Resumen corto:
Codelco emitió bonos por US$900 millones a tasa del 5.125% hasta 2033, en EE.UU. y Europa, sin garantías, con vencimiento en 2033, y financió proyectos por US$13.4 mil millones (2022-2024).
**********
COMISIÓN PARA EL MERCADO FINANCIERO
CHILE FORMULARIO HECHO ESENCIAL COLOCACIÓN DE BONOS EN EL EXTRANJERO
1.0 IDENTIFICACIÓN DEL EMISOR
2.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Razón Social Corporación Nacional del Cobre de Chile
Nombre fantasía CODELCO-CHILE
R.U.T. 61.704.000-K
N? Inscripción Reg. Valores 785
Dirección Huérfanos 1270, Comuna de Santiago, Santiago
Teléfono 22 690 3000
Actividades y negocios Ver Anexo 1.
ESTA COMUNICACIÓN SE HACE EN VIRTUD DE LO ESTABLECIDO EN EL ARTÍCULO 9 E INCISO SEGUNDO DEL ARTICULO 10* DE LA LEY N? 18.045, Y SE TRATA DE UN HECHO ESENCIAL RESPECTO DE LA SOCIEDAD, SUS NEGOCIOS, SUS VALORES DE OFERTA
PÚB
LICA YO DE LA OFERTA DE ELLOS, SEGÚN CORRESPONDA.
3.0 CARACTERÍSTICAS EMISIÓN
3.1
3.2
3.3
3.4
3.4.1
3.4.2
3.4.3
3.4.4
Moneda de denominación [ Dólares de los Estados Unidos de América (US$). |
Moneda total emisión [US$ 900.000.000 |]
Portador a la orden Bonos registrados a nombre de los tenedores en los libros de The Depository Trust Company (“DTC”)
Series Bonos 2033
Monto de la serie US$ 900.000.000
N* de bonos Ver 3.4.3
Valor nominal bono US$200.000 mínimo. En caso de sumas superiores, serán por múltiplos de US$1,000.
Tipo reajuste NA
COMISIÓN PARA EL MERCADO FINANCIERO 1
COMISIÓN PARA EL MERCADO FINANCIERO
CHILE
3.4.5 Tasa de interés 5,125%
3.4.6 Fecha de emisión 02022023
3.4.7 Para cada serie llenar la siguiente tabla de desarrollo:
Bonos 2033:
El capital de los bonos será pagadero en su integridad a su vencimiento, el día 2 de febrero de 2033.
Los bonos devengarán un interés de 5,125% anual, base de un año de 360 días, el cual será pagadero en 20 cuotas los días 2 de febrero y 2 de agosto de cada año, a partir del 2 de Agosto de 2023. Los intereses serán devengados desde el 2 de febrero de 2023.
N* Cuota | N* Cuota Fecha Intereses Amortización | Total Cuota | Saldo Capital Interés | Amortiz.
1 – 2-ago-2023 23.062.500 – 23.062.500 900.000.000 2 – 2-feb-2024 23.062.500 – 23.062.500 900.000.000 3 – 2-ago-2024 23.062.500 – 23.062.500 900.000.000 4 – 2-feb-2025 23.062.500 – 23.062.500 900.000.000 5 – 2-ago-2025 23.062.500 – 23.062.500 900.000.000 6 – 2-feb-2026 23.062.500 – 23.062.500 900.000.000 7 – 2-ago-2026 23.062.500 – 23.062.500 900.000.000 8 – 2-feb-2027 23.062.500 – 23.062.500 900.000.000 9 – 2-ago-2027 23.062.500 – 23.062.500 900.000.000 10 – 2-feb-2028 23.062.500 – 23.062.500 900.000.000 11 – 2-ago-2028 23.062.500 – 23.062.500 900.000.000 12 – 2-feb-2029 23.062.500 – 23.062.500 900.000.000 13 – 2-ago-2029 23.062.500 – 23.062.500 900.000.000 15 – 2-feb-2030 23.062.500 – 23.062.500 900.000.000 15 – 2-ago-2030 23.062.500 – 23.062.500 900.000.000 16 – 2-feb-2031 23.062.500 – 23.062.500 900.000.000 17 – 2-ago-2031 23.062.500 – 23.062.500 900.000.000 18 – 2-feb-2032 23.062.500 – 23.062.500 900.000.000 19 – 2-ago-2032 23.062.500 – 23.062.500 900.000.000 20 – 2-feb-2033 23.062.500 900.000.000 923.062.500 10)
3.5 Garantías
3.5.1 Tipo y montos de las garantías
No aplica.
