reduction goal of
900,000t CO2e by 2023, 100% compliance with the climate change strategy roadmap and 100% compliance with the
internal plan to address regulatory requirements.
Implementation of the Directors’
Remuneration Policy in 2021
Directors will be paid fees in 2021 in accordance
with the same roles as in 2020 as set out on
page 140. These fees were reviewed against
relevant benchmarks at the beginning of 2021
and based on this exercise, the Board agreed to
keep Non-Executive Director fees unchanged but
to increase the fees payable for Committee roles
and the role of Senior Independent Director to
bring these fees closer to levels observed in the
market and to reflect the considerable additional
time commitments and responsibilities attached
to these roles, which has continued to grow in
recent years.
Benefits that were reported in 2020 will continue
to apply. Directors are not expected to receive
any other remuneration in 2021.
The fees payable for Committee roles and
the role of Senior Independent Director from
1 April 2020 are set out below:
Committee and arrangements in place
with advisers
The names of the members of the Remuneration
and Talent Management Committee are set
out on page 134 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.
The Committee noted that except as highlighted
below Willis Towers Watson had no other
connection with the Company, and is satisfied
that the advice provided by Willis Towers Watson
in 2020 was objective and independent and that
no conflict of interest arose as a result of these
services. Willis Towers Watson’s fees for this
work were charged in accordance with time
and materials and amounted to £145,130.
Additional Director fees payable from 1 April 2021
Role
Additional fees ($000)
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
33
42
20
25
10
35
20
35
20
35
20
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 work were tabled for
the Committee’s review and the Committee was
satisfied that the advice received was objective
and independent.
In determining that advice received was
independent, the Committee took into account
that 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 also received assistance from
the Chairman, Jean-Paul Luksic, the CEO,
Iván Arriagada, the Vice President of Human
Resources, Ana Maria Rabagliati and the Company
Secretary, Julian Anderson, during 2020, 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.
152
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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 112-114.
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 25 to the
financial statements.
Results and dividends
The consolidated profit before tax has increased
from $1,349.2 million in 2019 to $1,413.1 million
in 2020.
The Board has recommended a final dividend of
48.5 cents per ordinary share (2019 – 7.1 cents).
An interim dividend of 6.2 cents was paid on
2 October 2020 (2019 interim dividend –
10.7 cents). This gives total dividends per
share proposed in relation to 2020 of 54.7
cents (2019 – 17.8 cents) and a total dividend
amount in relation to 2019 of $539.3 million
(2019 – $175.5 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 (2019 – $0.1 million).
Further information relating to dividends
is set out in the Financial review on page 91
and in Note 14 to the financial statements.
Political contributions
The Group did not make political donations during
the year ended 31 December 2020 (2019 – 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 30 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 23 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.
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
Nominal
value
per share
Percentage
of capital
985,856,695
5p
96.10%
2,000,000
£1
3.90%
Authority to issue shares and
authority to purchase own shares
At the 2020 AGM, held on 20 May 2020,
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 12 May 2021. 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 2020
AGM granted authority to the Directors to allot
equity securities in the Company for cash up
to an aggregate nominal amount of £2,464,641,
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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
153
Corporate Governance
Directors’ Report continued
The Company was also authorised by a
shareholders’ resolution passed at the 2020
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 2020, 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 142)
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
94.12
58.04
9.94
4.26
–
–
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 37 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 2020 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, as detailed in Note 1 to 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 the principal decisions made by the Company
during the year, are set out on pages 34-61 of
the Strategic Report and pages 108-109 of the
Corporate Governance Report.
Other statutory disclosures
The Corporate Governance Report on
pages 94-152, the Statement of Directors’
responsibilities on page 155 and Note 25 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 engagement
Greenhouse gas emissions
Streamlined energy and
carbon reporting
Location in
Strategic Report
Pages 64-83
Page 30
Pages 64-83
Pages 42-44
Page 53
Pages 52-53
Disclosures required pursuant to Listing Rule
9.8.4R can be found on the following pages of
the Annual Report:
Location in
Annual Report
See Notes 6, 10
and 16 to the
financial statements
on pages 178-181,
186 and 189.
Page 103
Statement of interest
capitalised by the Group
(LR 9.8.4(1))
Relationship agreement
(LR 9.8.4(14))
By order of the Board
Julian Anderson
Company Secretary
15 March 2021
154
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Statement of Directors’ responsibilities in respect of the financial statements
Statement of Directors’
responsibilities
In the case of each director in office at the date
the directors’ report is approved:
• so far as the director is aware, there is
no relevant audit information of which the
group’s and parent company’s auditors are
unaware; and
• they have taken all the steps that they ought
to have taken as a director in order to make
themselves aware of any relevant audit
information and to establish that the group’s
and parent company’s auditors are aware of
that information.
By order of the Board
Jean-Paul Luksic
Chairman
15 March 2021
Ollie Oliveira
Senior Independent
Director
The Directors are responsible for preparing the
Annual Report and the financial statements in
accordance with applicable law and regulation.
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 accounting standards in conformity
with the requirements of the Companies Act 2006
and international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union and parent
company financial statements in accordance with
United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law).
Under company law, 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 parent company and of
the profit or loss of the group for that period. In
preparing the financial statements, the directors
are required to:
• select suitable accounting policies and then
apply them consistently
• state whether applicable international
accounting standards in conformity with the
requirements of the Companies Act 2006
and international financial reporting standards
adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European
Union have been followed for the group
financial statements and United Kingdom
Accounting Standards, comprising FRS 101
have been followed for the parent company
financial statements, subject to any material
departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates
that are reasonable and prudent; and
• prepare the financial statements on the
going concern basis unless it is inappropriate
to presume that the group and parent
company will continue in business.
The directors are also responsible for
safeguarding the assets of the group and parent
company and hence for taking reasonable steps
for the prevention and detection of fraud and
other irregularities.
The directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the group’s and parent
company’s transactions and disclose with
reasonable accuracy at any time the financial
position of the group and parent company
and enable them to ensure that the financial
statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
The directors are responsible for the
maintenance and integrity of the parent
company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Directors’ confirmations
The directors consider that the annual report
and accounts, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the group’s
and parent company’s position and performance,
business model and strategy.
Each of the directors, whose names and functions
are listed in the Corporate Governance Report,
confirm that, to the best of their knowledge:
• the group financial statements, which have
been prepared in accordance with international
accounting standards in conformity with the
requirements of the Companies Act 2006 and
international financial reporting standards
adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European
Union, give a true and fair view of the assets,
liabilities, financial position and profit of
the group;
• the parent company financial statements,
which have been prepared in accordance
with United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair view
of the assets, liabilities, financial position and
profit of the parent company; and
• the Strategic Report includes a fair review
of the development and performance of the
business and the position of the group and
parent company, together with a description
of the principal risks and uncertainties that
it faces.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
155
Financial Statements
Financial Statements
Financial
statements
156
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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
158
165
166
166
167
168
169
212
antofagasta.co.uk
Antofagasta plc Annual Report 2020
157
Financial Statements
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 2020 and of the Group’s profit and the Group’s cash flows for the year then ended;
• the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of
the Companies Act 2006;
• 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.
We have audited the financial statements, included within the Annual Report and Financial Statements 2020 (the “Annual Report”), which comprise: the
consolidated and Parent Company balance sheets as at 31 December 2020; 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 and Risk Committee.
Separate opinion in relation to international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union
As explained in note 1 to the Group financial statements, the Group, in addition to applying international accounting standards in conformity with the
requirements of the Companies Act 2006, has also applied international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
In our opinion, the Group financial statements have been properly prepared in accordance with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
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.
Other than those disclosed in note 8 to the financial statements, we have provided no non-audit services to the Group in the period under audit.
158
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Our audit approach
Context
The most significant impact on the audit for the year ended 31 December 2020 was the COVID-19 pandemic. As a result of COVID-19, Chile and the United
Kingdom were both placed under government lockdowns for large parts of our 2020 audit cycle, which impacted the way we conducted our work, with more
procedures being performed remotely, including the Group team’s direction and oversight of our component teams. The impacts of the pandemic, both from a
financial reporting perspective and as it related to delivering the audit largely remotely, were continuously re-evaluated throughout the year, including the
impact of the pandemic on our risk assessment.
Overview
Audit scope
• We identified two components (2019: two) as individually financially significant components, which required an audit of their complete financial information
due to their financial significance to the Group, and a further three components (2019: three) where we concluded that a full scope audit of the component
financial information was warranted.
• We also determined that specified procedures were necessary in respect of certain balances within the corporate segment and transport division to ensure
that we had sufficient coverage from our audit work over each line of the Group’s financial statements.
• Taken together, the components at which audit work was performed accounted for 97% of Group revenue.
Key audit matters
• Assessment of indicators of impairment for the Antucoya and Centinela cash generating units (Group)
• COVID-19 (Group and Parent Company)
Materiality
• Overall Group materiality: $64 million (2019: $70 million) based on approximately 5% of three year average profit before tax adjusted for one-off items.
• Overall Parent Company materiality: $22 million (2019: $13 million) based on 1% of total assets.
• Performance materiality: $48 million (Group) and $16.5 million (Parent Company).
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
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined in the
Auditors’ responsibilities for the audit of the financial statements section, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
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. 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 the 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:
• Inquiries with management, including the Group’s Vice President of Legal and the Head of Internal Audit, regarding their consideration of known or
suspected instances of non-compliance with laws and regulation, fraud, and breaches of applicable environmental regulations;
• Obtaining legal letters from the Group’s external legal advisers in respect of litigation and claims and other such matters, where considered necessary;
• Evaluation of management’s controls designed to prevent and detect irregularities, in particular their anti-bribery controls;
• Challenging assumptions and judgements made by management in respect of critical accounting judgements and significant accounting estimates, in
particular in relation to impairment indicator assessments at Antucoya and Centinela (see related key audit matter below); and
• Identifying and testing journal entries, in particular any journal entries posted with certain unusual account combinations.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected in the financial statements. 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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
159
Financial Statements
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.
COVID-19 is a new key audit matter this year. Provisions for decommissioning and restoration, which was a key audit matter last year, is no longer included
because of the reduced audit risk given the absence of both significant cost estimate updates and also any mandatory reviews by the Chilean regulator of the
cost estimate in the current year. Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Assessment of indicators of impairment for the Antucoya
and Centinela cash generating units (Group)
In accordance with IAS 36 ‘Impairment of assets’, the Directors
are required to perform an impairment assessment of long-
lived assets at any time an indicator of impairment exists. The
Directors considered various external and internal factors, as
set out in IAS 36, in assessing whether an impairment indicator
existed as at 31 December 2020, such as short- and long-term
forecast copper prices, the operational performance of these
mines and indicative estimates of movements in value during
the year based on the latest Life of Mine plans. The Directors
concluded that no impairment indicators existed as at 31
December 2020 in respect of either Antucoya or Centinela and,
therefore, no detailed impairment tests were performed.
This assessment required judgement on the part of the
Directors in determining whether an impairment trigger existed
and was, therefore, considered a key audit matter. There is a
heightened level of potential impairment risk at Antucoya, given
its relatively high cost base, and at Centinela given its sensitivity
to changes in the long-term copper price.
Refer to note 5 to the financial statements and the Audit and
Risk Committee’s views set out on page 125.
COVID-19 (Group and Parent Company)
Management has undertaken an assessment of the impact of
COVID-19 on the Group and Parent Company financial
statements focusing on the potential impact of the pandemic on
the Group’s accounting estimates and judgements. The areas
where management has given greatest attention to the
accounting and disclosure implications of COVID-19 are as
follows:
• The Group’s going concern assessment (note 1 to the
financial statements);
• Impairment considerations, including asset sensitivities (note
5 to the financial statements);
• Net realisable value of inventories (note 20 to the financial
statements; and
• Recoverability of trade receivables (note 21 to the financial
statements).
We focused on the impact of COVID-19 on the Group and
Parent Company financial statements as its impact may be
significant and pervasive, both in terms of the impact on a range
of the Group’s accounting judgements and estimates, including
but not limited to impairment, and in terms of the related
disclosures in the Annual Report. Refer also to the Audit and
Risk Committee’s views set out on page 125.
In addition, restrictions on travel and office closures limited our
ability to access mine sites and resulted in a large proportion of
the audit being delivered remotely.
We assessed management’s conclusion that there were no impairment indicators as at 31
December 2020.
Our procedures included evaluating management’s assessment of impairment indicators,
including evaluating the completeness of the assessment by reference to both internal and
external factors, including but not limited to the impact of COVID-19, operational
performance in the year, macro-economic factors including forecast copper prices, foreign
currency exchange rates and market interest rates, climate change, and expected future
production profiles and capital expenditure as included in the latest Life of Mine plan for
each operation.
In addition, we evaluated management’s quantitative impairment indicator assessments,
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 expected capital and operating expenses in light of their historical
levels and recent operational performance, and considered the competence and objectivity
of management’s internal technical experts who prepared the Life of Mine plans. We
evaluated the appropriateness of key market related assumptions in the indicative valuation
models, including the copper prices, discount rates and foreign currency exchange rates,
with the support of our valuation experts. We performed sensitivity analysis around the key
assumptions within the cash flow forecasts, using both lower long-term copper prices and
a stronger Chilean peso. In light of the above, we assessed the appropriateness of the
related disclosures in note 5 to the financial statements, including the sensitivities provided.
Overall, we identified no material issues in our work.
We issued specific audit instructions to component teams, requesting additional risk
assessments to be performed on the impact of COVID-19 locally, and directed component
auditors to perform further procedures to address the additional areas that may be subject
to significant estimates or judgements to ensure the appropriateness and completeness of
our audit risk assessment and planned audit response.
We assessed our ability to execute the audit when operating under lockdown and the
related international travel restrictions. We implemented alternative communication and
review protocols with management and with our component auditors. We also held a
planning meeting involving management and our component auditors, and agreed ways to
facilitate a remote audit, including determining how we could ensure appropriate access to
relevant documentation that we needed for our audit. We increased the frequency and
extent of our direction and oversight of our component audit teams, using more frequent
video conferencing and more extensive remote working paper reviews, to satisfy ourselves
as to the appropriateness of audit work performed by our component teams based in
Santiago.
With the support of our component teams where necessary, we evaluated management’s
accounting estimates in light of COVID-19. We considered its impact on impairment and we
have reported a separate key audit matter in respect of the assessment of indicators of
impairment at Antucoya and Centinela. Our procedures and conclusions in respect of going
concern are set out separately within the Conclusions relating to going concern section of
this report.
We assessed management’s disclosures in the Annual Report in relation to the impact of
COVID-19, considering whether the disclosures were consistent with our underlying audit
procedures both at the Group and at the component level. Overall, we identified no material
issues from our work.
160
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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, as well as the Parent Company Antofagasta plc, were also subject to an audit of their
complete financial information. We also requested that component auditors perform specified procedures over the corporate offices in Chile, and specific line
items of other entities within the Group (including the transport division) to ensure that we had sufficient coverage from our audit work over each line of the
Group’s financial statements. The Group engagement team also performed specified procedures in respect of the recoverability of the intangible asset
associated with the Twin Metals’ mining licences, held within the corporate segment. 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.
A UK staff member was seconded to PwC Chile to be an integral part of the team for part of the year. The Group team also reviewed the component auditor
working papers and reviewed other 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
How we determined it
Rationale for benchmark
applied
Financial statements – Group
$64 million (2019: $70 million)
Financial statements – Parent Company
$22 million (2019: $13 million)
Approximately 5% of three year average profit before tax
adjusted for one-off items
1% of total assets
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 overall Group materiality, we chose to use an
underlying earnings measure as the benchmark because
an underlying measure removes the impact of material
items that 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
$64 million, which equates to approximately 4.3% of the
current year’s profit before tax adjusted for one-off
items.
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 $6 million and $45 million.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of
account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall
materiality, amounting to $48 million for the Group financial statements and $16.5 million for the Parent Company financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the
effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above $3.2 million (Group audit) (2019:
$3.5 million) and $1.1 million (Parent Company audit) (2019: $650,000) as well as misstatements below those amounts that, in our view, warranted reporting
for qualitative reasons.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
161
Financial Statements
Financial Statements
Independent auditors’ report to the members of Antofagasta plc continued
Conclusions relating to going concern
Our evaluation of the Directors’ assessment of the Group’s and the Parent Company’s ability to continue to adopt the going concern basis of accounting
included:
• Obtaining and examining management’s base case forecasts and downside scenarios, checking that the forecasts have been subject to board review and,
in the case of the base case, approval;
• Considering the historical reliability of management forecasting by comparing budgeted results with actual performance;
• Assessing the future cash flows included in the base case to ensure that these were consistent with our understanding from work performed over other
key accounting estimates in the financial statements such as the impairment indicator assessment;
• Performing our own sensitivity analysis to understand the impact of changes in cash flows and net debt on the resources available to the Group;
• Assessing the covenants applicable to the Group’s borrowings and considering whether the forecasts supported ongoing compliance with the covenants;
and
• Reading management’s paper to the Audit and Risk Committee in respect of going concern, and agreeing the forecasts set out in this paper to the
underlying base case cash flow model.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may
cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial
statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the Parent Company’s ability
to continue as a going concern.
