Full year financial report for the 12 months ended 30th December 2016
|YEAR ENDING 31 DECEMBER||2016||2015||%|
|Underlying Earnings per share (continuing operations, before exceptional items)||Cents||34.7||(0.5)(3)||-|
|Earnings per share (continuing and discontinued operations, after exceptional items)||Cents||16.0||61.7(4)||(74.1)%|
|Dividend per share||Cents||18.4||3.1||493.5%|
|Cash flow from operations (continuing & discontinued)||$m||1,457.3||858.3||69.8%|
|Attributable net debt at period end(1)||$m||(499.5)||(525.0)||(4.9)%|
|Average realised copper price||$/lb||2.33||2.28||2.2%|
|Cash costs before by-product credits(1)||$/lb||1.54||1.81||(14.9%)|
|Net cash costs(1)||$/lb||1.20||1.50||(20.0)%|
Note: The financial results are prepared in accordance with IFRS, unless otherwise noted below.
(1) Non IFRS measures. Refer to the alternative performance measures in Note 31 to the preliminary results announcement
(2) Calculated as EBITDA/Group revenue. If Associates and JVs revenue is included EBITDA margin was 41.1% in 2016 and 27.3% in 2015.
(3) Restated to exclude Michilla
(4) Includes the sale of the water division
(5) On a cash basis
(6) Includes pre-commercial production sales at Antucoya of 11,800 tonnes.
- EBITDA(1) for the full year was $1,626.1 million, 78.7% higher than the previous year as operating costs (before exceptional items) fell by 8.1% and revenue increased by 12.3%
- EBITDA margin(2) strengthened to 44.9%, up from 28.2% in the same period last year, and 40.8% in first six months of 2016 as prices and volumes increased in the second half of the year
- Operating cash flow generation of $1,457.3 million, up 69.8% compared to same period last year on the back of stronger margins and higher production
- Capital expenditure down by 24.2% to $795.1 million, compared to 2015 as the Antucoya project and Centinela expansion were completed during the year.
- Operating cost reduction of $242 million, of which $176 million was achieved under the Cost and Competitiveness Programme reducing mine site costs by 11c/lb.
- Exceptional items during the year of $386.4 million after tax, which includes the previously announced write off of the Group’s interest in Alto Maipo, and an impairment charge against Antucoya.
- Earnings per share from continuing operations and before exceptional items of 34.7 cents per share, a 35.2 cents increase on 2015.
- Earnings per share from continuing and discontinued operations after exceptional items of 16.0 cents per share as reported in the financial statements, compared to 61.7 cents per share in the previous year.
- Final dividend of 15.3 cents per share declared, bringing the total dividend for the year to 18.4 cents per share, a 15.3 cents per share increase compared to 2015 and, at 53%, is above the Company’s minimum payout policy of 35% of underlying net earnings per share.
- Safety. Regrettably there were two fatal accidents during the year, one at Antucoya and the other in the Transport Division. The Group remains committed to achieving zero fatalities and reducing Lost Time Incidents and is continually working to strengthen and deepen the safety culture at all its operations. In the last five years the Lost Time Injury Frequency Rate (LTIFR) has fallen by 40%.
- Group copper production increased to 709,400 tonnes by 12.5% compared to 2015. This was driven by higher copper production at Centinela and additional production coming from the Group’s new Antucoya and Zaldívar operations, partly offset by the closure of Michilla at the end of 2015
- Group cash costs(1) before by-product credits were $1.54/lb, 27c/lb lower than last year as a result of the successful cost savings achieved during the year, higher production and the previously announced change in the estimation method for deferred stripping costs
- Group net cash costs(1) were $1.20/lb, 20.0% lower than in 2015. This reflected the lower cash costs before by-product credits, higher gold production and higher realised prices for gold and molybdenum, partly offset by lower molybdenum production
Outlook for 2017
- Group production in 2017 is expected to be 685-720,000 tonnes of copper (as previously announced), 185-205,000 ounces of gold and 8,500-9,500 tonnes of molybdenum.