3.6 Amortización Extraordinaria:
3.6.1 Procedimientos y fechas:
No aplica.
COMISIÓN PARA EL MERCADO FINANCIERO 2
COMISIÓN PARA EL MERCADO FINANCIERO CHILE
5.0 PAÍS DE COLOCACIÓN
5.1 Nombre Bonos vendidos a los Compradores Iniciales (*nitial Purchasers, según dicho concepto se define en el Purchase Agreement, definido más abajo) domiciliados en los Estados Unidos de América.
5.2 Normas para obtener autorización de transar
Rule 144 A y Regulation S de la US Securities Act de 1933 de los Estados Unidos de América.
6.0 INFORMACIÓN QUE PROPORCIONARÁ
6.1 A futuros tenedores de bonos
Prospecto informativo (* Offering Memorandum) de fecha 30 de enero de
2023. Ver Anexo 2.
6.2 A futuros representantes de tenedores de bonos
Mismo documento mencionado en el punto 6.1 precedente.
7.0 CONTRATO DE EMISION
7.1 Características generales
Contrato de Compraventa (Purchase Agreement) celebrado el día 30 de enero de 2023 entre (A) Corporación Nacional del Cobre de Chile, como emisor de los bonos, y (B) BNP Paribas Securities Corp; BofA Securities Inc.; Santander Investment Securities Inc. y Scotia Capital (USA) Inc. como Compradores Iniciales (“Initial Purchasers). Ver Anexo 3.
El objeto del Purchase Agreement fue la adquisición, por los Compradores Iniciales (nitial Purchasers), de la totalidad de los bonos emitidos por Corporación Nacional del Cobre de Chile, bajo los términos y condiciones que se expresan en dicho contrato.
7.2 Derechos y obligaciones de los tenedores de bonos
COMISIÓN PARA EL MERCADO FINANCIERO 3
COMISIÓN PARA EL MERCADO FINANCIERO CHILE
Los bonos emitidos por Corporación Nacional del Cobre de Chile constituyen obligaciones directas, no garantizadas y no subordinadas de la compañía emisora. Los tenedores de bonos pueden declarar exigible anticipadamente la totalidad del capital más intereses en ciertos casos de incumplimiento por parte de Corporación Nacional del Cobre de Chile.
COMISIÓN PARA EL MERCADO FINANCIERO 4
COMISIÓN PARA EL MERCADO FINANCIERO
CHILE
8.0 OTROS ANTECEDENTES IMPORTANTES Los bonos no han sido registrados en los Estados Unidos de América bajo la U.S.
Securities Act de 1933 y, por lo tanto, solamente podrán ser vendidos a ciertos compradores institucionales calificados de acuerdo a lo dispuesto en la Rule 744 A de la mencionada ley yo fuera de los Estados Unidos de América, de acuerdo con lo señalado en la Regulation S de la misma norma.
9.0 DECLARACION DE RESPONSABILIDAD
El suscrito, en su calidad de Presidente Ejecutivo de la Corporación Nacional del Cobre de Chile (la “Sociedad”), ambos domiciliados en calle Huérfanos 1270, Santiago, a fin de dar debido cumplimiento a lo dispuesto en la Circular N*1072 de la Superintendencia de Valores y Seguros (hoy CMF), declara y da fe, bajo juramento, en este acto y bajo su correspondiente responsabilidad legal, respecto de la plena y absoluta veracidad y autenticidad de toda la información presentada y adjuntada por la Sociedad a la CMF en el presente “Formulario de Hecho Esencial Colocación de Bonos en el Extranjero”, con fecha 2 de febrero de 2023.