In relation to the Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this 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 our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below.
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 2020 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
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.
Directors’ Remuneration
In our opinion, the part of the Directors’ and CEO remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
162
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Corporate governance statement
The Listing Rules require us to review the Directors’ statements in relation to going concern, longer-term viability and that part of the corporate governance
statement relating to the Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Our additional
responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other information section of this
report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is
materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in
relation to:
• The Directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how
these are being managed or mitigated;
• The Directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in
preparing them, and their identification of any material uncertainties to the Group’s and Parent Company’s ability to continue to do so over a period of at
least twelve months from the date of approval of the financial statements;
• The Directors’ explanation as to their assessment of the Group’s and Parent Company’s prospects, the period this assessment covers and why the period
is appropriate; and
• The Directors’ statement as to whether they have a reasonable expectation that the Parent Company will be able to continue in operation and meet its
liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or
assumptions.
Our review of the Directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only consisted of
making inquiries and considering the Directors’ process supporting their statement; checking that the statement is in alignment with the relevant provisions of
the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and our knowledge and understanding
of the Group and Parent Company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement
is materially consistent with the financial statements and our knowledge obtained during the audit:
• The Directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information
necessary for the members to assess the Group’s and Parent Company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when 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.
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, 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.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically
involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based
on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample
is selected.
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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
163
Financial Statements
Financial Statements
Independent auditors’ report to the members of Antofagasta plc continued
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 obtained 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’ and CEO 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 and Risk 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 6 years, covering the years ended 31
December 2015 to 31 December 2020.
Simon Morley (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
15 March 2021
164
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Consolidated income statement
For the year ended 31 December 2020
Group revenue
Total operating costs
Operating profit from subsidiaries
Net share of results from associates and joint ventures
Impairment of investment in associate
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 from continuing operations
Profit from discontinued operations
Profit for the year
Attributable to:
Non-controlling interests
Profit attributable to the owners of the parent
Basic earnings per share
From continuing operations
From discontinued operations
Total continuing and discontinued operations
Notes
6,7
6,8
6,18
3
8
10
6
11
6
12
31
13
13
Excluding
exceptional items
2020
$m
Exceptional Items
2020
$m
5,129.3
(3,537.1)
1,592.2
5.1
–
1,597.3
18.9
(77.1)
(45.2)
(103.4)
1,493.9
(546.2)
947.7
7.3
955.0
–
–
–
–
(80.8)
(80.8)
–
–
–
–
(80.8)
19.7
(61.1)
–
(61.1)
2020
$m
5,129.3
(3,537.1)
1,592.2
5.1
(80.8)
1,516.5
18.9
(77.1)
(45.2)
(103.4)
1,413.1
(526.5)
886.6
7.3
893.9
408.4
546.6
(20.9)
(40.2)
387.5
506.4
54.7
0.7
55.4
(4.1)
–
(4.1)
50.6
0.7
51.3
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
341.7
501.4
US cents
50.9
–
50.9
antofagasta.co.uk
Antofagasta plc Annual Report 2020
165
Financial Statements
Financial Statements
Consolidated statement of comprehensive income
For the year ended 31 December 2020
Profit for the year
Items that may be or were subsequently reclassified to profit or loss:
(Losses)/gains on cash flow hedges – time value
Losses on cash flow hedges – intrinsic value
Losses/(gains) in fair value of cash flow hedges transferred to the income statement
Deferred tax effects arising on cash flow hedges deferred in reserves
Currency translation adjustment
Total items that may be or were subsequently reclassified to profit or loss
Items that will not be subsequently reclassified to profit or loss:
Actuarial gains/(losses) on defined benefit plans
Tax on items recognised through Other Comprehensive income/(expense) which will not be reclassified to
profit or loss in the future
Gains 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
Total comprehensive income for the year
Attributable to:
Non-controlling interests
Equity holders of the Company
Total comprehensive income for the year – continuing operations
Total comprehensive income for the year – discontinued operations
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Note
6
25
25
27
19
31
2020
$m
893.9
(19.2)
(12.9)
3.4
2.4
0.9
(25.4)
9.8
(2.6)
5.5
–
12.7
(12.7)
881.2
383.2
498.0
2020
$m
873.9
7.3
881.2
2019
$m
843.1
0.4
(7.7)
(0.8)
2.0
–
(6.1)
(4.7)
0.9
0.3
(0.3)
(3.8)
(9.9)
833.2
338.6
494.6
2019
$m
833.2
–
833.2
At 1 January 2019
Profit for the year
Other comprehensive expense for the year
Dividends
At 31 December 2019
Capital increases from non-controlling interest
(Note 23) 1
Profit for the year
Other comprehensive expense for the year
Dividends
At 31 December 2020
Share capital
$m
Share premium
$m
89.8
–
–
–
89.8
–
–
–
–
89.8
199.2
–
–
–
199.2
–
–
–
–
199.2
Other
reserves
(Note 30)
$m
(14.5)
–
(3.6)
–
(18.1)
–
–
(12.5)
–
(30.6)
Retained
earnings
(Note 30)
$m
7,084.9
501.4
(3.2)
(470.3)
7,112.8
–
506.4
4.1
(131.1)
7,492.2
Equity
attributable
to equity
owners of
the parent
$m
7,359.4
501.4
(6.8)
(470.3)
7,383.7
–
506.4
(8.4)
(131.1)
7,750.6
Non-controlling
interests
$m
2,078.7
341.7
(3.1)
(400.0)
2,017.3
210.0
387.5
(4.3)
(280.0)
2,330.5
Total
equity
$m
9,438.1
843.1
(9.9)
(870.3)
9,401.0
210.0
893.9
(12.7)
(411.1)
10,081.1
1. A capital contribution of $210 million was received from Marubeni, the minority partner at Antucoya, in order to replace part of Antucoya’s subordinated debt financing with equity (see Notes
23 and 31).
166
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Consolidated Balance sheet
As at 31 December 2020
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
2020
$m
2019
$m
15
16
20
18
21
25
19
28
20
21
25
22
22
23
25
24
29
23
25
24
18
27
29
28
30
30
30
31
150.1
9,851.9
2.6
278.1
914.6
55.9
0.3
11.1
6.4
11,271.0
592.7
1,016.9
49.8
1.1
2,426.0
1,246.8
5,333.3
16,604.3
(603.4)
(37.4)
(808.8)
(22.2)
(153.9)
(1,625.7)
(3,151.4)
–
(11.0)
(1.1)
(123.2)
(498.0)
(1,112.8)
(4,897.5)
(6,523.2)
10,081.1
89.8
199.2
(30.6)
7,492.2
7,750.6
2,330.5
10,081.1
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
The financial statements on pages 165-211 were approved by the Board of Directors on 15 March 2021 and signed on its behalf by
Jean-Paul Luksic
Chairman
Ollie Oliveira
Senior Independent Director
antofagasta.co.uk
Antofagasta plc Annual Report 2020
167
Financial Statements
Financial Statements
Consolidated Cash Flow Statement
For the year ended 31 December 2020
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
Acquisition of mining properties
Proceeds from sale of property, plant and equipment
Purchases of property, plant and equipment
Net increase 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
Capital increase from non-controlling interest 1
Proceeds from issue of new borrowings
Repayments of borrowings
Principal elements of lease payments
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Net increase/(decrease) in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the year
Notes
32
18
18
22
14
14
31
32
32
32
32
32
22,32
2020
$m
2,431.1
(52.7)
(319.7)
2,058.7
(7.2)
–
(1.5)
0.8
(1,305.9)
(886.3)
12.6
(2,187.5)
(131.1)
(0.1)
(280.0)
210.0
2,398.6
(1,393.8)
(86.5)
717.1
588.3
653.7
588.3
4.8
1,246.8
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
1. A capital contribution of $210 million was received from Marubeni, the minority partner at Antucoya, in order to replace part of Antucoya’s subordinated debt financing with equity
(see Notes 23 and 31).
168
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Notes to the financial statements
1 Basis of preparation
The financial statements have been prepared in accordance with both
international accounting standards in conformity with the requirements
of the Companies Act 2006 and international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.The financial statements have been prepared on the going
concern basis.
Going concern
The Group’s business activities, together with those factors likely to affect
its future performance, are set out in the Strategic Report, and in particular
within the Operating Review. Details of the cash flows of the Group during
the period, along with its financial position at the period-end, are set out in
the Financial Review. The financial statements include details of the Group’s
cash, cash equivalents and liquid investment balances in Note 22, and details
of borrowings are set out in Note 23.
When assessing the going concern status of the Group 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. The Group had a
strong financial position as at 31 December 2020, with combined cash, cash
equivalents and liquid investments of $3,672.8 million. Total borrowings were
$3,754.8 million, resulting in a net debt position of just $82.0 million. Of the
total borrowings, only 16% is repayable within one year, and 14% repayable
between one and two years. 43% of the borrowings are repayable after
more than 5 years.
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, and capital expenditure. 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 analysis has only included the draw-down of existing
committed borrowing facilities, and has not assumed that any new borrowing
facilities will be put in place. The Directors have assessed the principal risks
which could impact the prospects of the Group over the going concern
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 going concern
period;
• A shut-down of the Group’s operations for several months as the result of
COVID-19 related issues; and
• The occurrence of several of the Group’s most significant potential risks
within a single year, such as temporary shut-downs or operational disruption
due to issues such as labour strikes or water availability.
These stress-tests all 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 have formed a judgement, at the time
of approving the financial statements, that there are no material uncertainties
that cast doubt on the Group’s going concern status and that there is a
reasonable expectation that the Group has adequate resources to continue
in operational existence for at least twelve months from the date of approval
of the financial statements. The Directors therefore consider it appropriate
to adopt the going concern basis of accounting in preparing its financial
statements.
Company structure
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 following accounting standards, amendments and interpretations
became effective in the current reporting period:
• 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)
• Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and
IFRS 7)
• Covid-19-Related Rent Concessions (Amendment to IFRS 16)
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.
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
• Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
• Reference to the Conceptual Framework (Amendments to IFRS 3)
• Property, Plant and Equipment – Proceeds before Intended Use
(Amendments to IAS 16)
• Onerous Contract – Cost of Fulfilling a Contract (Amendments to IAS 37)
• Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS
1, IFRS 9, IFRS 16 and IAS 41)
The item which is expected to have most relevance to the Group is the
amendment to IAS 16 Property, Plant and Equipment – Proceeds before
intended use. Currently the Group deducts amounts received from the sale
of products during the initial ramp-up of new projects, before commercial
production is achieved, from the capital cost of the project. Under the
amendment to IAS 16 such amounts will instead be recognised as revenue
in the income statement along with a corresponding allocation of related
operating expenses, which is likely to result in increased revenue and
operating expenses and a higher initial capitalised amount.
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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
169
Financial Statements
Financial Statements
Notes to the financial statements continued
2 Principal accounting policies continued
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.
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 18.
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 over
time as the shipping service is provided, along with the associated costs.
Shipment revenue is recognised at the contracted price as this reflects the
standalone selling price.
170
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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.
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 are recognised in line with the performance of those
services.
Other Income
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.
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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
171
Financial Statements
Financial Statements
Notes to the financial statements continued
2 Principal accounting policies continued
I) Stripping costs
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.
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, 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.
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 16).
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.
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
172
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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.
N) Inventory
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.
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.
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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
173
Financial Statements
Financial Statements
Notes to the financial statements continued
2 Principal accounting policies continued
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
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 the lease liability
• any lease payments made at or before the commencement date less any
lease incentives received
• any initial direct costs, and
• restoration costs.
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 fair value which is typically
equal to 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.
174
Antofagasta plc Annual Report 2020
antofagasta.co.uk
(vi) Derivative financial instruments – As explained in Note 25(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.
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 project costs within property, plant and
equipment
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 2020 $ 23.0 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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
175
Financial Statements
Financial Statements
Notes to the financial statements continued
3 Critical accounting judgements and key
sources of estimation uncertainty continued
(ii)
As set out in Note 28, the Group has recognised $6.4 million of deferred
tax assets as at 31 December 2020, with the majority of these deferred
tax assets relating to short-term timing differences and provisions.
The Group had unused tax losses of $599.4 million available for offset
against future profits. Deferred tax assets of $5.3 million have been
recognised in respect of $19.6 million of these losses, with no deferred
tax assets recognised in respect of the remaining $579.8 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 $157 million could be recognised. In determining that it is not
currently appropriate to recognise these additional deferred tax assets
the Group has taken into account that the entities involved have
consistently generated taxable losses in recent years, and are currently
forecast to continue generating taxable losses in forthcoming years.
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 28, at 31 December 2020 deferred withholding tax
liabilities of $52.8 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
$4,810 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 5, 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 5. 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.
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 20, the value of work in progress
inventories at 31 December 2020 was $617.4 million.
If the copper spot price at 31 December 2020 (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
Income Statement of approximately $9 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 2020 was $1,048.7
million, and so as a very simplistic sensitivity, a 10% adjustment to the
useful economic lives of all of the Group’s property, plant and equipment
would result in an impact of approximately $100 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 29. The total value of these provisions as at 31 December 2020
was $520.2 million.
176
Antofagasta plc Annual Report 2020
antofagasta.co.uk
4 Exceptional items
Exceptional items are material items of income and expense which are non-
regular or non-operating and typically non-cash movements. The exceptional
items in 2020 and their impact on the results are set out below.
On 31 March 2020 the Group agreed to dispose of its 40% interest in
Hornitos coal-fired power station to ENGIE Energía Chile S.A. (“ENGIE”), the
owner of the remaining 60% interest. This was part of the value accretive
renegotiation of Centinela’s power purchase agreement which as a result will
be wholly supplied from lower cost renewable sources from 2022. Under
the terms of the agreement the Group will dispose of its investment to
Engie in 2021 for a nominal consideration, and will not be entitled to receive
any further dividend income from Hornitos from the date of the agreement.
Accordingly, the Group no longer has any effective economic interest in
the results or assets of Hornitos from 31 March 2020 onwards, and has
therefore recognised an impairment of $80.8 million in respect of its
investment in associate balance, and will no longer recognise any share of
Hornitos’ results. The post-tax impact of the impairment is $61.1 million, of
which $40.2 million is attributable to the equity owners of the Company.
A long-term copper price of $3.10/lb has been used in the base valuations
used in the impairment indicator assessment. As an additional down-side
sensitivity a valuation was performed with a long-term copper price of
$2.90/lb, reflecting the lower quartile price in the consensus of analyst
forecasts used when assessing the appropriate long-term price. Los
Pelambres, Centinela and Zaldivar still showed a positive headroom in this
alternative down-side scenario, however the Antucoya valuation indicated
a potential deficit of approximately $15million. 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.
There were no exceptional items in 2019.
5 Asset sensitivities
Other asset sensitivities
Based on an assessment of both qualitative and quantitative factors,
there were no indicators of potential impairment, or reversal of previous
impairments, for the Group’s non-current assets associated with its mining
operations at the 2020 year-end, and accordingly no impairment reviews
have been performed. The quantitative element of the trigger assessment
provides an indication of what the approximate recoverable amount of the
Group’s operations would be, were a full impairment test under IAS 36
to be performed. In order to provide an indication of the sensitivities of the
approximate recoverable amount of the Group’s mining operations, sensitivity
analysis has been performed on the preliminary valuation, prepared as part
of the Group’s impairment indicator analysis.
The COVID-19 situation is not expected to have a relevant negative impact on
the future production, operating expenses or capital projects of the Group’s
mining operations.
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 impairment indicator 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.
If a full IAS 36 impairment test were to be prepared, which was not the case
as at 31 December 2020, 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.
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. As an additional down-side sensitivity a valuation was performed
with a 10% stronger long-term Chilean peso exchange rate assumption.
Los Pelambres, Centinela, Antucoya and Zaldivar all still showed a positive
headroom in this alternative down-side scenario. A real post-tax discount
rate of 8% has been used in determining the present value of the forecast
future cash flows from the assets as part of the impairment indicator
assessment.
Climate change aspects relevant to asset sensitivities
The “Taskforce on Climate Related Financial Disclosures” (“TCFD”) section
on pages 54-56 of the Annual Report provides detail of the Group’s on-going
work to assess and reduce the Group’s exposure to climate risks, in line with
the TCFD framework. During 2020 the Group conducted an initial qualitative
assessment of the potential risks and opportunities and likely business
impacts under two climate change scenarios, and during 2021 will select the
most material risks and opportunities to undergo a quantitative scenario
analysis in order to estimate in more detail the potential operational and
financial impact to our operations. The following section provides a high-level
summary of the way in which climate change related factors could be
relevant to the sensitivities of the values of the Group’s mining operations,
based on the Group’s existing analysis.