- Group cash cost before by-product credits in 2017 (as previously announced) are expected to be similar to this year’s at $1.55/lb and net cash cost are expected to be approximately $1.30/lb.
- Further cost savings of $140 million under the Cost and Competitiveness Programme are included in the unit cost guidance figures
- Capital expenditure for 2017 is estimated at less than $900 million with some $100 million carried over from 2016.
- Los Pelambres Incremental Expansion feasibility study completed. High return $1.05 billion investment, increasing copper production by 55,000 tpa over 15 years from 2020.
- Long standing court cases at Los Pelambres resolved during the year, focus now on long term value creation for the company and all its stakeholders.
Antofagasta plc CEO Iván Arriagada said:
“2016 has been a year of operational delivery for Antofagasta putting us on a stronger and larger production base from which to grow. The successful integration of Zaldívar and the ramp-up of Antucoya – alongside the completion of the expansion of Centinela Concentrates – have contributed to a 12.5% rise in copper production to 709,400 tonnes.
“But volume increases are not the whole story at Antofagasta. We are focused on growth through profitable tonnes. A combination of measures to boost productivity, improve efficiencies and reduce costs has led to sustainable mine site cost reductions of $176 million in 2016. This performance helped cash flow from operations increase by 70% to $1.5 billion during the year whilst our EBITDA margins improved from 28% to 45%. In the medium term we expect to see a steady shift from a copper market in balance to a slight deficit, leading to further improvement in prices.
The Board has decided that in view of the Company’s improved performance and the more positive outlook to declare a final dividend of 15.3 cents per share, bringing the dividend for the full year to 18.4 cents per share, which represents 53% of underlying earnings per share, significantly more than the company’s commitment to pay-out a minimum of 35%.
“Antofagasta’s cautious approach has served us well in what is a cyclical industry, providing us with a stable operating base and a strong balance sheet. As a company we were founded with an entrepreneurial spirit, one that looks for opportunities where others do not see them and it is this attitude – combined with a continued commitment to capital discipline – that informs our outlook. Consequently, our focus in 2017 is on developing those projects that offer all our stakeholders the best returns – such as the incremental expansion at Los Pelambres, which we expect to approve by the end of the year – and will underpin the continued success of Antofagasta.”
Group copper production in 2017 is expected to be in the range of 685-720,000 tonnes, similar to the 709,400 tonnes produced in 2016. Centinela will be operating at its newly expanded throughput capacity and the Group will benefit from the first year of full production from Antucoya and start-up production from Encuentro Oxides. However, this growth will be offset by lower mined grades at Centinela and Los Pelambres.
Group cash costs before by-product credits for 2017 are expected to be almost unchanged at $1.55/lb as further expected savings from the Cost and Competitiveness Programme and the decrease in unit costs at Antucoya and Zaldívar are offset by a lower contribution from the lowest cost mine, Los Pelambres. Net cash costs are expected to increase by some 10c/lb to $1.30/lb.
This year has started strongly following the upturn in the last quarter of 2016, bolstered by the continued improvement in sentiment towards copper and the production problems at some of the world’s largest copper mines. It seems that there is now a reflationary environment and this is positive for commodities. As many continue to adjust their forecasts for China, the Group is confident that consumption there will continue to grow
as they support their power and infrastructure requirements.
The higher level of mine disruptions experienced since the beginning of the year should keep pressure on refined copper availability and support the fundamentals for copper in the months to come. As a result, the Group does not foresee copper returning to the lows of 2016.
In the medium term the Group expects to see a steady shift from a market in balance to a slight deficit, leading to a further improvement in prices. There are wild cards of course, but these are more likely to be positive for the copper price than negative. Potential higher demand in the US under the new administration is one, increased disruptions to supply is another.