NOMBRE CARGO C.N.I. FIRMA André Presidente 9617644-9 Sougarret Ejecutivo
COMISIÓN PARA EL MERCADO FINANCIERO 5
COMISIÓN PARA EL MERCADO FINANCIERO CHILE
ANEXO 1
MEMORIA ANUAL https:www.codelco.commemoria2021sitedocs2022021920220219165533memoria_codelco_2021.pdf
COMISIÓN PARA EL MERCADO FINANCIERO 6
COMISIÓN PARA EL MERCADO FINANCIERO CHILE
ANEXO 2
OFFERING MEMORANDUM
COMISIÓN PARA EL MERCADO FINANCIERO 7
COMISIÓN PARA EL MERCADO FINANCIERO CHILE
ANEXO 3
PURCHASE AGREEMENT
COMISIÓN PARA EL MERCADO FINANCIERO 8
IMPORTANT NOTICE
THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1) QUALIFIED INSTITUTIONAL BUYERS (QIBs) (WITHIN THE MEANING OF RULE 144A UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT)) OR (2) NON-U.S. PERSONS (WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT) OUTSIDE THE U.S.
IMPORTANT: You must read the following before continuing. The following applies to the Offering Memorandum following this page, and you are advised to read this carefully before reading, accessing or making any other use of the Offering Memorandum. In accessing the Offering Memorandum, you agree to be bound by the following terms and conditions, including any modifications thereto any time you receive any additional information from us.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANTTO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE LAWS OF OTHER JURISDICTIONS. THE OFFERING MEMORANDUM AND THE OFFER OF THE NOTES ARE ONLY ADDRESSED TO AND DIRECTED AT PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA (THE EEA) OR IN THE UNITED KINGDOM WHO ARE QUALIFIED INVESTORS AS DEFINED IN REGULATION (EU) 20171129 (THE PROSPECTUS REGULATION) OR, IN THE UNITED KINGDOM AS DEFINED IN THE PROSPECTUS REGULATION AS IT FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 (THE EUWA) (THE UK PROSPECTUS REGULATION). NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 12862014 (AS AMENDED, THE PRIPS REGULATION) OR IN THE UNITED KINGDOM BY THE PRIPS REGULATION AS IT FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUWA (THE UK PRIIPS REGULATION) FOR OFFERING OR SELLING THE SECURITIES OR OTHERWISE MAKING THEM AVAILABLE TO RETAIL INVESTORS IN THE EEA OR THE UNITED KINGDOM, HAS BEEN PREPARED AND THEREFORE THE OFFERING OR SELLING OF THE SECURITIES OR OTHERWISE MAKING THEM AVAILABLE TO ANY RETAIL INVESTOR IN THE EEA OR THE UNITED KINGDOM MAY BEUNLAWFUL UNDER THE PRIIPS REGULATION OR THE UK PRIIPS REGULATION. THIS COMMUNICATION IS ONLY BEING DISTRIBUTED TO AND IS ONLY DIRECTED AT (I) PERSONS WHO ARE OUTSIDE THE UNITED KINGDOM (II) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED (THE ORDER); (II) PERSONS FALLING WITHIN ARTICLES 19(2XA) TO (D) OF THE ORDER; OR (IV) PERSONS TO WHOM AN INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED (THE FSMA)) IN CONNECTION WITH THE ISSUE OR SALE OF ANY NOTES MAY OTHERWISE LAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER REFERRED TO AS RELEVANT PERSONS). THE NOTES ARE ONLY AVAILABLE TO, AND ANY INVITATION, OFFER OR AGREEMENT TO SUBSCRIBE, PURCHASE OR OTHERWISE ACQUIRE SUCH NOTES AREONLY AVAILABLE TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS.
ANY PERSON WHO IS NOT A RELEVANT PERSON SHOULD NOT ACT OR RELY ON THIS DOCUMENT OR ANY OF ITS CONTENTS.
THE FOLLOWING OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS NOTICE MAY RESULT IN A VIOLATION OF THE SECURITIES ACTOR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.