Relevant aspects of the Group’s operations
The following aspects of the Group’s mining operations are particularly
relevant when looking at the potential impacts of climate change on the
operational performance and value of the Group’s mining operations:
• The Group’s mining business is focused on copper. The transition to a low-
carbon economy requires many carbon reduction measures with two major
drivers being the increased demand for renewable energy and the
electrification of transportation systems. As copper is a primary component
in these technologies, this is expected to have a positive impact on copper
demand in the medium- to long-term.
• The Group has been working to eliminate its involvement with coal-fired
electricity generation. The Group has electricity supply contracts in place
which mean that from 2022 all of the mining operations’ electricity supply
will be from renewable sources.
• The Group has also held a 40% interest in the Hornitos coal-fired power
station in northern Chile. In March 2020 the Group agreed to dispose of this
interest, recognising a full impairment of the carrying value of this investment.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
177
Financial Statements
Financial Statements
Notes to the financial statements continued
5 Asset sensitivities continued
• The Group’s sensitivity analysis has identified an increased risk of drought in
the Coquimbo region where Los Pelambres is situated as one of the principal
potential climate related physical risks for the Group. In the Atacama region
where Antucoya, Centinela and Zaldivar are situated, water scarcity has
always been acute and is expected to remain so. The Group has been focused
on reducing its use of continental fresh water for a number of years, through
the use of sea water and maximising the level of recycling of water in its
operations. Centinela and Antucoya were designed to operate entirely with
raw (i.e. non-desalinated) sea water. Los Pelambres is currently constructing
a desalination plant, and by 2025 this will result in 95% of its water usage
coming from desalinated sea water or recycled water. 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.
Relevant aspects of the asset sensitivity and valuation analysis
The nature of the asset sensitivity and valuation analysis described above
means that some level of assessment of potential future climate-related
risks should effectively already be incorporated into a number of the key
assumptions used in this analysis. As explained above, the Group typically
uses a “fair value less cost to dispose” methodology when performing this
analysis, which reflects the price the Group could expect to receive from the
sale of the asset to an external market participant. Accordingly, the Group
uses assumptions which an external market participant could reasonably
be expected to use when valuing the asset. Therefore, where possible the
Group uses assumptions which are supported by external market data –
in particular, in respect of the forecasts for the future copper price, the
future US dollar / Chilean peso exchange rate and the discount rate. This
market data should reflect the market’s current best estimate of the risks
and opportunities impacting, for example, the future copper price or
comparable mining assets etc – including within those overall risks and
opportunities the market’s current assessment of the probable impact of
climate-related factors.
6 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 (the Group’s Chief Executive Officer)
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.
178
Antofagasta plc Annual Report 2020
antofagasta.co.uk
A) Segment revenues and results
For the year ended 31 December 2020
Revenue
Operating cost excluding depreciation
Depreciation and amortisation
Loss on disposals
Operating profit/(loss)
Equity accounting results
Impairment of investment in associate3
Net share of results from associates
and joint ventures
Investment income
Interest expense
Other finance items
Profit/(loss) before tax
Tax
Profit/(loss) for the year from
continuing operations
Profit for the period 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
Centinela
$m
2,655.1
(992.1)
(252.6)
(2.5)
1,407.9
–
–
–
4.7
(4.3)
(26.0)
1,382.3
(435.8)
1,844.5
(932.8)
(662.9)
(1.8)
247.0
–
(95.6)
(95.6)
4.3
(24.9)
(13.7)
117.1
(23.0)
Antucoya
$m
480.3
(314.5)
(94.6)
–
71.2
–
–
–
0.8
(25.5)
(4.0)
42.5
(0.3)
Zaldívar
$m
–
–
–
–
–
12.2
–
12.2
–
–
–
12.2
–
Exploration
and
evaluation2
$m
Corporate
and other
items
$m
Mining
$m
–
(85.1)
–
–
(85.1)
–
–
–
–
–
–
(85.1)
–
–
4,979.9
(66.2) (2,390.7)
(1,017.9)
(4.3)
1,567.0
5.7
(95.6)
(7.8)
–
(74.0)
(6.5)
–
(6.5)
9.0
(20.7)
(5.5)
(97.7)
(59.2)
(89.9)
18.8
(75.4)
(49.2)
1,371.3
(518.3)
Transport
division
$m
149.4
(91.4)
(30.8)
(2.0)
25.2
(0.6)
14.8
14.2
0.1
(1.7)
4.0
41.8
(8.2)
Total
$m
5,129.3
(2,482.1)
(1,048.7)
(6.3)
1,592.2
5.1
(80.8)
(75.7)
18.9
(77.1)
(45.2)
1,413.1
(526.5)
946.5
94.1
42.2
12.2
(85.1)
(156.9)
853.0
33.6
886.6
–
946.5
371.5
–
94.1
12.9
–
42.2
3.1
575.0
1,663.0
81.2
911.7
39.1
165.8
–
12.2
–
12.2
95.5
–
(85.1)
–
(85.1)
(85.1)
7.3
(149.6)
–
7.3
860.3
387.5
–
33.6
–
7.3
893.9
387.5
(149.6)
(72.7)
472.8
2,678.2
33.6
506.4
61.0
2,739.2
827.3
441.8
44.6
–
5,475.9
–
–
(2,700.1)
5,898.8
–
–
(1,823.2)
1,641.5
–
–
(702.5)
–
–
909.0
–
–
–
–
–
–
8.4
1,322.1
26.2
1,348.3
2,284.2
2.7
–
15,300.4
2.7
909.0
(1,202.6) (6,428.4)
382.9
3.7
5.6
(94.8)
15,683.3
6.4
914.6
(6,523.2)
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 216).
2. Operating cash outflow in the exploration and evaluation segment was $43.1 million.
3. On 31 March 2020 the Group agreed to dispose of its 40% interest in Hornitos coal-fired power station to ENGIE Energía Chile S.A. (“ENGIE”), the owner of the remaining 60% interest. This
has resulted in a $80.8 million impairment in respect of the Group’s investment in associate balance.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
179
Financial Statements
Financial Statements
Notes to the financial statements continued
6 Segment information continued
For the year ended 31 December 2019
Exploration
and
evaluation2
$m
Corporate
and other
items
$m
Zaldívar
$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
Segment assets
Deferred tax assets
Investment in associates and joint venture
Segment liabilities
Los Pelambres
$m
Centinela
$m
2,363.9
(979.8)
(258.5)
(10.5)
1,115.1
–
11.1
(7.7)
8.8
1,127.3
(341.4)
2,007.9
(1,048.4)
(532.2)
(1.5)
425.8
–
7.9
(36.5)
3.4
400.6
(88.5)
785.9
785.9
(309.0)
312.1
312.1
(69.4)
476.9
1,384.1
242.7
959.5
Antucoya
$m
432.2
(345.9)
(92.2)
–
(5.9)
–
1.4
(42.7)
(0.5)
(47.7)
(0.2)
(47.9)
(47.9)
36.7
(11.2)
86.3
–
–
–
–
–
15.5
–
–
–
15.5
–
15.5
15.5
–
15.5
112.6
573.0
535.9
43.0
–
4,251.2
–
–
(1,696.7)
5,792.2
–
–
(1,789.6)
1,647.1
–
–
(933.3)
–
–
961.8
–
Mining
$m
4,804.0
(2,556.0)
(890.8)
(12.0)
1,345.2
13.0
46.6
(108.6)
13.5
1,309.7
(498.3)
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)
–
(70.8)
(7.9)
–
(78.7)
(2.5)
26.2
(21.7)
1.8
(74.9)
(68.2)
(143.1)
(143.1)
–
811.4
811.4
(341.7)
31.7
31.7
–
843.1
843.1
(341.7)
(143.1)
(73.3)
469.7
2,358.1
31.7
80.8
501.4
2,438.9
16.0
1,167.9
68.6
1,236.5
1,543.3
5.5
–
(694.0)
13,233.8
5.5
961.8
(5,113.6)
343.6
2.7
63.0
(95.8)
13,577.4
8.2
1,024.8
(5,209.4)
–
(111.1)
–
–
(111.1)
–
–
–
–
(111.1)
–
(111.1)
(111.1)
–
(111.1)
(111.1)
–
–
–
–
–
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 216).
2. Operating cash outflow in the exploration and evaluation segment was $43.0 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 $6.8 million (year ended 31 December 2019 – $5.3 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 7.
(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 7.
(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 nil (31 December 2019 – $56.9 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 $5.6 million
(31 December 2019 – $6.2 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 18.
180
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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
2020
$m
2019
$m
2,323.6
940.4
603.9
480.3
106.4
251.3
181.8
27.7
43.3
21.2
4,979.9
149.4
5,129.3
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
2020
$m
2019
$m
123.3
593.5
29.3
116.4
92.3
224.4
182.0
152.3
612.4
158.0
102.7
85.0
213.8
95.3
216.5
88.9
1,631.1
531.4
667.5
353.4
235.7
132.5
5,129.3
1,561.5
517.2
692.1
371.2
171.0
143.1
4,964.5
Information about major customers
In the year ended 31 December 2020 the Group’s mining revenue included $763.4 million related to one large customer that individually accounted for more
than 10% of the Group’s revenue (year ended 31 December 2019 – one large customer representing $711.9 million).
1. Figures include both revenue from the sale of products and the associated income from the provision of shipping services.
Non-current assets by location of assets
Chile
USA
Other
2020
$m
11,092.7
178.3
–
11,271.0
2019
$m
Restated
10,818.0
176.9
0.1
10,995.0
The above amounts reflect non-current assets excluding financial assets (in particular, derivative financial instruments) and deferred tax assets. The prior
period comparatives have been restated to exclude financial assets and deferred tax assets, resulting in a reduction in respect of the assets located in Chile
of $9.9 million as at 31 December 2019.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
181
Financial Statements
Financial Statements
Notes to the financial statements continued
7 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.
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 over time as the shipping service is provided.
An analysis of the Group’s revenue is as follows:
Revenue from contracts with customers
Sale of products
Provision of shipping services associated with the sale of products
Transport services
Provisional pricing adjustments in respect of copper, gold and molybdenum
Total revenue
2020
$m
2019
$m
4,617.3
95.4
149.4
267.2
5,129.3
4,693.4
92.9
160.5
17.7
4,964.5
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 6.
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.
For the year ended 31 December 20201
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
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
2,256.7
949.3
594.8
474.8
104.9
250.6
205.0
31.6
(29.1)
(43.6)
(15.2)
(18.7)
(0.4)
(0.3)
(0.4)
(0.3)
(72.7)
(33.9)
(0.7)
(0.7)
–
0.2
0.2
(1.2)
3.7
0.4
(1.5)
–
(0.2)
2.5
(1.1)
(0.2)
194.6
67.0
11.2
7.8
1.5
(2.0)
4.6
58.7
26.8
(0.1)
0.5
–
0.9
(0.2)
253.3
93.8
11.1
8.3
1.5
(1.1)
4.4
Total pricing adjustments
Realised losses on commodity derivatives
Revenue before deducting tolling charges
Tolling charges
Revenue net of tolling charges
180.6
–
2,437.3
(113.6)
2,323.7
59.9
–
1,009.2
(68.8)
940.4
10.4
(1.3)
603.9
–
603.9
7.6
(2.1)
480.3
–
480.3
1.7
–
106.6
(0.2)
106.4
1.4
–
252.0
(0.7)
251.3
3.3
–
208.3
(26.5)
181.8
2.1
0.3
2.4
2.2
–
33.8
(6.1)
27.7
182
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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
Los Pelambres
Copper
concentrate
$m
Centinela
Copper
concentrate
$m
2,144.9
1,222.3
Centinela
Copper
cathodes
$m
506.1
Antucoya
Copper
cathodes
$m
434.8
Los Pelambres
Gold in
concentrate
$m
Centinela
Gold in
concentrate
$m
Los Pelambres
Molybdenum
concentrate
$m
Centinela
Molybdenum
concentrate
$m
76.2
325.3
298.1
7.4
23.6
0.3
9.5
9.9
0.7
(1.0)
0.7
(0.9)
–
(1.3)
(0.7)
1.4
(0.7)
(8.4)
23.9
19.4
(0.3)
(0.2)
(1.3)
0.7
(9.1)
–
–
–
(41.3)
(14.6)
(1.8)
(2.9)
0.5
6.4
(7.0)
(0.8)
29.1
15.2
0.4
0.4
–
1.2
(0.4)
–
(12.2)
0.6
(1.4)
(2.5)
0.5
7.6
(7.4)
(0.8)
Total pricing adjustments
Realised gains on commodity derivatives
Revenue before deducting tolling charges
Tolling charges
Revenue net of tolling charges
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
(0.8)
–
75.4
(0.2)
75.2
8.3
–
333.6
(1.1)
332.5
(16.5)
–
281.6
(32.6)
249.0
(0.8)
–
6.6
(1.0)
5.6
1. Figures include both revenue from the sale of products and the associated income from the provision of shipping services.
(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
2020
2019
Tonnes
$/lb
$/lb
162,300
3.52
3.28
158,600
2.81
2.68
(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
2020
13,800
3.52
3.50
(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
2020
16,300
1,917
1,861
(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
2020
2,000
9.34
9.38
2019
12,000
2.80
2.77
2019
21,200
1,542
1,485
2019
1,900
9.20
9.30
antofagasta.co.uk
Antofagasta plc Annual Report 2020
183
Financial Statements
Financial Statements
Notes to the financial statements continued
7 Revenue continued
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 – molybdenum concentrate
Centinela – gold in concentrate
Centinela – copper cathodes
Antucoya – copper cathodes
Effect on debtors of year end
mark-to-market adjustments
2020
$m
58.7
(0.2)
26.8
0.3
0.9
(0.1)
0.5
86.9
2019
$m
29.1
(0.4)
15.2
–
1.2
0.4
0.4
45.9
8 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
Impairment of investment in associate
Total profit from operations, associates and joint ventures
2020
$m
5,129.3
(2,856.9)
2,272.4
(484.6)
27.0
(222.6)
1,592.2
5.1
(80.8)
1,516.5
2019
$m
4,964.5
(2,963.6)
2,000.9
(445.9)
28.4
(207.6)
1,375.8
24.4
–
1,400.2
Other operating expenses comprise $85.0 million of exploration and evaluation expenditure (2019 – $111.0 million), $17.9 million in respect of the employee
severance provision (2019 – $24.8 million), $45.2 million in respect of the closure provision (2019 – $2.8 million credit) and $74.5 million of other expenses
(2019 – $74.5 million).
Profit before tax is stated after (charging)/crediting:
Foreign exchange (gains)/losses
• included in net finance costs
• included in income tax expense
Depreciation of property, plant and equipment
• owned assets
• 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
2020
$m
(28.4)
0.1
(966.9)
(81.8)
(6.3)
(1,810.0)
(453.8)
(45.2)
(17.9)
(85.0)
(1.8)
2019
$m
35.8
0.7
(828.0)
(81.4)
(12.7)
(1,970.1)
(439.8)
2.8
(24.8)
(111.1)
(1.5)
184
Antofagasta plc Annual Report 2020
antofagasta.co.uk
A more detailed analysis of auditors´ remuneration on a worldwide basis is provided below:
Group
Fees payable to the Company´s auditors and its associates for the audit of parent company and consolidated
financial statements
Fees payable to the Company´s auditors 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
2020
$000
920
323
185
–
352
–
–
1,780
2019
$000
944
288
219
–
19
–
20
1,490
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 124. No services were provided pursuant
to contingent fee arrangements.
9 Employees
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
2020
Number
944
2,092
3
798
67
528
4
4
4,440
1,379
5,819
2019
Number
926
2,057
2
787
62
469
4
4
4,311
1,408
5,719
(i) 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.
(ii) 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
2020
$m
(430.2)
(23.6)
(453.8)
2019
$m
(416.1)
(23.7)
(439.8)
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
2020
$m
(18.6)
(18.6)
2019
$m
(16.1)
(16.1)
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 139.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
185
Financial Statements
Financial Statements
Notes to the financial statements continued
10 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
Effects of changes in foreign exchange rates
Preference dividends
Net finance expense
2020
$m
3.4
15.5
18.9
(77.1)
(77.1)
(16.7)
(28.4)
(0.1)
(45.2)
(103.4)
2019
$m
9.8
37.3
47.1
(111.1)
(111.1)
(22.7)
35.8
(0.1)
13.0
(51.0)
During 2020, amounts capitalised and consequently not included within the above table were as follows: $21.0 million at Los Pelambres (year ended
31 December 2019 – $12.5 million) and $5.7 million at Centinela (year ended 31 December 2019 – $4.7 million).
The fair value through profit or loss line represents the fair value gains relating to liquid investments.
