Annual Report 2012
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Xstrata Annual Report 2012 Annual Report 2012 Contents 64 Financial statements Key financial results 1 Directors’ responsibilities statement 64 CEO’s strategic review 2 Independent auditor’s report 65 Business model 4 Consolidated income statement 66 Consolidated statement of comprehensive income 67 Business review 5 Consolidated statement of financial position 68 Financial review 5 Consolidated cash flow statement 70 Key performance indicators 11 Consolidated statement of changes in equity 71 Risk management 16 Notes to the financial statements 72 Operating review 20 Operations data 31 138 Parent financial statements Independent auditor’s report 138 Governance 36 Balance sheet 139 Board of directors 36 Notes to the financial statements 140 Corporate Governance report 38 Cautionary note regarding forward Remuneration report 45 looking statements 146 Directors’ report 59 Shareholder information 147 Directors, officers and auditors Directors Sir John Bond (Chairman) Mick Davis (Chief Executive Officer) Trevor Reid (Chief Financial Officer) Santiago Zaldumbide (executive director) David Rough (Deputy Chairman and Senior Independent Director) Con Fauconnier (non-executive director) Ivan Glasenberg (non-executive director) Peter Hooley (non-executive director) Claude Lamoureux (non-executive director) Aristotelis Mistakidis (non-executive director) Tor Peterson (non-executive director) Sir Steve Robson CB (non-executive director) Ian Strachan (non-executive director) Company Secretary Richard Elliston Head Office Bahnhofstrasse 2 PO Box 102 6301 Zug Switzerland Independent auditors Ernst & Young LLP 1 More London Place London SE1 2AF Registered office 1st Floor, Almack House 26-28 King Street London SW1Y 6QW Registered in England and Wales no. 4345939 Key financial results Year ended Year ended % $m 31.12.12 31.12.11 Change Revenue 31,618 33,877 (7) Operating EBITDA* 8,122 11,648 (30) EBITDA* 8,123 11,677 (30) Operating profit* 4,790 8,431 (43) EBIT* 4,791 8,460 (43) Attributable profit* 3,652 5,785 (37) Attributable profit 1,180 5,713 (79) Earnings per share (basic)* $1.24 $1.97 (37) Earnings per share (basic) $0.40 $1.95 (79) Dividends per share 45.5¢ 40¢ 14 Net debt to net debt plus equity 24% 15% 60 Net assets 46,791 45,701 2 Net assets per share** $15.80 $15.59 1 * Excludes exceptional items ** Excluding own shares Highlights: • A transformational year for Xstrata in which ten major projects were commissioned; • Real cost savings of $176 million; the eleventh consecutive year of successfully delivering sustainable, long-term reductions to operating costs; • During 2012, our Reserves and Resource base continued to grow; with significant increases at our South American copper operations and at our zinc sites; • Continued improvements to our safety and environmental performance; with a Group-wide 15% reduction in total recordable injuries on 2011 performance; • Two successful bond issues, raising $7.4 billion, ensuring a benign debt repayment schedule and strong balance sheet; • Final dividend of 31.5¢ per share, bringing the dividends for the year to 45.5¢, a 14% increase on 2011; and • Our shareholders approved the proposed merger between Glencore and Xstrata, subject to the necessary regulatory approvals being received and the Xstrata court process being completed. Xstrata | Annual Report 2012 | www.xstrata.com 1 XS035_ARA2012_AW.pdf 1 11/04/2013 16:05 CEO’s strategic review 2012 was a transformational year for Xstrata across a number of Margaret mine in north-west Queensland, Australia. Mount Margaret fronts. Our organic growth strategy, the third phase of Xstrata’s will add around 30,000 tonnes of annual copper in concentrate strategic development – following our acquisition and asset production to Ernest Henry’s production profile. Expansion of the transformation stages – began in earnest in 2009 as we committed concentrator and associated mine at our Antamina copper/zinc joint to grow our capacity by 50% in copper equivalent terms by the end venture mine in Peru was successfully commissioned in the first quarter of 2014. The development of our project pipeline reached its zenith of 2012 and throughput rates are consistently exceeding the planned in 2012, with ten major projects entering commissioning. This year 38% capacity increase. Commercial grade production from our new also marked the peak of our expansionary capital expenditure Antapaccay mine commenced in November, in line with budget and programme at $7.6 billion. schedule and we are on track to achieve our steady state concentrator throughput rate of 70,000 tonnes per day by mid-2013. The mine is In addition, in November, our shareholders approved our merger expected to produce an average of 160,000 tonnes of copper in with Glencore International plc, heralding the next significant concentrate per annum, plus gold and silver by-products, in the first development in Xstrata’s history and the creation of a unique natural five years of its 20-year life. In December, the Lomas II project at Lomas resources group with an improved ability to capture returns and Bayas in Chile commissioned on schedule, extending the mine life by fully-integrated along the commodities value chain. 