Confirmation of your Representation: In order to be eligible to view this Offering Memorandum or make an investment decision with respect to the securities, investors must be either (1) QIBs or (2) non-U.S. persons (within the meaning of Regulation S under the Securities Act) outside the United States. This Offering Memorandum is being sent at your request and by accepting the e-mail and accessing this Offering Memorandum, you shall be deemed to have represented to us that (1) you and any customers you represent are either (a) QIBs or (b) non-U.S. persons (within the meaning of Regulation S under the Securities Act) and (2) you consent to the delivery of such Offering Memorandum by electronic transmission.
You are reminded that this Offering Memorandum has been delivered to you on the basis that you are a person into whose possession this Offering Memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorized to, deliver this Offering Memorandum to any other person.
The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the initial purchasers or any affiliate of the initial purchasers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the initial purchasers or such affiliate on behalf of the issuer in such jurisdiction.
The following Offering Memorandum has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may bealtered or changed during the process of electronic transmission, and consequently neither the initial purchasers, nor any person who controls them nor any of their directors, officers, employees nor any of their agents nor any affiliate of any such person accept any liability or responsibility whatsoever in respect of any difference between the Offering Memorandum distributed to you in electronic format and the hard copy version available to you on request from the initial purchasers.
OFFERING MEMORANDUM Strictly Confidential
CODELCO
Corporación Nacional del Cobre de Chile
U.S.$900,000,000 5.125% Notes due 2033
The notes (the notes) will bear interest at the rate of 5.125% per year and will mature on February 2, 2033. The interest on the notes will be pa yable semi-annually in arrears on February 2 and August 2 of each year, beginning on
August 2,2023.
We may redeem the notes atour option, in whole orin part, at any time and from time to time priorto the date that is three months prior to the maturity date, at a redemption price equal to the greater of 100%ofthe outstanding principal amount of the notes to be redeemed and a redemption price based on a make-whole premium, plus accrued and unpaid interest to the date of redemption. In addition, we ma y redeem the notes at our option, in whole or in part, at any time and from time to time, beginning on the date thatis three months priorto the maturity date, ata redemption price equalto 100% oftheoutstanding principal a mountof the notes to bered eemed, plus accrued and unpaid interest to the date of redemption. Upon the occurrence of specified events relating to Chilean tax law, we may redeem the notes in whole, but not in part, at 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. See Description of Notes-Tax Redemption and -Optional Redemption.
The notes will constitute direct, general, unconditional, unsecured and unsubordinated obliga tions of Corporación Nacional del Cobre de Chile (CODELCO orthe Company). The notes will rank without any preference equally among themselves and equally with all other unsubordinated and unsecured obliga tions of CODELCO, other than certain obligations granted preferential treatment pursuant to Chilean la w. It is understood that this provision will not be construed so as to require CODELCO to make payments under the notes ratably with payments being made under any other obliga tions. See Description ofNotes-Ranking.
We intend to use the netproceeds from the sale of the notes for general corporate purposes. We intend to apply to list the notes on the Official List of the Luxembourg Stock Exchange and for tra ding on the Euro MTF market of the Luxembourg Stock Exchange; however, the notes have not yet been listed. Currently, there is no public market for the notes. No guarantee can be given thatsuch application will be approved or that the notes will trade in the Euro MTF market.
See Risk Factors beginning on page 16 fora discussion of certain risks that you should consider in connection with an investmentin the notes.
Neither the U.S. Securities and Exchange Commission (the SEC) nor any other regulatory body has approved or disapproved ofthese securities or passed upon the adequacy or accuracy of this offering memorandum. Any representation to the contrary is a criminal offense.
The notes havenotbeenregistered under the United States Securities Act of 1933, as amended (the Securities Act), or any state securities laws, and are being offered and sold only to (i) qualified institutional buyers under Rule 144A underthe Securities Act and (ii) persons outsidethe United States under Regulation S underthe Securities Act. Fora description of certain restrictions on the transfer of the notes, see Transfer Restrictions and Plan of Distribution.