The interest expense shown above includes $9.7 million in respect of leases (2019 – $13.0 million).
11 Income tax expense
The tax charge for the year comprised the following:
Current tax charge
• 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
2020
$m
2019
$m
(353.5)
(106.1)
(55.8)
0.1
(515.3)
(1.1)
4.2
(14.3)
(11.2)
(526.5)
(255.5)
(67.2)
(32.4)
0.7
(354.4)
(125.1)
0.6
(27.2)
(151.7)
(506.1)
The rate of first category (ie corporate) tax in Chile is 27.0% (2019 – 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.
186
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Profit before tax
Tax at the Chilean corporate tax rate of 27%
Impairment of investment in associate
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
Reversal of previously unrecognised tax losses/(unrecognised tax
losses)
Net other items
Tax expense and effective tax rate for the year
Year ended
Excluding exceptional items
2020
Year ended
Including exceptional items
2020
$m
%
$m
%
$m
1,493.9
(403.4)
–
(101.3)
28.1
(9.8)
(1.6)
(70.0)
1.4
10.5
(0.1)
(546.2)
27.0
–
6.8
(1.9)
0.7
0.1
4.7
(0.1)
(0.7)
–
36.6
1,413.1
(381.5)
(2.2)
(101.3)
28.1
(9.8)
(1.6)
(70.0)
1.4
10.5
(0.1)
(526.5)
27.0
0.2
7.2
(2.0)
0.6
0.1
5.0
(0.1)
(0.7)
–
37.3
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
The effective tax rate varied from the statutory rate principally due to the mining tax (royalty) (net impact of $73.2 million / 5.2% 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 $70.0 million / 5.0%), items not deductible for Chilean corporate tax purposes, principally the funding of expenses outside of Chile (impact of $9.8
million / 0.6%), adjustments in respect of prior years (impact of $1.6 million / 0.1%), partly offset by unrecognised tax gains (impact of $10.5 million / 0.7%)
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 $1.4 million / 0.1%).
The impact of the exceptional items on the effective tax rate including exceptional items was $2.2 million / 0.2%.
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).
12 Discontinued operations
In 2016 the Group disposed of Minera Michilla SA, with the profit on disposal, along with the results for that year, being presented on the “Profit for the period
from discontinued operations” line in the income statement. The Group retained certain residual options over the Michilla operation, and in December 2020
the current owner of Michilla paid the Group $10.0 million in order to extinguish those options, resulting in a post-tax gain for the Group of $7.3 million.
Consistent with the original presentation in 2016, this gain has been reflected on the “Profit for the period from discontinued operations” line in the income
statement.
13 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
2020
$m
506.4
2019
$m
501.4
2020
Number
2019
Number
985,856,695 985,856,695
2020
cents
50.6
0.7
51.3
2019
cents
50.9
–
50.9
Basic earnings per share are calculated as profit after tax and non-controlling interests, based on 985,856,695 (2019: 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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
187
Financial Statements
Financial Statements
Notes to the financial statements continued
13 Earnings per share continued
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
14 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
2020
2019
$m
$m
$m
501.4
506.4
–
(7.3)
501.4
499.1
Number 985,856,695 985,856,695
50.9
50.6
cents
2020
$m
2019
$m
2020
cents
per share
2019
cents
per share
70.0
364.7
61.1
131.1
105.5
470.2
7.1
6.2
13.3
37.0
10.7
47.7
The recommended 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
2020
$m
2019
$m
2020
cents
per share
2019
cents
per share
478.2
70.0
48.5
7.1
This gives total dividends proposed in relation to 2020 (including the interim dividend) of 54.7 cents per share or $539.3 million (2019 – 17.8 cents per share
or $175.5 million).
In accordance with IAS 32, preference dividends have been included within interest expense (see Note 10) and amounted to $0.1 million (2019 – $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 153.
15 Intangible assets
Cost
At 1 January 2019
Additions
Disposals
At 31 December 2019
Additions
Disposals
At 31 December 2020
$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. These assets are classified
as intangible assets as construction of the related mining operation has not yet commenced. When construction commences the licences will be transferred
from intangible assets to the mining properties category within property, plant and equipment. Depreciation of these mining licences, along with the
construction costs of the related mining operation, will commence when the operation is capable of commercial production.
188
Antofagasta plc Annual Report 2020
antofagasta.co.uk
16 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
Total
$m
Cost
At 1 January 2019
Additions
Additions – capitalised depreciation
Adjustment to capitalised decommissioning
provisions
Capitalisation of interest
Capitalisation of critical spare parts
Reclassifications
Asset disposals
At 31 December 2019
At 1 January 2020
Additions
Additions – capitalised depreciation
Adjustment to capitalised decommissioning
provisions
Capitalisation of interest
Capitalisation of critical spare parts
Reclassifications
Asset disposals
At 31 December 2020
Accumulated depreciation and impairment
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
At 1 January 2020
Charge for the year
Depreciation capitalised in inventories
Depreciation capitalised in property, plant
and equipment
Asset disposals
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
5,321.1
0.5
–
24.8
–
–
121.2
(2.8)
5,464.8
5,464.8
0.2
–
59.4
–
–
403.7
–
5,928.1
(2,140.1)
(245.9)
–
–
0.6
2.2
(2,383.2)
(2,383.2)
(230.4)
–
84.1
–
–
–
–
–
15.6
–
99.7
99.7
–
–
–
–
–
9.7
(1.1)
108.3
(30.5)
(3.5)
–
–
–
–
(34.0)
(34.0)
(4.8)
55.8
4.8
–
662.3
–
–
1,471.4
346.5
62.6
–
–
–
5.2
–
–
–
–
667.5
667.5
–
–
1,880.5
1,880.5
356.7
67.8
–
–
–
–
–
–
–
–
–
–
667.5 2,305.0
(490.3)
(40.0)
–
–
–
–
(530.3)
(530.3)
(31.8)
–
(441.9)
(262.2)
–
–
–
–
(704.1)
(704.1)
(413.0)
–
–
–
–
–
60.6
60.6
1.4
–
–
–
–
–
(0.1)
61.9
–
–
–
–
–
–
–
–
–
–
–
–
–
146.1 6,845.5
–
–
–
–
955.2
777.4
–
409.3
45.2
–
15,950.8
1,174.4
62.6
–
–
–
64.7
(7.2)
203.6
203.6
–
–
–
8.9
11.5
197.5
(4.4)
7,059.0
7,059.0
0.3
–
–
–
–
(385.1)
(12.2)
1,335.3
1,335.3
937.4
–
–
–
–
(23.0)
(0.9)
430.6
430.6
33.6
–
24.8
8.9
11.5
(3.9)
(27.5)
17,201.6
17,201.6
1,329.6
67.8
–
–
8.0
–
10.2
–
192.5
14.6
(3.1)
(10.2)
208.0 7,266.9
–
18.7
–
(620.5)
(4.3)
1,666.6
–
–
–
–
(5.3)
59.4
26.7
10.2
–
(24.1)
458.9 18,671.2
(84.3)
(13.7)
–
(3,348.3)
(267.6)
(49.7)
–
–
6.8
(91.2)
(91.2)
(18.8)
–
(62.6)
(6.7)
3.7
(3,731.2)
(3,731.2)
(268.1)
(74.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
(99.9)
(81.4)
–
(6,635.3)
(914.3)
(49.7)
(62.6)
–
3.4
9.5
13.6
0.9
(7,644.9)
(170.9)
(170.9)
(7,644.9)
(81.8) (1,048.7)
(74.8)
–
–
5.3
(67.8)
16.9
(247.4) (8,819.3)
–
–
(562.1)
–
–
(1,117.1)
–
–
(2,613.6)
–
9.2
(67.8)
2.1
(100.8) (4,139.8)
0.3
(38.5)
61.9
60.6
105.4
137.2
1,187.9
1,176.4
3,314.5
3,081.6
69.8
65.7
107.2
112.4
3,127.1
3,327.8
1,666.6
1,335.3
211.5
259.7
9,851.9
9,556.7
The Group has no pledged assets (2019 – nil) as security against bank loans provided to the Group.
At 31 December 2020 the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to $849.5 million
(2019 – $863.3 million) of which $553.2 million was related to Los Pelambres and $289.6 million to Centinela.
Compensation from insurance companies related to property, plant and equipment included in the consolidated income statement was nil in 2020
(2019 – nil).
The average interest rate for the amounts capitalised was 4.2% (2019 – 3.5%).
At 31 December 2020, assets capitalised relating to the decommissioning provision were $199.5 million (2019 – $140.1 million).
Depreciation capitalised in property, plant and equipment of $67.8 million related to the depreciation of assets used in mine development (operating stripping)
at Centinela, Los Pelambres and Antucoya (2019 – $62.6 million).
antofagasta.co.uk
Antofagasta plc Annual Report 2020
189
Financial Statements
Financial Statements
Notes to the financial statements continued
17 Investments in subsidiaries
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.
Country of
incorporation
Country of
operations
Registered office
Nature of business Economic interest
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
Inversiones Ferrobol Limitada
Inversiones Los Pelambres Chile Limitada
Equatorial Resources SpA
Minera Santa Margarita de Astillas SCM
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
Bolivia
Chile
Chile
Chile
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
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
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
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%
82.0%
190
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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 2 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
Mining
Logistics
Investment
Mining
Community
development
Investment
12
Railway
12
Investment
12
Investment
12
12
Forestry
12 Road transport
Investment
12
Transport
12
Transport
12
Transport
12
Transport
12
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
Antofagasta plc Annual Report 2020
191
Financial Statements
Financial Statements
Notes to the financial statements continued
18 Investment in associates and joint ventures
Balance at the beginning of the year
Obligations on behalf of JV and associates at the beginning of the year
Capital contribution
Impairment of investment in associate (i)
Share of net profit/(loss) before tax
Share of tax
Share of income/(loss) from JV and associates
Dividends receivable
Balance at the end of the year
Obligations on behalf of JV and associates at the end of the year
Balance at the beginning of the year
Obligations on behalf of JV and associates at the beginning of the year
Capital contribution
Share of net profit/(loss) before tax
Share of tax
Share of income/(loss) from JV and associates
Dividends receivable
Other comprehensive income
Balance at the end of the year
Obligations on behalf of JV and associates at the end of the year
Inversiones
Hornitos
2020
$m
56.9
–
23.9
(80.8)
–
–
–
–
–
–
Inversiones
Hornitos
2019
$m
54.6
–
–
13.8
(3.5)
10.3
(8.0)
–
56.9
–
ATI (ii)
2020
$m
6.1
–
–
–
(0.9)
0.4
(0.5)
–
5.6
–
ATI
2019
$m
5.1
–
–
1.5
(0.4)
1.1
–
(0.1)
6.1
–
Minera
Zaldívar (iii)
2020
$m
961.8
–
–
–
19.8
(7.6)
12.2
(65.0)
909.0
–
Minera
Zaldívar
2019
$m
996.4
–
–
23.8
(8.2)
15.6
(50.0)
(0.2)
961.8
–
Tethyan
Copper (iv)
2020
$m
–
(1.8)
7.2
–
(6.5)
–
(6.5)
–
–
(1.1)
Tethyan
Copper
2019
$m
–
(1.0)
1.8
(2.6)
–
(2.6)
–
–
–
(1.8)
Total
2020
$m
1,024.8
(1.8)
31.1
(80.8)
12.4
(7.2)
5.2
(65.0)
914.6
(1.1)
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)
The investments which are included in the $913.4 million balances at 31 December 2020 are set out below:
Investment in associates
(i) On 31 March 2020 the Group agreed to dispose of its 40% interest in Hornitos coal-fired power station to ENGIE Energía Chile S.A. (“ENGIE”), the
owner of the remaining 60% interest. This was part of the value accretive renegotiation of Centinela’s power purchase agreement which as a result will
be wholly supplied from lower cost renewable sources from 2022. Under the terms of the agreement the Group will dispose of its investment to Engie
in 2021 for a nominal consideration, and will not be entitled to receive any further dividend income from Hornitos from the date of the agreement.
Accordingly, the Group no longer has any effective economic interest in the results or assets of Hornitos from 31 March 2020 onwards, and has
therefore recognised an impairment of $80.8 million in respect of its investment in associate balance, and will no longer recognise any share of Hornitos’
results. The post-tax impact of the provision is $61.1 million, of which $40.2 million is attributable to the equity owners of the Company.
(ii) The Group’s 30% interest in ATI, which operates a concession to manage installations in the port of Antofagasta.
Investment in joint ventures
(iii) The Group’s 50% interest in Minera Zaldívar SpA (“Zaldívar”).
(iv) 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 35.
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.
192
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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
Other comprehensive expense
Total comprehensive income
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
Other comprehensive expense
Total comprehensive income/(expense)
ATI
2020
$m
0.2
11.3
108.2
(19.9)
(83.5)
40.4
(1.9)
–
(1.9)
ATI
2019
$m
0.8
13.2
112.5
(18.3)
(90.0)
52.2
3.6
(0.3)
3.3
Tethyan
Copper
2020
$m
4.2
–
–
(6.2)
(0.1)
–
(12.9)
–
(12.9)
Tethyan
Copper
2019
$m
1.7
–
–
(5.1)
(0.1)
–
(5.1)
–
(5.1)
Total
2020
$m
0.2
11.3
108.2
(19.9)
(83.5)
40.4
(1.9)
–
(1.9)
Total
2019
$m
30.1
39.2
377.6
(62.1)
(243.9)
192.1
29.4
(0.3)
29.1
Total
2020
$m
285.2
677.2
1,856.3
(296.2)
(670.5)
599.3
11.4
–
11.4
Total
2019
$m
140.4
631.3
1,846.8
(123.8)
(518.0)
687.6
47.9
(0.4)
47.5
Inversiones
Hornitos
2019
$m
29.3
26.0
265.1
(43.8)
(153.9)
139.9
25.8
–
25.8
Minera
Zaldívar
2020
$m
281.0
677.2
1,856.3
(290.0)
(670.4)
599.3
24.3
–
24.3
Minera
Zaldívar
2019
$m
138.7
631.3
1,846.8
(118.7)
(517.9)
687.6
53.0
(0.4)
52.6
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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
193
Financial Statements
Financial Statements
Notes to the financial statements continued
19 Equity investments
Balance at the beginning of the year
Movement in fair value
Foreign currency exchange differences
Balance at the end of the year
2020
$m
5.1
5.5
0.5
11.1
2019
$m
4.7
0.3
0.1
5.1
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.
20 Inventories
Current
Raw materials and consumables
Work-in-progress
Finished goods
Non-current
Work-in-progress
Total
2020
$m
2019
$m
178.2
339.3
75.2
592.7
278.1
870.8
219.9
276.7
89.8
586.4
208.0
794.4
During 2020 a net realisable value (“NRV”) adjustment of $1.5 million has been recognised (2019 $18.5 million). Non-current work-in-progress represents
inventory expected to be processed more than 12 months after the balance sheet date.
The carrying value of the Group’s inventory balances has been reassessed with consideration of the effects of the COVID-19 pandemic. No material
adjustments have been made to the carrying values of the inventory balances for the year ended 31 December 2020 as a result of the COVID-19 pandemic.
21 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
2020
$m
832.6
184.3
1,016.9
2019
$m
570.9
111.5
682.4
2020
$m
–
55.9
55.9
2019
$m
–
48.2
48.2
2020
$m
832.6
240.2
1,072.8
Total
2019
$m
570.9
159.7
730.6
The largest balances of trade receivables are with equity participants in the key mining projects. Many other significant trade receivables are secured
by letters of credit or other forms of security. 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 7.
Movements in the provision for doubtful debts were as follows:
Balance at the beginning of the year
Utilised in year
Foreign currency exchange difference
Balance at the end of the year
2020
$m
(3.1)
1.8
(0.2)
(1.5)
2019
$m
(4.6)
1.6
(0.1)
(3.1)
194
Antofagasta plc Annual Report 2020
antofagasta.co.uk
The ageing analysis of the trade and other receivables balance is as follows:
2020
2019
Neither
past due
nor impaired
$m
1,064.3
724.1
Past due but not impaired
Up to
3 months
past due
$m
8.0
4.0
3-6 months
past due
$m
0.2
0.1
More than
6 months
past due
$m
0.3
2.4
Total
$m
1,072.8
730.6
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.
The recoverability of the Group’s trade receivables has been reassessed with consideration of the effects of the COVID-19 pandemic. No material adjustments
have been made to the carrying values of trade receivables for the year ended 31 December 2020 as a result of the COVID-19 pandemic.
22 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 2020 and 2019 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 follow:
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.