16 years at existing production levels of 75,000 tonnes of copper cathodes per annum. Economic environment Our businesses faced difficult operating conditions during the Xstrata Zinc commenced production at the high-grade Lady Loretta year, as the combined impact of falling commodity prices, ongoing mine in Queensland, Australia, more than one year ahead of inflationary pressure on operating costs and continued strong schedule and on budget. At full production, Lady Loretta will be producer currencies relative to the US dollar put pressure on delivering an estimated 1.6 million tonnes of ore per annum, while our margins. first ore was delivered six months ahead of schedule at the 1 million tonnes per annum mine expansion at George Fisher zinc mine. The global growth rate in 2012 slowed relative to the post-credit crunch recovery in 2010 and 2011, with lower inventory restocking Xstrata Alloys commissioned the 600,000 tonne per annum and the impact of fiscal consolidation starting to be felt. The Tswelopele pelletizing and sintering plant, on time and on budget. economies of OECD countries grew marginally, while emerging Xstrata Nickel completed construction on Line 1 at the Koniambo markets, such as China and India, decelerated from their previous ferronickel operation in New Caledonia and all major components record levels of growth, impacted by the fall in exports to the US and have commissioned successfully. We anticipate producing Europe. Sovereign debt concerns in the eurozone continued, while commercial-grade ferronickel in the second quarter of 2013, a second round of quantitative easing in the US failed to deliver ensuring Koniambo is well positioned to deliver the two-year meaningful growth. production ramp-up to achieve its nameplate 60,000 tonnes As a result, commodity prices were significantly impacted, with of nickel in ferronickel per annum run rate by the end of 2014. realised Australian export thermal and coking coal prices falling by Looking ahead, completion of these projects de-risks Xstrata’s 7% and 25% respectively and the average LME nickel price by 23% organic growth pipeline, with the Las Bambas copper project in compared to 2011. southern Peru being our sole remaining major greenfield project First evident in late 2012 and continuing into the early part of 2013, under construction. Las Bambas continues to mitigate project risk a gradual global recovery appears underway, particularly in China through the advance purchase and delivery of major plant and and the US. Chinese fiscal policy easing and clear statements by the processing equipment, its use of the ‘standard concentrator’ design, US Federal Reserve regarding their intention to continue stimulating already successfully constructed at Antapaccay, and the transfer of the US economy have boosted confidence in these economies and skills and experience from our Antapaccay project. We have recently are supportive of a marginally improved environment for commodity confirmed a definitive estimate of $5.2 billion for Las Bambas, demand in 2013. reconfirming the project’s status as a world class, Tier 1 copper asset that will deliver substantial value. Las Bambas is now in Operating performance full construction with over 90% of engineering works and 80% of Against the backdrop of a deteriorating global economy in 2012, procurement completed by the end of 2012. Las Bambas is set to I am nevertheless pleased with the operating performances delivered produce 400,000 tonnes of copper per annum from 2015 for at least by our team. Our ongoing focus on reducing costs, both through the first five years of its more than 20 year projected mine life. The incremental changes to operational processes and through larger mineralised district that hosts our Las Bambas project orebodies cost saving initiatives, allows me to report, for the eleventh and Tintaya and Antapaccay mines has enormous potential for consecutive year, a reduction of costs in real terms. The $176 million further mineral resource expansion and prefeasibility studies are of cost savings achieved in 2012 was predominantly realised through already underway at our Coroccohuayco project as a potential a combination of cost efficiency initiatives and the benefit of brownfield expansion to our Antapaccay mine. increased volumes in our coal and zinc businesses. This mirrors further substantial increases in our copper Mineral The highlight of our operating performance, however, was the Resources across the portfolio, mainly due to a significant 19% commencement of commissioning of the ten major organic growth increase in total Mineral Resources at our Collahuasi joint venture in projects we promised when we initiated this phase of our growth Chile to 9 billion tonnes; a 20% increase in total Mineral Resources at strategy in 2009. our El Pachón project in Argentina to 3.3 billion tonnes; and a 27% increase in total Mineral Resources at our new Antapaccay mine in In Xstrata Coal, we completed, on schedule, the first stage of Peru to over 1 billion tonnes.