The notes will not be registered under Law No. 18,045, as amended, (the Securities Market Law) with the Chilean Financial Market Commission (Comisión para el Mercado Financiero or *CMF) and, accordingly, the notes cannot and will not be offered or sold to persons in Chile except in circumstances in which they are offered in reliance onan availa ble exemption from such registration. The notes may be privately offered in Chile to certain qualified investo1s, pursuantto Rule (Norma de Carácter General) No. 216, dated June 12, 2008, and to Rule (Norma de Carácter General) No. 336, dated June 27, 2012, both issued by the former CMF, the Chilean Securities and Insurance Commission (Superintendencia de Valores y Seguros).
The notes are being offered pursuant to an exemption from the requirement to publish a prospectus under the Prospectus Regulation, and this offering memorandum has not been approved by a competent authority within the meaningof the Prospectus Regulation. The notes are not intended to be offered, sold, or otherwise made a vailabk to and should not be offered, sold, or otherwise made available to any retail investor in the European Economic Area.
The notes are being offered pursuant to an exemption from the requirement to publish a prospectus under the UK Prospectus Regulation and this offering memorandum has not been approved by a competent authority within the meaningofthe UK Prospectus Regulation. Thenotes are not intended to be o ffered, sold, or otherwise madea vailable to and should not be offered, sold, or otherwise madea vailable to any retail investor in the United Kingdom.
Issue price per note: 99.938% plus accrued interest, if any, from February 2,2023.
The notes will be delivered in book-entry form only through the facilities of The Depository Trust Company (DTC) and its direct and indirect participants, including Euroclear Bank S.A.N.V. (Euroclear), as operator ofthe Eurockar system, and Clearstream Banking, S.A., Luxembourg (Clearstream) on or about February 2,2023.
Joint Book-Running Managers
BNP PARIBAS BofA Securities Santander Scotiabank
The date ofthis offering memorandum is January 30, 2023.
We have not, and the initial purchasers have not, authorized anyone to provide any information other than that contained in this offering memorandum. We and the initial purchasers take no responsibility for, and can provide no assurance as to the reliability of, any other information thatothers may give you. We are not, and the initial purchasers are not, making an offer of these securities in any jurisdiction where the offer is not permitted. Prospective investors should not assume that the information contained in this offering memorandum is accurate as of any date other than the date on the frontof this offering memorandum.
After having made all reasonable inquiries, we confirm that (1) the information contained in this offermg memorandum is true and accurate in all material respects, (ii) the opinions and intentions expressed herein are honestly held and (iii) there are no other facts the omission of which would make this offering memorandum as a whole, orany of such information or the expression of any such opinions or intentions, misleading. CODELCO accepts responsibility accordingly.
Unless otherwise indicated orthe context otherwise requires, all references in this offering memorandum to CODELCO, the Company, we, our, ours, us or similar terms refer to Corporación Nacional del Cobre de Chile (CODELCO) together with its subsidiaries.
TABLE OF CONTENTS Page NOTE REGARDING FORWARD-LOOKING STATEMENTS, iv
ENFORCEABILITY OF CIVIL LIABILITIES… 00.
PRESENTATION OF FINANCIAL AND STATISTICAL INFORMATION RISK FACTORS …….
USE OF PROCEEDS CAPITALIZATION..
EXCHANGE RATES…
SELECTED CONSOLIDATED FINANCIAL DAT SELECTED OPERATING DATA…
MANAGEMENT”S DI SCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS… 00.
BUSINESS AND: PROPERTIES OVERVIEW OF THE COPPER MARKET.
REGULATORY FRAMEWORK ..
MANAGEMENT…
RELATED PARTY TRANS SACTIONS FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN CHILE DESCRIPTION OF NOTES.
TAXATION… .. 119 PLAN OF DISTRIBUTION 2.123 TRANSFER RESTRICTIONS… …129 VALIDITY OF THE NOTES. 132 INDEPENDENT AUDITORS…. 2.133 GLOSSARY OF CERTAIN MINING TERMS.. …134 GENERAL INFORMATION. 138
INDEX TO FINANCIAL STATEMENTS .F-l
The notes may not be offered or sold, directly or indirectly, in the Republic of Chile (Chile) or to any resident of Chile, exceptas permitted by applicable Chilean law.