2020
$m
1,246.8
2,426.0
3,672.8
2020
$m
3,558.9
112.8
–
1.1
3,672.8
2020
$m
2,007.1
–
46.0
279.5
553.3
741.5
33.9
2.1
–
3,663.4
9.4
3,672.8
2019
$m
653.7
1,539.7
2,193.4
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
There have been no impairments recognised in respect of cash or cash equivalents as at 31 December 2020 (31 December 2019 nil).
antofagasta.co.uk
Antofagasta plc Annual Report 2020
195
Financial Statements
Financial Statements
Notes to the financial statements continued
23 Borrowings
A) Analysis by type of borrowing
Borrowings may be analysed by business segment and type as follows:
Los Pelambres
• Senior 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
• Bond
• Leases
Transport division
• Senior loan
• Leases
Preference shares
Total
Note
2020
$m
2019
$m
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(1,288.1)
(91.4)
(496.5)
(203.0)
–
(78.0)
(261.1)
(191.5)
(75.0)
(19.9)
(496.6)
(495.6)
(18.6)
(469.4)
(115.0)
(298.8)
(205.9)
(200.0)
(81.0)
(325.4)
(391.9)
(75.0)
(27.7)
(499.2)
–
(19.3)
(36.5)
(0.3)
(2.7)
(3,754.8)
(44.6)
(1.0)
(2.6)
(2,756.8)
(i)
The 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 5 years and
an interest rate of LIBOR six-month rate plus 1.2%. The second tranche has a remaining duration of 8 years and an interest rate of LIBOR six-month rate plus 0.85%. As at 31 December
2020 the loan facility had been fully drawn-down. The loan is subject to financial covenants which require that specified net debt to EBITDA and EBITDA to finance expense ratios are
maintained.
(ii)
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 1.5 years.
(iii) The previous Centinela senior loan was repaid in February 2020. A new $500 million senior loan was put in place at that time, with a remaining duration of 4.2 years and an interest rate
of LIBOR six-month rate plus 0.95%. The loan is subject to financial covenants which require that specified net debt to EBITDA and EBITDA to finance expense ratios are maintained.
(iv) The subordinated debt at Centinela is provided by Marubeni Corporation and is US dollar denominated with a remaining duration of 5.5 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)
Leases at Centinela are mainly Chilean peso denominated, with a weighted average interest rate of 5.1% and a remaining duration of 3 years.
(vi) The senior loan at Antucoya represents a US dollar denominated syndicated loan, with a remaining duration of 3.9 years and 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.
(vii) The subordinated debt at Antucoya is provided by Marubeni Corporation and is US dollar denominated with a remaining duration of 4.5 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.
During the year ended 31 December 2020 Antucoya made a $210 million repayment of the subordinated debt due to Marubeni which was replaced with equity.
(viii) 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%.
(ix) 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 3 years.
(x)
The previous Corporate (Antofagasta plc) senior loan was repaid in August 2020. A new $500 million senior loan was put in place at that time, with an interest rate of LIBOR six-month
rate plus 2.25% and has a remaining duration of 4.7 years.
(xi) Antofagasta plc issued a $500 million corporate bond in October 2020 with a 10 year tenor and a yield of 2.415%.
(xii) Leases at Corporate and other items are denominated in Unidades de Fomento (ie inflation-linked Chilean pesos) and have a remaining duration of 7.2 years and are at fixed rates with
an average interest rate of 5.3%.
(xiii) The senior loan at the Transport division is 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 1 year.
(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 2020. 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.
196
Antofagasta plc Annual Report 2020
antofagasta.co.uk
B) Leases
Information in respect of the Group’s leases is contained in the following notes:
• Note 16 – depreciation charges, additions and disposals in respect of the right of use assets relating to the leases
• Note 32(b) – repayments of the lease balances and new lease liabilities arising during the period
• Note 10 – interest expense in respect of the lease balances
C) Analysis of borrowings by currency
The exposure of the Group’s borrowings to currency risk is as follows:
At 31 December 2020
Corporate loans
Bond
Other loans (including short-term loans)
Leases
Preference shares
At 31 December 2019
Corporate loans
Other loans (including short-term loans)
Leases
Preference shares
D) 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 2020
Corporate loans
Bond
Other loans (including short-term loans)
Leases
Preference shares
At 31 December 2019
Corporate loans
Other loans (including short-term loans)
Leases
Preference shares
Chilean
pesos
$m
–
–
–
(169.5)
–
(169.5)
Chilean
pesos
$m
–
–
(195.7)
–
(195.7)
Sterling
$m
–
–
–
–
(2.7)
(2.7)
Sterling
$m
–
–
–
(2.6)
(2.6)
Fixed
$m
–
(495.6)
–
(177.6)
(2.7)
(675.9)
Fixed
$m
–
–
(199.3)
(2.6)
(201.9)
US dollars
$m
(2,578.8)
(495.6)
(469.5)
(38.7)
–
(3,582.6)
US dollars
$m
(1,637.4)
(872.8)
(48.3)
–
(2,558.5)
Floating
$m
(2,578.8)
–
(469.5)
(30.6)
–
(3,078.9)
Floating
$m
(1,637.4)
(872.8)
(44.7)
–
(2,554.9)
2020
Total
$m
(2,578.8)
(495.6)
(469.5)
(208.2)
(2.7)
(3,754.8)
2019
Total
$m
(1,637.4)
(872.8)
(244.0)
(2.6)
(2,756.8)
2020
Total
$m
(2,578.8)
(495.6)
(469.5)
(208.2)
(2.7)
(3,754.8)
2019
Total
$m
(1,637.4)
(872.8)
(244.0)
(2.6)
(2,756.8)
antofagasta.co.uk
Antofagasta plc Annual Report 2020
197
Financial Statements
Financial Statements
Notes to the financial statements continued
23 Borrowings continued
E) Maturity profile
The maturity profile of the Group’s borrowings is as follows:
At 31 December 2020
Corporate loans
Bond
Other loans
Leases
Preference shares
At 31 December 2019
Corporate loans
Other loans
Leases
Preference shares
Within
1 year
$m
(454.3)
–
(75.0)
(74 .1)
–
(603.4)
Within
1 year
$m
(373.3)
(275.0)
(75.6)
–
(723.9)
Between
1-2 years
$m
(471.3)
–
–
(62.6)
–
(533.9)
Between
1-2 years
$m
(135.2)
–
(59.7)
–
(194.9)
Between
2-5 years
$m
(941.0)
–
–
(67.4)
–
(1,008.4)
Between
2-5 years
$m
(1,128.9)
–
(92.9)
–
(1,221.8)
The amounts included above for 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
(712.2)
(495.6)
(394.5)
(4.1)
(2.7)
(1,609.1)
After
5 years
$m
–
(597.8)
(15.8)
(2.6)
(616.2)
2020
$m
(81.3)
(66.7)
(71.9)
(4.3)
(224.2)
16.0
(208.2)
All leases are on a fixed payment basis and no arrangements have been entered into for contingent rental payments.
24 Trade and other payables
Trade creditors
Other creditors and accruals
Due in one year
Due after one year
2020
$m
(536.5)
(272.3)
(808.8)
2019
$m
(513.5)
(237.1)
(750.6)
2020
$m
–
(11.0)
(11.0)
2019
$m
–
(8.2)
(8.2)
2020
$m
(536.5)
(283.3)
(819.8)
2020
Total
$m
(2,578.8)
(495.6)
(469.5)
(208.2)
(2.7)
(3,754.8)
2019
Total
$m
(1,637.4)
(872.8)
(244.0)
(2.6)
(2,756.8)
2019
$m
(82.4)
(68.4)
(99.6)
(16.7)
(267.1)
23.1
(244.0)
Total
2019
$m
(513.5)
(245.3)
(758.8)
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 21 days (2019 – 26 days).
At 31 December 2020, the other creditors and accruals include $3.8million (2019 – $6.8 million) relating to prepayments. Prepayments are offset against
payables to the same suppliers.
198
Antofagasta plc Annual Report 2020
antofagasta.co.uk
25 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
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 (restated1)
Cash and cash equivalents
Liquid investments
Financial liabilities
Derivative financial liabilities
Trade and other payables
Borrowings and leases
2020
$m
Total
1.4
11.1
992.6
1,246.8
2,426.0
4,677.9
2019
$m
Total
4.8
5.1
668.4
653.7
1,539.7
2,871.7
–
(815.8)
(3,754.8)
(4,570.6)
(37.4)
(816.1)
(3,754.8)
(4,608.3)
–
–
184.6
1,246.8
–
1,431.4
–
–
97.1
653.7
–
750.8
1.4
–
808.0
–
2,426.0
3,235.4
(37.4)
(0.3)
–
(37.7)
–
11.1
–
–
–
11.1
–
–
–
–
4.8
–
571.3
–
1,539.7
2,115.8
(12.1)
(0.4)
–
(12.5)
–
5.1
–
–
–
5.1
–
–
–
–
At fair value
through profit
and loss
At fair value
through other
comprehensive
income
Held at amortised
cost
–
(755.9)
(2,756.8)
(3,512.7)
(12.1)
(756.3)
(2,756.8)
(3,525.2)
The fair value of the fixed rate bond included within the “Borrowings and leases” category was $503.5 million at 31 December 2020 compared with its
carrying value of $495.6 million. The fair value of all other financial assets and financial liabilities carried at amortised cost is not materially different from the
carrying value presented above.
1. The “Loans and receivables” balances for the comparative periods have been restated to exclude certain amounts which are outside the scope of the definition of “financial assets” per IAS 32
Financial Instruments: Presentation, resulting in a $62.2 million reduction in the balance as at 31 December 2019.
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
Level 1
$m
Level 2
$m
Level 3
$m
–
11.1
–
2,426.0
2,437.1
–
–
–
1.4
–
808.0
–
809.4
(37.4)
(0.3)
(37.7)
–
–
–
–
–
–
–
–
Total
2020
$m
1.4
11.1
808.0
2,426.0
3,246.5
(37.4)
(0.3)
(37.7)
antofagasta.co.uk
Antofagasta plc Annual Report 2020
199
Financial Statements
Financial Statements
Notes to the financial statements continued
25 Financial instruments and financial risk management continued
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
–
5.1
–
1,539.7
1,544.8
–
–
–
Level 2
$m
4.8
–
571.3
–
576.1
(12.1)
(0.4)
(12.5)
Level 3
$m
–
–
–
–
–
–
–
–
Total
2019
$m
4.8
5.1
571.3
1,539.7
2,120.9
(12.1)
(0.4)
(12.5)
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 2020 relate to foreign exchange and commodity options.
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 2020, 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.
(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 2020, sales of copper and molybdenum concentrate
and copper cathodes represented 88.9% 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 7. Details of commodity rate derivatives entered into by the Group are given in Note 23(E).
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 $16.8 million
(2019 – increase by $16.5 million).
200
Antofagasta plc Annual Report 2020
antofagasta.co.uk
• 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 $16.8 million
(2019 – decrease by $16.5 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 $73.5 million (2019 – $77.3 million) and earnings
per share by 7.5 cents (2019 – 7.8 cents), based on production volumes in 2020, 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 $11.8 million (2019 – $10.7
million), and earnings per share by 1.2 cents (2019 – 1.0 cents), based on production volumes in 2020, 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 $10.1 million (2019 –
$14.5 million), and earnings per share by 1.0 cents (2019 – 1.5 cents), based on production volumes in 2020, 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 25(D).
The currency exposure of the Group’s cash, cash equivalents and liquid investments is given in Note 22, and the currency exposure of the Group’s
borrowings is given in Note 23(C). The effects of exchange gains and losses included in the income statement are given in Note 10. 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 166.
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% increase against the Chilean peso as at the reporting date, profit attributable to the owners of the parent would
have increased by $15.8 million (2019 – increase of $10.2 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 $19.3 million (2019 – decrease of $12.5 million).
(III) Interest rate risk
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 25(D).
The Interest rate exposure of the Group’s borrowings is given in Note 23.
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 $1.7 million (2019 – decrease of $1.5 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 $1.1 million (2019 – increase
of $0.5 million). There would have been no impact on the income statement.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
201
Financial Statements
Financial Statements
Notes to the financial statements continued
25 Financial instruments and financial risk management continued
(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 64-83.
(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 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 21).
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.
At the end of 2020 the Group was in a net debt position (2019 – net debt position), as disclosed in Note 32(C). Details of cash, cash equivalents and liquid
investments are given in Note 22, while details of borrowings including the maturity profile are given in Note 23(E). Details of undrawn committed borrowing
facilities are also given in Note 23.
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 2020
Corporate loans
Other loans (including short-term loans)
Leases
Preference shares1
Trade and other payables
Derivative financial instruments
At 31 December 2019
Corporate loans
Other loans (including short-term loans)
Leases
Preference shares1
Trade and other payables (restated2)
Derivatives financial instruments
Less than
6 months
$m
(223.4)
(82.3)
(42.1)
–
(808.8)
(36.0)
(1,192.6)
Less than
6 months
$m
(206.6)
(391.9)
(37.2)
–
(750.6)
(6.3)
(1,392.6)
Between
6 months
to 1 year
$m
(221.1)
(6.0)
(39.1)
–
–
–
(266.2)
Between
6 months
to 1 year
$m
(204.3)
(202.3)
(35.3)
–
–
–
(441.9)
Between
1-2 years
$m
(462.6)
(24.1)
(66.7)
(2.7)
(11.0)
–
(567.1)
Between
1-2 years
$m
(1,062.7)
(76.0)
(64.4)
(2.6)
(8.2)
(1.0)
(1,214.9)
After
2 years
$m
(1,838.5)
(1,011.7)
(76.2)
–
–
–
(2,926.4)
After
2 years
$m
(234.3)
(205.9)
(100.4)
–
–
–
(540.6)
2020
Total
$m
(2,745.6)
(1,124.1)
(224.1)
(2.7)
(819.8)
(36.0)
(4,952.3)
2019
Total
$m
(1,707.9)
(876.1)
(237.3)
(2.6)
(758.8)
(7.3)
(3,590.0)
1. 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.
2. The “Trade and other payables” balance for the comparative period has been restated to exclude certain amounts which are outside the scope of the definition of “financial liabilities” per
IAS 32 Financial Instruments: Presentation, resulting in a $22.0 million reduction in the balance as at 31 December 2019.
202
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Capital risk management
(VIII)
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/debt (defined as cash, cash equivalents and liquid investments less borrowings) which was a net debt of
$82.0 million at 31 December 2020 (2019 – net debt $563.4 million), as well as gross cash (defined as cash, cash equivalents and liquid investments) which
was $3.672.8 million at 31 December 2020 (2019 – $2,193.4 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 23. 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 2020 year-end relate to provisionally priced trade receivables and foreign exchange and commodity options, and are
immaterial to the Group.
26 Long-term incentive plan
The long-term incentive plan (the “Plan”) forms 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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
203
Financial Statements
Financial Statements
Notes to the financial statements continued
26 Long-term incentive plan continued
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
2020
2019
$19.2
49.56%
3 years
0.73%
0.08%
$11.2
38.50%
3 years
4.18%
1.71%
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 characteristic of each plan.
The number of awards outstanding at the end of the year is as follows:
Outstanding at 1 January 2020
Granted during the year
Cancelled during the year
Payments during the year
Outstanding at 31 December 2020
Number of awards that have vested
Restricted
Awards
Performance
Awards
548,543
474,969
(30,356)
(254,421)
738,735
286,058
1,403,917
760,352
(61,847)
(472,896)
1,629,526
The Group has recorded a liability for $22.3 million at 31 December 2020, of which $11.0 million is due after more than one year (31 December 2019 –
$10.2 million of which $6.5 million was due after more than one year) and total expenses of $17.2 million for the year (2019 – expense of $7.7 million).
27 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 2020 was $0.1 million
(2019 – $0.1 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 2020 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:
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
2020
3.5%
2.0%
5.7%
2020
$m
(17.9)
(4.9)
(6.2)
(29.0)
2019
5.0%
1.5%
7.5%
2019
$m
(24.8)
(4.9)
7.8
(21.9)
204
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Movements in the present value of severance provisions were as follows:
Balance at the beginning of the year
Current service cost
Actuarial gains/(losses)
Interest cost
Paid in the year
Foreign currency exchange difference
Balance at the end of the year
Assumptions description
Discount rate
2020
$m
(118.7)
(17.9)
9.8
(4.9)
14.5
(6.0)
(123.2)
2019
$m
(107.4)
(24.8)
(4.7)
(4.9)
15.3
7.8
(118.7)
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 2020
3.64%
20–year Chilean Central Bank Bonds
Governmental
AA–/AA+
Secondary
Chilean peso
15 November 2020
Bloomberg
31 December 2019
4.01%
20–year Chilean Central Bank Bonds
Governmental
AA–/AA+
Secondary
Chilean peso
15 November 2019
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.
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 2016 to 2020.
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 $7.1 million. If the discount rate is 100 basis points lower the defined
benefit obligation would increase by $8.0 million.
• If the expected salary growth increases by 1% the defined benefit obligation would increase by $6.4 million. If the expected salary growth decreases by
1% the defined benefit obligation would decrease by $5.9 million.
• If the staff turnover increases by 1% the defined benefit obligation would decrease by $2.7 million. If the staff turnover decreases by 1% the defined benefit
obligation would increase by $4.1 million.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
205
Financial Statements
Financial Statements
Notes to the financial statements continued
28 Deferred tax and liabilities
At 1 January 2019
(Charge)/credit to income
Charge deferred in equity
Reclassification
At 1 January 2020
(Charge)/credit to income
Disposal of subsidiary
Charge deferred in equity
Reclassifications
At 31 December 2020
Accelerated
capital allowances
$m
Temporary
differences
on provisions
$m
Withholding
tax
$m
Short-term
differences
$m
(1,057.3)
(87.2)
–
32.7
(1,111.8)
(10.3)
–
–
–
(1,122.1)
190.2
(34.8)
0.8
(36.2)
120.0
2.9
–
2.0
(0.3)
124.6
(11.3)
(27.2)
–
–
(38.5)
(14.3)
–
–
–
(52.8)
40.0
(4.6)
–
0.1
35.5
6.5
–
–
–
42.0
Mining tax
(Royalty)
$m
(108.2)
0.7
0.1
–
(107.4)
4.2
–
(0.3)
–
(103.5)
Tax losses
$m
Disposal
$m
0.3
1.4
–
3.5
5.2
(0.2)
–
–
0.3
5.3
–
–
–
–
–
–
0.1
–
0.1
Total
$m
(946.3)
(151.7)
0.9
0.1
(1.097.0)
(11.2)
0.1
1.7
–
(1,106.4)
The charge to the income statement of $11.2 million (2019 – $151.7 million) includes a credit for foreign exchange differences of $0.1 million (2019 – 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
2020
$m
6.4
(1,112.8)
(1,106.4)
2019
$m
8.2
(1,105.2)
(1,097.0)
At 31 December 2020, the Group had unused tax losses of $599.4 million (2019 – $438.1 million) available for offset against future profits. A deferred tax
asset of $5.3 million has been recognised in respect of $19.6 million of these losses as at 31 December 2020 (31 December 2019 – $5.7 million in respect of
$20.7 million of the losses). No deferred tax asset has been recognised in respect of the remaining $579.8 million of tax losses (2019 – $417.4 million of tax
losses). These losses may be carried forward indefinitely.
At 31 December 2020 deferred withholding tax liabilities of $52.8 million have been recognised (31 December 2019 $38.5 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 $4,810 million (31 December 2019 – $5,065 million).
Temporary differences arising in connection with interests in associates are insignificant.
The deferred tax balance of $1,106.4 million (2019 – $1,097.0 million) includes $1,053.4 million (2019 – $1,039.0 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.
29 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
2020
$m
(413.2)
(45.2)
(11.8)
(59.4)
22.2
(12.8)
(520.2)
(22.2)
(498.0)
(520.2)
2019
$m
(409.8)
2.8
(17.8)
(24.8)
30.9
5.5
(413.2)
(22.0)
(391.2)
(413.2)
Decommissioning and restoration costs relate to the Group’s mining operations. Costs are estimated on the basis of a formal closure plan and are subject to
regular independent formal review by Sernageomin, the Chilean government agency which regulates the mining industry in Chile. There have not been any
significant updates to the mining operations closure plans approved by Sernageomin during the year. During 2019 the Pelambres, Centinela and Zaldivar
balances were updated to reflect new plans approved by Sernageomin during that year. The provision balance reflects the present value of the forecast future
cash flows expected to be incurred in line with the closure plans, discounted using Chilean real interest rates with durations corresponding with the timings of
the closure activities. At 31 December 2020 the real discount rates ranged from 0.5% to 0.9%. It is estimated that the provision will be utilised from 2021 until
2068 based on current mine plans, with approximately 22% of the total provision balance expected to be utilised between 2021 and 2030, approximately 46%
between 2031 and 2040, approximately 9% between 2041 and 2050 and approximately 23% between 2051 and 2068.
206
Antofagasta plc Annual Report 2020
antofagasta.co.uk
30 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
2020
Number
2019
Number
2020
$m
2019
$m
1,300,000,000
1,300,000,000
118.9
118.9
2020
Number
2019
Number
2020
$m
2019
$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 2019 or 2020. Details of the Company’s preference share capital,
which is included within borrowings in accordance with IAS 32 Financial Instruments, are given in Note 23A(xiv).
(II) Other reserves and retained earnings
Details of the share premium account, hedging, fair value and translation reserves and retained earnings for both 2020 and 2019 are included within the
consolidated statement of changes in equity on page 166.
Hedging reserves1
At 1 January
Parent and subsidiaries net cash flow hedge fair value losses
Parent and subsidiaries net cash flow hedge losses/(gains) transferred to the income statement
Tax on the above
At 31 December
Equity investment revaluation reserve2
At 1 January
Gains on equity investment
At 31 December
Foreign currency translation reserves3
At 1 January
Currency translation adjustment
At 31 December
Total other reserves per balance sheet
Retained earnings
At 1 January
Parent and subsidiaries’ profit for the period
Equity accounted units’ (loss)/profit after tax for the period
Actuarial gains/(losses) 4
Total comprehensive income for the year
Dividends paid
At 31 December
2020
$m
(5.0)
(24.2)
3.4
1.9
(23.9)
(10.8)
5.5
(5.3)
(2.3)
0.9
(1.4)
(30.6)
2019
$m
(1.1)
(4.5)
(0.6)
1.2
(5.0)
(11.1)
0.3
(10.8)
(2.3)
–
(2.3)
(18.1)
7,112.8
582.1
(75.7)
4.1
7,623.3
(131.1)
7,492.2
7,084.9
477.0
24.4
(3.2)
7,583.1
(470.3)
7,112.8
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 25.
2. The equity investments revaluation reserves record fair value gains or losses relating to equity investments, as described in Note 19.
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 27.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
207
Financial Statements
Financial Statements
Notes to the financial statements continued
31 Non-controlling interests
The non-controlling interests of the Group during 2020 and 2019 are as follows:
Los Pelambres
Centinela
Antucoya
Total
Non-controlling
Interest
%
40.0
30.0
30.0
Country
Chile
Chile
Chile
At
1 January 2020
$m
1,012.4
1,103.2
(98.3)
2,017.3
Share of
profit/(losses)
for the financial
year
$m
371.5
12.9
3.1
387.5
Capital
Increase1
$m
–
–
210.0
210.0
Share of
dividends
$m
(280.0)
–
–
(280.0)
Hedging and
actuarial
gains/(losses)
$m
3.4
(2.4)
(5.3)
(4.3)
At
31 December
2020
$m
1,107.3
1,113.7
109.5
2,330.5
1. A capital contribution of $210 million was received from Marubeni, the minority partner at Antucoya, in order to replace part of Antucoya’s subordinated debt financing with equity.
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
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 2020 and 2019 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
2020
$m
40.0%
904.8
1,466.5
4,009.4
(764.6)
(1,935.5)
1,196.9
(776.6)
74.8
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)
Centinela
2020
$m
30.0%
736.3
1,490.8
4,408.0
(495.5)
(1,327.7)
790.8
(460.4)
(88.0)
Centinela
2019
$m
30.0%
491.6
1,188.6
4,603.6
(820.1)
(969.5)
1,157.7
(510.4)
(231.0)
Antucoya
2020
$m
30.0%
143.6
324.5
1,317.0
(246.4)
(456.1)
147.3
(41.3)
(75.8)
Antucoya
2019
$m
30.0%
113.4
288.3
1,358.8
(212.4)
(720.9)
73.8
(49.5)
(37.0)
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 6.
(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.
208
Antofagasta plc Annual Report 2020
antofagasta.co.uk
32 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 finance expense
Net share of results from associates and joint ventures (exc. exceptional items)
Impairment of investment in associate
Increase in inventories
(Increase)/decrease in debtors
Increase in creditors
Increase/(decrease) in provisions
Cash flow generated from continuing operations
B) Analysis of changes in net debt
2020
$m
1,413.1
1,048.7
6.3
103.4
(5.1)
80.8
(13.6)
(259.9)
31.0
26.4
2,431.1
2019
$m
1,349.2
914.3
12.6
51.1
(24.3)
–
(7.6)
211.5
88.0
(24.1)
2,570.7
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
At
1 January
2020
$m
653.7
1,539.7
Cash flow
$m
588.3
887.9
2,193.4
(648.4)
(1,861.8)
(75.6)
(168.4)
(2.6)
(2,756.8)
(563.4)
1,476.2
200.1
(1,204.9)
18.2
68.3
–
(918.3)
557.9
Fair value
gains
$m
New leases
$m
Amortisation
of finance
costs
$m
Capitalisation
of interest
$m
–
(1.6)
(1.6)
–
–
–
–
–
–
(1.6)
–
–
–
–
–
–
(33.5)
–
(33.5)
(33.5)
–
–
–
–
(12.5)
–
–
–
(12.5)
(12.5)
–
–
–
–
(23.4)
–
–
–
(23.4)
(23.4)
Movement
between
maturity
categories
$m
–
–
–
(88.8)
88.8
(14.1)
14.1
–
–
–
Other
$m
Exchange
$m
At
31 December
2020
$m
–
–
–
4.7
–
(2.1)
0.3
–
2.9
2.9
4.8
–
1,246.8
2,426.0
4.8
2.6
–
–
(15.7)
(0.1)
(13.2)
(8.4)
3,672.8
(529.8)
(3,013.8)
(73.6)
(134.9)
(2.7)
(3,754.8)
(82.0)
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
Adoption of
new
accounting
standards
$m
At
1 January
2019
$m
–
–
1,034.4
863.2
–
–
–
–
(131.7)
–
1,897.6
(607.2)
(1,711.9)
(38.8)
(133.0)
(3.0)
(131.7) (2,493.9)
(596.3)
(131.7)
Cash flow
$m
(375.0)
676.5
301.5
100.0
(253.3)
30.0
62.5
–
(60.8)
240.7
Fair value
gains
$m
New leases
$m
Amortisation
of finance
costs
$m
Capitalisation
of interest
$m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(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
–
–
(5.7)
–
653.7
1,539.7
–
4.3
–
(3.3)
3.5
0.1
4.6
4.6
(5.7)
–
–
–
11.8
0.3
12.1
6.4
2,193.4
(648.4)
(1,861.8)
(75.6)
(168.4)
(2.6)
(2,756.8)
(563.4)
antofagasta.co.uk
Antofagasta plc Annual Report 2020
209
Financial Statements
Financial Statements
Notes to the financial statements continued
32 Notes to the consolidated cash flow statement continued
C) Net debt
Cash, cash equivalents and liquid investments
Total borrowings
2020
$m
3.672.8
(3,754.8)
(82.0)
2019
$m
2,193.4
(2,756.8)
(563.4)
33 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
2020
2019
$1.3600=£1;
$1 = Ch$710.95
$1.2820=£1;
$1 = Ch$792.07
$1.2860=£1;
$1 = Ch$748.74
$1.2760=£1;
$1 = Ch$702.82
34 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 Andrónico 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 $212.6 million (2019 – $159.3 million). The balance due to ENEX SA at the end of
the year was nil (2019 – nil);
• the Group earned interest income of $1.7 million (2019 – $4.0 million) during the year on deposits with Banco de Chile SA, a subsidiary of Quiñenco. Deposit
balances at the end of the year were $nil (2019 – $67.9 million);
• the Group earned interest income of $0.3 million (2019 – $0.2 million) during the year on investments with BanChile Administradora General de Fondos SA, a
subsidiary of Quiñenco. Investment balances at the end of the year were nil (2019 – $6.0 million).
• the Group purchased shipping services from Hapag Lloyd, an associate of Quiñenco, of $7.0 million (2019 – $1.0 million). The balance due to Hapag Lloyd at the
end of the year was nil (2019 – nil).
B) Compañía de Inversiones Adriático SA
In 2020, 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 $0.7 million (2019 –$0.6 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 2020 the Group incurred $0.1 million (year ended 31 December 2019 – $0.1 million) of
exploration expense at these properties.
D) Tethyan Copper Company Limited
As explained in Note 18 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 2020 the Group contributed $7.2 million (2019 – $1.8 million) to Tethyan.
E) Compañia Minera Zaldívar SpA
The Group has a 50% interest in Zaldívar (see Note 18), 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 $0.5million (2019 – $6.0 million). During 2020 the Group has received dividends of
$65.0 million from Minera Zaldívar (2019 – 50.0 million).
Inversiones Hornitos SA
F)
As explained in Note 18, the Group has a 40% interest in Inversiones Hornitos SA, which is accounted for as an associate. The Group paid $128.2 million
(year ended 31 December 2019 – $187.7 million) to Inversiones Hornitos in relation to the energy supply contract at Centinela. During 2020 the Group has not
received dividends from Inversiones Hornitos SA (2019 – $8.0 million).
G) Directors and other key management personnel
Information relating to Directors’ remuneration and interests is given in the Remuneration Report on page 139. Information relating to the remuneration
of key management personnel including the Directors is given in Note 9.
210
Antofagasta plc Annual Report 2020
antofagasta.co.uk
35 Tethyan arbitration award
In July 2019 the World Bank Group’s International Centre 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”), the joint venture held equally by the Company and
Barrick Gold Corporation, in relation to an arbitration claim 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 Tethyan 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.
Later in 2019, Pakistan requested ICSID to annul the award, triggering a provisional stay of enforcement of the award under the ICSID Convention. In March
2020, ICSID appointed a committee to(cid:6783)consider Pakistan’s request for annulment and whether the provisional stay of enforcement should continue for the
duration of the annulment proceedings. The Committee issued a decision partially terminating the stay of enforcement in October, permitting Tethyan to
enforce 50% of the award plus accrued interest on the condition that any amounts collected through enforcement of the award must be put into escrow and
returned if the award is annulled. Tethyan has resumed proceedings to enforce the award in accordance with the conditions set by the Committee. The
Committee is expected to issue a decision on Pakistan’s annulment application within the next one to two years.
It is expected that the proceeds of the award will only be recognised in Antofagasta’s financial statements once they are received by the Company.
36 Litigation and contingent liabilities
The Group is subject from time to time to legal proceedings, claims, complaints and investigations arising out of the ordinary course of business. The Group
cannot predict the outcome of individual legal actions or claims or complaints or investigations. As a result, the Group may become subject to liabilities that
could affect our business, financial position and reputation. Litigation is inherently unpredictable and large judgments may at times occur. The Group may
incur, in the future, judgments or enter into settlements of claims that could lead to material cash outflows. The Group considers that no material loss to the
Group is expected to result from the legal proceedings, claims, complaints and investigations that the Group is currently subject to. Provision is made for all
liabilities that are expected to materialise through legal claims against the Group.
37 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.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
211
Financial Statements
Financial Statements
Notes to the financial statements continued
38 Antofagasta plc – Balance sheet of the Parent Company and related notes
The Balance Sheet of the Parent Company as at 31 December 2020 and 2019 is as follow:
As at 31 December 2020
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
At 31 December
Total equity
Note
38E
38E
38F
2020
$m
2019
$m
538.6
485.0
–
1,023.6
573.5
447.2
177.7
1,198.4
2,222.0
(303.8)
(8.3)
(312.0)
(994.9)
(994.9)
(1,307.0)
915.0
89.8
199.2
197.7
559.4
(131.1)
626.0
915.0
538.6
485.0
0.1
1,023.7
233.0
15.2
39.4
287.6
1,311.3
(315.6)
(7.2)
(322.8)
(501.8)
(501.8)
(824.6)
486.7
89.8
199.2
354.6
313.4
(470.3)
197.7
486.7
The financial statements on pages 212-215 were approved by the Board of Directors on 15 March 2021 and signed on its behalf by
Jean-Paul Luksic
Chairman
Ollie Oliveira
Senior Independent Director
212
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Parent Company statement of changes in equity
At 1 January 2019
Comprehensive income for the year
Dividends
At 31 December 2019
Comprehensive income for the year
Dividends
At 31 December 2020
Share capital
$m
Share premium
$m
Retained earnings
$m
Total equity
$m
89.8
–
–
89.8
–
–
89.8
199.2
–
–
199.2
–
–
199.2
354.6
313.4
(470.3)
197.7
559.4
(131.1)
626.0
643.6
313.4
(470.3)
486.7
559.4
(131.1)
915.0
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.
38A 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’
• Paragraph 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 $559.4 million (2019 – $313.4 million).
antofagasta.co.uk
Antofagasta plc Annual Report 2020
213
Financial Statements
Financial Statements
Notes to the financial statements continued
38 Antofagasta plc – Balance sheet of the Parent Company and related notes continued
38B Significant accounting estimates and judgements
The most significant accounting estimate for the Antofagasta plc Parent Company balance sheet is the carrying value of the investment in subsidiaries and
receivables balances, which have a total carrying value as at 31 December 2020 of $1,597.1 million. Over 99% of the value of these balances relates to
intercompany balances, primarily with Group holding companies which hold the Group’s investments in the operating companies. There is not considered to
be any significant risk of a relevant overstatement of these carrying values. In assessing this the Group has considered the overall market capitalisation of the
Group, which was $19.4 billion at 31 December 2020, the cash and other assets held by the relevant Group companies and the level of earnings generated by
the Group’s operations.
38C Principal accounting policies of the Parent Company
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.
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 above, 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.
E) Current asset investments and cash at bank and in hand
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.
H) Equity instruments – ordinary share capital and share premium
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.
214
Antofagasta plc Annual Report 2020
antofagasta.co.uk
38D Employee Benefit Expense
A) Average number of employees
The average monthly number of employees was 4 (2019 – 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
2020
$m
1.8
0.2
0.1
2.1
2019
$m
1.7
0.2
0.1
2.0
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.
38E Subsidiaries
A)
Investment in subsidiaries
Shares in subsidiaries at cost
Amounts owed by subsidiaries due after more than one year
1 January 2020
31 December 2020
2020
$m
60.6
478.0
538.6
Loans
$m
478.0
478.0
2019
$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 (2019 – $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.
B) Trade and other receivables – amounts owed by subsidiaries due after one year
At 31 December 2020, an amount of $496.6 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 2020.
C) Trade and other receivables – amounts owed by subsidiaries due within one year
At 31 December 2020, amounts owed by subsidiaries due within one year were $568.4 million (2019 – $228.0 million). There have been no impairments
recognised in respect of subsidiary receivables as at 31 December 2020.
38F 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 2020 and 31 December 2019. As explained in Note 23C, 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 23A (xv)) at any general meeting.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
215
Other Information
Financial Statements
Alternative performance measures (not subject to audit or review)
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.
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 historical cost of property, plant and equipment or the particular financing structure adopted by the business.
For the year ended 31 December 2020
Operating profit/(loss)
Depreciation and amortisation
Gain on disposals
EBITDA from subsidiaries
Proportional share of the EBITDA
from associates and JV
EBITDA
For the year ended 31 December 2019
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
1,407.9
252.6
2.5
1,663.0
–
1,663.0
Los Pelambres
$m
1,115.1
258.5
10.5
1,384.1
–
1,384.1
247.0
662.9
1.8
911.7
–
911.7
Centinela
$m
425.8
532.2
1.5
959.5
–
959.5
71.2
94.6
–
165.8
–
165.8
Antucoya
$m
(5.9)
92.2
–
86.3
–
86.3
–
–
–
–
95.5
95.5
(85.1)
–
–
(85.1)
–
(85.1)
–
–
–
–
112.6
112.6
(111.1)
–
–
(111.1)
–
(111.1)
Zaldívar
$m
Exploration and
evaluation
$m
Corporate and
other items
$m
Mining
$m
1,567.0
1,017.9
4.3
2,589.2
(74.0)
7.8
–
(66.2)
(6.5)
(72.7)
89.0
2,678.2
Mining
$m
1,345.2
890.8
12.0
2,248.0
(78.7)
7.9
–
(70.8)
Transport
division
$m
25.2
30.8
2.0
58.0
3.0
61.0
Transport
division
$m
30.6
23.5
0.7
54.8
Total
$m
1,592.2
1,048.7
6.3
2,647.2
92.0
2,739.2
Total
$m
1,375.8
914.3
12.7
2,302.8
(2.5)
(73.3)
110.1
2,358.1
26.0
80.8
136.1
2,438.9
216
Antofagasta plc Annual Report 2020
antofagasta.co.uk
C) Cash costs
Cash costs are a measure of the cost of operating production expressed in terms of cents per pound of payable copper produced.
This is considered to be a useful and relevant measure as it is a standard industry measure applied by most major copper mining companies which reflects
the direct costs involved in producing each pound of copper. It therefore allows a straightforward comparison of the unit production cost of different mines,
and allows an assessment of the position of a mine on the industry cost curve. It also provides a simple indication of the profitability of a mine when compared
against the price of copper (per lb).
Reconciliation of cash costs excluding tolling charges and by-product revenue:
Total Group operating cost (Note 6)
Zaldívar operating costs
Less:
Depreciation and amortisation (Note 6)
Loss on disposal (Note 6)
Elimination of non-mining operations:
Corporate and other items – Total operating cost (Note 6)
Exploration and evaluation – Total operating cost (Note 6)
Transport division – Total operating cost (Note 6)
Closure provision and other expenses not included within cash costs
Inventory variation
Total cost relevant to the mining operations’ cash costs
Copper production volumes (tonnes)
Cash costs excluding tolling charges and by-product revenue ($/tonne)
Cash costs excluding tolling charges and by-product revenue ($/lb)
Reconciliation of cash costs before deducting by-product revenue:
Tolling charges – copper – Los Pelambres (Note 7)
Tolling charges – copper – Centinela (Note 7)
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)
2020
$m
2019
$m
3,537.1
190.9
3,588.7
224.3
(1,048.7)
(6.3)
(64.3)
(85.1)
(91.4)
(105.8)
11.1
2,337.5
(914.3)
(12.7)
(70.8)
(111.1)
(105.7)
(81.8)
3.0
2,519.6
733,920
769,970
3,185
3,272
1.43
1.48
113.6
68.8
182.4
147.5
104.6
252.1
733,920
769,970
248.5
0.13
1.43
0.13
1.56
327.4
0.17
1.48
0.17
1.65
antofagasta.co.uk
Antofagasta plc Annual Report 2020
217
Other Information
Financial Statements
Alternative performance measures continued
C) Cash costs continued
Reconciliation of cash costs (net of by-product revenue):
Gold revenue – Los Pelambres (Note 6)
Gold revenue – Centinela (Note 6)
Molybdenum revenue – Los Pelambres (Note 6)
Molybdenum revenue – Centinela (Note 6)
Silver revenue – Los Pelambres (Note 6)
Silver revenue – Centinela (Note 6)
Total by-product revenue
Copper production volumes (tonnes)
By-product revenues ($/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)
2020
$m
2019
$m
106.4
251.3
181.8
27.7
43.3
21.2
631.7
75.2
332.5
248.9
5.7
30.7
27.6
720.6
733,920
769,970
860.7
0.42
1.56
(0.42)
1.14
935.9
0.43
1.65
(0.43)
1.22
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 and 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 22)
Borrowings:
Los Pelambres (Note 23)
Centinela (Note 23)
Antucoya (Note 23)
Corporate (Note 23)
Railway and other transport services (Note 23)
Total
amount
$m
904.8
736.3
143.6
1,843.4
44.7
3,672.8
(1,379.5)
(777.5)
(547.5)
(1,013.5)
(36.8)
2020
Attributable
share
$m
Attributable
amount
$m
Total
amount
$m
2019
Attributable
share
$m
60%
70%
70%
100%
100%
60%
70%
70%
100%
100%
542.9
515.4
100.5
1,843.4
44.7
3,046.9
(827.7)
(544.2)
(383.3)
(1,013.5)
(36.8)
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%
Attributable
amount
$m
243.3
344.1
79.4
1,177.2
5.7
1,849.7
(350.6)
(550.0)
(574.0)
(521.1)
(45.6)
Total (Notes 23 and 32)
(3,754.8)
(2,805.5)
(2,756.8)
(2,041.3)
Net (debt)/cash
(82.0)
241.4
(563.4)
(191.6)
218
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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
2020
$m
2019
$m
2018
$m
2017
$m
2016
$m
150.1
9,851.9
2.6
278.1
914,6
55.9
0.3
11.1
6.4
11,271.0
5,333.3
(1,625.7)
(4,897.5)
10,081.1
89.8
199.2
7,461.6
7,750.6
2,330.5
10,081.1
150.1
9,556.7
2.1
208.0
1,024.8
48.2
1.7
5.1
8.2
11,004.9
3,605.5
(1,548.9)
(3,660.5)
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
89.8
199.2
7,070.4
7,359.4
2,078.7
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
89.8
199.2
7,029.4
7,318.4
1,823.2
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
89.8
199.2
6,526.3
6,815.3
1,694.4
8,509.7
2020
$m
2019
$m
2018
$m
2017
$m
2016
$m
5,129.3
4,964.5
4,733.1
4,749.4
3,621.7
Total profit from operations and associates
1,516.5
1,400.2
1,367.2
1,900.8
355.7
Profit before tax
Income tax expense
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Non-controlling interests
Net earnings (profit attributable to equity holders of the Company)
1,413.1
(526.5)
886.6
7.3
893.9
(387.5)
506.4
1,349.2
(506.1)
843.1
–
843.1
(341.7)
501.4
1,252.7
(423.7)
829.0
51.3
880.3
(336.6)
543.7
1,830.8
(633.6)
1,197.2
0.5
1,197.7
(447.1)
750.6
284.6
(108.6)
176.0
38.3
214.3
(56.3)
158.0
EBITDA
2,739.2
2,438.9
2,228.3
2,586.6
1,626.1
Earnings per share
Basic and diluted earnings per share
1. These numbers have been restated for prior years.
2020
cents
2019
cents
2018
cents
2017
cents
2016
cents
51.3
50.9
55.1
76.2
16.0
antofagasta.co.uk
Antofagasta plc Annual Report 2020
219
Other Information
Financial Statements
Five year summary continued
Dividends per share proposed in relation to the year
Ordinary dividends (interim and final)
Dividends per share paid in the year and deducted from equity
Consolidated cash flow statement
Cash flow from continuing operations
Interest paid
Income tax paid
Net cash from operating activities
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
Financing activities
Dividends paid to equity holders of the Company
Dividends paid to preference holders and non-controlling interests
Capital increase from non-controlling interest
New borrowings less repayment of borrowings and leases
Net cash generated from/(used in) financing activities
2020
cents
54.7
54.7
13.3
2020
$m
2019
cents
34.1
34.1
47.7
2019
$m
2018
cents
43.8
43.8
47.4
2018
$m
2017
cents
50.9
50.9
25.6
2017
$m
2,431.1
(52.7)
(319.7)
2,058.7
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)
–
–
(893.5)
(1,306.6)
12.6
(2,187.5)
(131.1)
(280.1)
210.0
918.3
717.1
–
58.0
(678.3)
(1,076.9)
41.0
(1,656.2)
(470.3)
(400.1)
–
60.8
(809.6)
145.2
16.6
284.2
(872.2)
26.4
(399.8)
(466.9)
(120.1)
–
(347.1)
(934.1)
3.1
81.8
115.9
(894.4)
14.3
(679.3)
(252.3)
(320.1)
–
(487.0)
(1,059.4)
2016
cents
18.4
18.4
3.1
2016
$m
1,457.3
(46.3)
(272.6)
1,138.4
30.0
10.2
(425.2)
(794.6)
14.4
(1,165.2)
(30.6)
(260.0)
–
214.3
(76.3)
Net increase/(decrease) in cash and cash equivalents
588.3
(375.0)
(23.1)
358.8
(103.1)
Consolidated net cash
Cash, cash equivalents and liquid investments
Short-term borrowings
Medium and long-term borrowings
2020
$m
2019
$m
2018
$m
2017
$m
2016
$m
3,672.8
2,193.4
1,897.6
2,252.3
2,048.5
(603.4)
(3,151.4)
(3,754.8)
(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)
Net (debt)/cash at the year-end
(82.0)
(563.4)
(596.3)
(456.4)
(1,071.7)
220
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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
2020
‘000
tonnes
359.6
246.8
79.3
48.2
733.9
Production
2019
‘000
tonnes
363.4
276.6
71.9
58.1
770.0
2020
‘000
tonnes
366.0
247.7
76.5
48.3
738.5
Sales
2019
‘000
tonnes
356.1
287.8
71.6
56.7
772.2
Net cash costs
Realised prices
2020
‘000
$/lb
0.81
1.27
1.82
1.80
2019
‘000
$/lb
0.91
1.26
2.17
1.75
2020
‘000
$/lb
3.02
2.95
2.85
2019
‘000
$/lb
2.75
2.75
2.74
–
1.14
1.22
2.98
2.75
1.43
1.48
1.57
1.65
1.27
1.40
(0.46)
0.81
(0.49)
0.91
1.85
(0.58)
1.27
1.83
(0.58)
1.26
2020
‘000
ounces
60.4
143.7
204.1
Production
2019
‘000
ounces
59.7
222.6
282.3
2020
‘000
ounces
58.4
141.2
199.6
Sales
2019
‘000
ounces
52.6
236.2
288.8
2.80
2.72
Realised prices
2020
$/oz
2019
$/oz
1,827
1,784
1,797
1,770
1,434
1,412
1,416
1,394
‘000
tonnes
‘000
tonnes
‘000
tonnes
‘000
tonnes
$/lb
$/lb
10.9
1.7
12.6
11.2
0.4
11.6
10.8
1.7
12.5
11.8
0.3
12.1
8.8
8.9
8.8
8.7
10.8
11.1
10.8
11.4
antofagasta.co.uk
Antofagasta plc Annual Report 2020
221
Other Information
Financial Statements
Ore reserves and mineral resources estimates
At 31 December 2020
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.
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 230-231.
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.
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.
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.
222
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
678.8
694.7
331.7
377.3
1,010.5
1,072.0
93.3
119.8
230.5
205.7
323.9
325.5
571.6
540.5
1,166.5
1,288.8
1,738.1
1,829.4
665.0
660.3
1,397.0
1,494.5
2,062.0
2,154.9
402.3
292.5
308.4
394.5
710.7
687.0
0.60
0.58
0.59
0.53
0.35
0.40
0.46
0.38
0.41
0.47
0.38
0.41
0.34
0.30
0.32
0.60
0.58
0.020
0.020
0.019
0.018
0.60
0.020
0.020
0.05
0.05
0.05
0.05
0.05
0.05
407.3
416.8
199.0
226.4
606.3
643.2
0.54
0.33
0.41
0.46
0.40
0.42
0.48
0.39
0.41
0.39
0.28
0.33
–
–
–
–
–
–
–
–
–
–
–
–
65.3
161.4
226.7
83.9
144.0
227.9
0.012
0.012
0.012
0.012
0.012
0.012
0.18
0.12
0.14
0.18
0.12
400.2
378.4
816.5
902.2
0.14
1,216.7
1,280.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
465.5
462.2
977.9
1,046.2
– 1,443.4
1,508.4
–
–
–
281.6
215.9
497.5
204.8
276.1
480.9
–
– 2,547.2
2,632.5
Total Group Subsidiaries
3,783.2
3,913.9
0.44
0.45
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Group Joint Venture
Zaldívar (see note (k))
Proved
Probable
Total Group Joint Venture
Total Group Ore Reserves
4,250.7 4,482.4
0.44
0.45
344.2
430.8
123.2
137.7
467.5
568.5
0.46
0.41
0.45
0.43
0.42
0.43
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
172.1
61.6
215.4
68.8
233.7
284.2
– 2,780.9
2,916.8
antofagasta.co.uk
Antofagasta plc Annual Report 2020
223
Other Information
Financial Statements
Ore reserves and mineral resources estimates continued
At 31 December 2020
Mineral Resources Estimates (including ore reserves)
Group Subsidiaries
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
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
1,156.9
1,165.8
2,117.8 2,069.5
3,283.5 3,226.4
2,835.1
2,762.5
6,061.5
6,046.1
1,165.8
1,156.9
2,117.8 2,069.5
3,283.5 3,226.4
2,835.1
2,762.5
6,061.5
6,046.1
126.7
329.0
455.7
18.5
474.2
180.4
311.7
492.1
27.0
519.2
980.5
923.0
1,917.1 2,100.4
2,897.6 3,023.4
1,168.2
1,228.4
4,191.6
4,126.0
1,107.2
2,246.1
3,353.3
1,246.9
4,600.2
1,103.4
2,412.1
3,515.5
1,195.3
4,710.8
427.0
390.3
817.3
418.4
1,235.8
427.0
390.3
817.3
418.4
1,235.8
441.3
393.8
835.1
365.7
1,200.8
441.3
393.8
835.1
365.7
1,200.8
0.58
0.52
0.54
0.46
0.50
0.58
0.52
0.54
0.46
0.50
0.51
0.33
0.38
0.34
0.37
0.49
0.37
0.41
0.31
0.38
0.49
0.36
0.41
0.31
0.38
0.33
0.30
0.31
0.26
0.30
0.33
0.30
0.31
0.26
0.30
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
0.020
0.016
0.018
0.016
0.017
0.020
0.016
0.018
0.016
0.017
–
–
–
–
–
0.020
0.016
0.017
0.016
0.017
0.020
0.016
0.017
0.016
0.017
–
–
–
–
–
0.05
0.05
0.05
0.06
0.05
0.05
0.05
0.05
0.06
0.05
–
–
–
–
–
0.05
0.05
0.05
0.06
0.05
699.5
1,270.7
1,970.1
1,657.5
3,627.6
694.1
1,241.7
1,935.8
1,701.1
3,636.9
0.05
699.5
0.05 1,270.7
0.05
1,970.1
0.06 1,657.5
0.05 3,627.6
694.1
1,241.7
1,935.8
1,701.1
3,636.9
–
–
–
–
–
88.7
230.3
319.0
12.9
331.9
126.3
218.2
344.5
18.9
363.4
0.013
0.013
0.013
0.011
0.012
0.013
0.012
0.013
0.011
0.012
0.19
0.12
0.14
0.08
0.13
0.19
686.4
0.12 1,342.0
0.14 2,028.3
0.09
859.9
0.13 2,888.2
646.1
1,470.3
2,116.4
817.8
2,934.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
775.0
772.4
1,688.5
– 1,572.3
– 2,347.3 2,460.9
836.7
–
872.8
3,297.5
– 3,220.1
–
–
–
–
–
–
–
–
–
298.9
273.2
572.1
292.9
865.0
298.9
273.2
572.1
292.9
865.0
308.9
275.6
584.5
256.0
840.6
308.9
275.6
584.5
256.0
840.6
224
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
–
0.49
–
0.43
0.43
0.35
0.40
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
32.4
69.5
101.9
6.6
108.5
–
0.39
–
0.007
–
0.07
–
281.4
0.007
0.007
0.007
0.007
0.007
0.007
0.007
0.007
0.06
0.06
0.05
0.05
0.06
0.06
0.05
654.9
936.4
612.1
–
86.8
86.8
38.8
125.6
–
704.1
704.1
684.8
Group Subsidiaries
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
32.4
69.5
101.9
6.6
86.8
86.8
38.8
108.5
125.6
281.4
654.9
936.4
704.1
704.1
612.1
684.8
1,548.5
1,388.9
313.8
–
724.5
790.9
1,038.3
790.9
618.7
723.6
1,657.0
1,514.5
–
–
–
18.3
18.3
–
–
–
–
–
–
18.3
18.3
–
–
–
0.40
0.43
0.41
0.43
0.34
0.35
0.27
0.32
0.40
0.34
0.36
0.27
0.33
–
–
–
0.29
0.29
–
–
–
321.9
321.9
321.9
321.9
0.38
0.38
–
–
–
–
–
–
–
–
–
340.2
340.2
340.2
340.2
0.37
0.37
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
0.05
1,548.5
1,388.9
–
–
313.8
–
724.5
790.9
– 1,038.3
790.9
–
618.7
723.6
– 1,657.0
1,514.5
–
–
–
–
–
–
–
–
–
–
–
9.3
9.3
–
–
–
–
–
–
9.3
9.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.05
0.05
0.05
0.05
164.2
164.2
164.2
164.2
–
–
–
–
–
–
–
–
–
-
–
–
–
–
–
–
173.5
173.5
173.5
173.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
antofagasta.co.uk
Antofagasta plc Annual Report 2020
225
Other Information
Financial Statements
Ore reserves and mineral resources estimates continued
At 31 December 2020
Mineral Resources Estimates (including Ore reserves) continued
Group Subsidiaries
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
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
1.7
20.2
21.9
10.2
32.1
35.2
20.2
55.3
4.9
60.2
36.9
40.4
77.2
15.0
92.3
–
–
–
30.8
30.8
–
–
–
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
–
–
–
0.23
0.27
0.27
0.26
0.27
0.34
0.28
0.32
0.26
0.31
0.33
0.28
0.30
0.26
0.30
–
–
–
0.31
0.31
–
–
–
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.006
0.008
0.007
0.009
0.007
0.006
0.008
0.007
0.009
0.007
0.13
0.08
0.11
0.05
0.10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.13
0.08
0.11
0.05
0.11
–
–
–
–
–
–
–
–
–
–
–
–
–
1.3
15.8
17.1
7.9
25.0
35.2
20.2
55.3
4.9
60.2
36.5
35.9
72.4
12.8
85.2
–
–
–
15.7
15.7
–
–
–
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
–
–
–
1,873.4
1,873.4
1,873.4
1,873.4
0.50
0.50
0.50
0.50
0.011
0.011
0.011
0.011
0.03
0.03
0.03
0.03
955.4
955.4
955.4
955.4
–
–
–
–
–
–
–
–
–
1,904.2
1,904.2
1,904.2
1,904.2
0.50
0.50
–
–
–
0.50
0.50
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
971.1
971.1
–
–
–
971.1
971.1
226
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Group Subsidiaries
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
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
–
–
–
87.2
87.2
–
–
–
87.2
87.2
–
–
–
–
–
–
87.2
87.2
–
–
–
87.2
87.2
–
–
–
–
–
–
0.49
0.49
–
–
–
0.49
0.49
–
–
–
52.0
52.0
52.0
52.0
0.69
0.69
–
–
–
52.0
52.0
–
–
–
52.0
52.0
–
–
–
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
antofagasta.co.uk
Antofagasta plc Annual Report 2020
227
Other Information
Financial Statements
Ore reserves and mineral resources estimates continued
At 31 December 2020
Mineral Resources Estimates (including Ore reserves) continued
Group Subsidiaries
2020
2019
2020
2019
2020
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
291.4
818.3
1,109.7
1,109.7
534.1
534.1
1,643.8
1,643.8
–
93.1
93.1
29.3
–
93.1
93.1
29.3
122.4
122.4
–
90.4
90.4
217.0
307.4
–
90.4
90.4
217.0
307.4
–
–
–
–
–
–
435.5
435.5
435.5
435.5
291.4
291.4
1,001.8
1,001.8
1,293.2
1,293.2
1,215.9
1,215.9
2,509.1
2,509.1
9,862.9
9,791.9
8,661.1 8,582.7
18,524.0 18,374.6
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
0.42
0.44
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
(%)
2019
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)
2020
2019
2020
2019
0.57
0.57
0.57
0.57
0.57
0.57
0.57
0.57
0.57
224.6
771.6
996.1
483.2
224.6
771.6
996.1
483.2
0.57
1,479.3
1,479.3
–
–
–
0.31
0.31
0.26
0.30
0.31
0.31
0.26
0.30
65.2
65.2
20.5
85.7
–
–
–
0.87
0.87
0.64
0.70
0.87
0.87
0.64
0.70
63.3
63.3
151.9
215.2
–
–
–
–
–
0.57
0.57
0.57
0.37
0.47
–
–
–
–
–
–
–
–
–
–
–
304.8
304.8
304.8
304.8
0.57
0.57
224.6
900.0
224.6
900.0
0.57
1,124.6
1,124.6
0.37
960.4
960.4
0.47 2,085.0
2,085.0
–
7124.9
6,998.1
– 5,656.3
5,626.4
– 12,781.2 12,624.5
–
65.2
65.2
20.5
85.7
–
63.3
63.3
151.9
215.2
–
–
–
228
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Group Joint Venture
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
Tonnage
(millions of tonnes)
Copper
(%)
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
0.40
0.35
0.39
0.43
0.39
0.40
0.39
0.40
0.36
0.39
0.40
0.38
0.39
0.40
0.39
555.4
595.7
242.3
249.0
797.7
844.7
33.8
29.1
831.5
873.8
104.6
107.9
305.3
312.2
409.9
420.1
27.4
29.1
437.4
449.2
660.0
703.6
547.6
561.2
1,207.6
1,264.8
61.2
58.2
1,268.8
1,323.0
Tonnage
(millions of tonnes)
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
Copper
(%)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
277.7
297.9
121.1
124.5
398.8
422.3
16.9
14.5
415.7
436.9
52.3
152.7
205.0
13.7
54.0
156.1
210.1
14.5
218.7
224.6
330.0
351.8
273.8
280.6
603.8
632.4
30.6
29.1
634.4
661.5
Molybdenum
(%)
Gold
(g/tonne)
Attributable Tonnage
(millions of tonnes)
Total Group
Measured + Indicated
Inferred
Total Group Mineral Resources
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
11,070.6 10,987.0
8,722.3 8,784.6
19,792.8 19,771.6
0.45
0.42
0.44
0.46
0.43
0.44
–
–
–
–
–
–
–
–
–
– 7,728.7
7,586.6
– 5,686.9
5,753.9
– 13,415.6 13,340.5
antofagasta.co.uk
Antofagasta plc Annual Report 2020
229
Other Information
Financial Statements
Ore reserves and mineral resources estimates continued
At 31 December 2020
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 2019), $9.50/lb molybdenum (unchanged from 2019) and $1,500/oz gold ($1,300 in 2019), 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 2019). 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 2020 on the Polo Sur resource model and reserves for the Llano oxide deposit at Centinela. 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 59 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 2020 the mineral resource model
has been updated with 28,078 metres and as a result total resources decreased overall by a net 15 million tonnes, including depletion.
B) Centinela (Concentrates and Cathodes)
Centinela is 70% owned by the Group and consists of Centinela Concentrates (Esperanza + Esperanza Sur and Encuentro Sulphide mostly sulphide porphyry
deposits) and Centinela Cathodes (Tesoro Central and Tesoro Sur oxide deposits, including the oxide portion of the Mirador, Encuentro and Llano 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 Llano deposit, following completion of external
audits during the year, which has largely offset depletion. Centinela Cathodes ore reserves are made up of 207 million tonnes at 0.48% copper of heap leach
ore and 117 million tonnes at 0.26% copper of ROM ore. Centinela Concentrates ore reserves decreased by a net 91 million tonnes, with depletion of 35 million
tonnes in Esperanza and updates to the geometallurgical and grade models in the Esperanza and Esperanza Sur deposits. For 2020 the mineral resource
model in Esperanza y Esperanza Sur has been updated with 35,045 metres and as a result total resources decreased overall by a net 66 million tonnes,
including depletion.
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
2020 the mineral resource model has been updated with 71 drill holes for a total of 18,000 metres. Ore reserves have increased by a net 24 million tonnes,
including a depletion of 28 million tonnes offset by an increase in resources converted to reserves. Mineral resources have increased by a net 34 million
tonnes, due to depletion offset by the application of more optimistic modifying factors and 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.
The 2020 resource model has been updated with 101 drill holes for a total of 16,000 metres. Mineral resources, mostly in hypogene ore, have increased by a
net 143 million tonnes, due to the resource model update and the use of more conservative mining and processing costs in pit optimisation.
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 2020 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 increased by a net 24 million
tonnes due to lower mining and processing costs, along with an increase in the gold price considered in pit optimisation.
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 2020
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 2020 the mineral resource
model has not been updated.
230
Antofagasta plc Annual Report 2020
antofagasta.co.uk
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 2020 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 2020 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
Zaldívar is 50% owned by the Group. The cut-off grade applied to the determination of ore reserves for Heap Leach ore is 0.33% copper, while the cut-off
grade for Dump Leach material is 0.20% copper. In the case for mineral resources the cut-off grade for Heap Leach ore is 0.16% copper, while 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.
The cut-off grade applied to the primary sulphide portion of the mineral resources is 0.30% copper. Ore reserves have decreased 101 million tonnes, due to
depletion in the period of 37 million tonnes and a change in the strategy for determining the cut-off grade. The final pit phase in the southern portion of the
orebody (Phase 13), which represents approximately 20% 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. For 2020 the resource model has not been updated. Mineral resources have decreased by a net 54 million tonnes, due
to depletion and the use of more conservative modifying factors in pit optimisation. The optimisation considers 772 million tonnes of oxides and secondary
sulphides plus 432 million tonnes of primary sulphides, with 0.11 g/tonne gold and 0.007 % molybdenum.
M) 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 34(c) to the financial statements.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
231
Other Information
Financial Statements
Glossary and definitions
Business, financial and accounting
AIFR
AMSA
Annual Report
Antucoya
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
Directors
Duluth
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.
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.
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.
EBITDA
EIA
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
KPI
LIBOR
LME
Los Pelambres
LSE
Earnings Before Interest, Tax, Depreciation
and Amortisation.
Environmental Impact Assessment.
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 Mining and Metals.
International Financial Reporting
Interpretations Committee.
International Financial Reporting Standards.
Inversiones Hornitos S.A. owns the 150MW Hornitos
thermoelectric power plant in Mejillones in Chile’s
Antofagasta region. The Group entered into an
agreement to dispose of its 40% interest in
April 2020, effective in 2021.
Impuesto al Valor Agregado, or Chilean Value Added
Tax (Chilean VAT).
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.
232
Antofagasta plc Annual Report 2020
antofagasta.co.uk
SERNAGEOMIN
SHFE
SONAMI
Sterling
SVS
SDGs
TCFD
Tethyan
TSR
Twin Metals
Minnesota
Project
UK
UKLA
US
US dollar
Zaldívar
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.
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.
LTIFR
LTIP
Marubeni
Michilla
PEP
Platts
PPA
Provisional
pricing
Quiñenco
Ramsar
Convention
Reko Diq
RCA
Realised prices
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.
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.
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.
Resolución de Calificación Ambiental, Environmental
Approval Resolution.
Effective sale price achieved comparing revenues
(grossed up for tolling charges for concentrate)
with sales volumes.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
233
Other Information
Financial Statements
Glossary and definitions continued
Mining industry
Brownfield
project
By-products
(credits in
copper
concentrates)
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
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 results 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.
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.
234
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Shareholder information
Currency abbreviations
$
$000
$m
£
£000
£m
p
C$
C$m
Ch$
Ch$000
Ch$m
A$
A$000
A$m
US dollar
Thousand US dollars
Million US dollars
Pound sterling
Thousand pounds sterling
Million pounds sterling
Pence sterling
Canadian dollar
Million Canadian dollars
Chilean peso
Thousand Chilean pesos
Million Chilean pesos
Australian dollar
Thousand Australian dollars
Million Australian dollars
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 153, and in Note 14 to the Financial Statements.
If approved at the Annual General Meeting, the final dividend of 48.5 cents
will be paid on 14 May 2021 to ordinary shareholders that are on the
register at the close of business on 22 April 2021. Shareholders can elect
(on or before 26 April 2021) 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
29 April 2021.
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 Cleveland House, 33 King
Street, London SW1Y 6RJ at 2.00 pm on Wednesday 12 May 2021. Given
the constantly evolving nature of the ongoing COVID-19 pandemic, it is
unlikely that the Company will be able to welcome shareholders to the AGM
in the usual way. Please refer to the Notice of the 2021 Annual General
Meeting for further information and the resolutions to be proposed at
the 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 30 to the
Financial Statements.
antofagasta.co.uk
Antofagasta plc Annual Report 2020
235
Other Information
Financial Statements
Shareholder information continued
Shareholder calendar 2020
20 January 2021
16 March 2021
21 April 2021
22 April 2021
23 April 2021
26 April 2021
29 April 2021
12 May 2021
14 May 2021
21 July 2021
19 August 2021
2 September 2021
3 September 2021
6 September 2021
9 September 2021
1 October 2021
20 October 2021
19 January 2022
Q4 2020 Production Report
Full Year 2020 Results Announcement
Q1 2021 Production Report
2020 Final Dividend – Ex Dividend date
2020 Final Dividend – Record date
2020 Final Dividend – Final date for receipt of
Currency Elections
2020 Final Dividend – Pound sterling/Euro Rate set
Annual General Meeting
2020 Final Dividend – Payment date
Q2 2021 Production Report
Half Year 2021 Results Announcement
2021 Interim Dividend – Ex Dividend date
2021 Interim Dividend – Record date
2021 Interim Dividend – Final date for receipt of
Currency Elections
2021 Interim Dividend – Pound sterling/Euro Rate set
2021 Interim Dividend – Payment date
Q3 2021 Production Report
Q4 2021 Production Report
Dates are provisional and subject to change.
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZY
United Kingdom
Tel: +44 370 702 0159
www.computershare.com
Website
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.
236
Antofagasta plc Annual Report 2020
antofagasta.co.uk
Designed and produced by Black Sun Plc
www.blacksunplc.com
This report is printed on paper certified in accordance with
the FSC® (Forest Stewardship Council®) and is recyclable
and acid-free.
Pureprint Ltd is FSC certified and ISO 14001 certified
showing that it is committed to all round excellence and
improving environmental performance is an important
part of this strategy. Pureprint Ltd aims to reduce at source
the effect its operations have on the environment and is
committed to continual improvement, prevention of pollution
and compliance with any legislation or industry standards.
Pureprint Ltd is a Carbon / Neutral® Printing Company.
Antofagasta plc
Cleveland House
33 King Street
London
SW1Y 6RJ
United Kingdom