This offering memorandum has been prepared by CODELCO solely foruse in connection with theproposed offering of the securities described herein. This offering memorandum is personal to each offeree and does not constitute an offerto any other person orto the public generally to subscribe for, or otherwise acquire, securities. We and the initial purchasers reserve the right to reject for any reason any offerto purchase any of thenotes.
This offering memorandum may only be used forthepurposes ofthis offering.
The initial purchasers make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this offering memorandum. Nothing contained in this offering memorandum is, orshall be relied uponas, a promise orrepresentation by the initial purchasers asto the pastor future.
CODELCO has furnished the information contained in this offering memorandum.
In makingan investment decision, prospective investors must rely on theirown examination of CODELCO and the terms of the offering, including the merits and risks involved. Each prospective investor should consult its own advisors as needed to make its investment decision and to determine whether it is lega ly permitted to purchase the securities under applicable legal investment or similar laws or regulations. Investors should be aware that they may be requiredto bearthe financial risks of this investment for an indefinite period of time.
Prospective investors should not construe anything in this offering memorandum as legal, business, tax or otheradvice.
This offering memorandum contains summaries believed to be accurate with respect to certain documents, but reference is made to the actual documents for complete information. All such summaries are qualified in their entirety by such reference. Copies ofdocuments referred to herein will be ma de availa ble to prospective investors (1) upon requestto CODELCO orthe initial purchasers and (ii) at the office ofthepayinga gent.
IN CONNECTION WITH THIS OFFERING, BNP PARIBAS SECURITIES CORP., BOFA SECURITIES, INC., SANTANDER INVESTMENT SECURITIES INC., AND SCOTIA CAPITAL (USA) INC., OR ANY PERSON ACTING FOR ANY OF THEM, MAY OVER ALLOT OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL FOR A LIMITED PERIOD AFTER THE ISSUE DATE. HOWEVER, THERE IS NO OBLIGATION FOR BNP PARIBAS SECURITIES CORP., BOFA SECURITIES, INC., SANTANDER INVESTMENT SECURITIES INC., AND SCOTIA CAPITAL (USA) INC., OR ANY PERSON ACTING FOR ANY OF THEM, TO DO THIS. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME, AND MUST BE BROUGHT TO AN END AFTERA LIMITED PERIOD.
You must: (i) comply with all applicable la ws and regulations in forcein any jurisdiction in connection with the possession or distribution of this offering memorandum and the purchase, o ffer or sale of the notes; and (ii) obtain any consent, approval or permission required to be obtained by you forthepurchase, offer or sale by you ofthe notes underthe laws and regulations applicable to you in force in any jurisdiction to which you are subjectorin which you makesuch purchases, offers or sales; neither we nor the initial purchasers shall ha ve any responsibility therefor.
The notes are subject to restrictions on resale and transfer as described under Transfer Restrictions. By purchasingthenotes, you will be deemed to havemade certain acknowledgments, representations and a greementsas described under Transfer Restrictions. You may be required to bearthe financial risks of investing in the notes for an indefinite period of time.
The price and amount of the notes to be issued under the offering memorandum will be determined by the Issuer and the initial purchasers at the time of issue in accordance with prevailing marketconditions.
You acknowled ge that: e you have been afforded an opportunity to request from us, and to review, all additional information considered by you to be necessary to verify the accuracy of, orto supplement, the information contained in this offering memorandum; ii e youhavenotrelied on the initial purchasers or any person affiliated with the initial purchasers in connection with your investigation of the accuracy of such information or your investment decision; e you have made your own assessment concerning the relevant tax, legal, currency and other considerations relevantto investmentin the notes; e you have sufficient knowledge and experience to be capable of evaluating the merits and risks of a prospective investment in the notes; and e no person has been authorized to give any information or to make any representation concerning us or the notes, other than as contained in this offering memorandum and, if given or made, any such other information or representation should not be relied upon as having been authorized by us orthe initial purchasers.
In the United Kingdom, this offering memorandum is for distribution only to, andis directed only at, and any offerof the notes subsequently made may only be directed at persons who: (1) ha ve professional experience in matters relatingto investments falling within Article 19(5) of the Order; (ii) are persons falling within Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the Order; (iii) are outside the United Kingdom (the UK; or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaningof Section21 ofthe FSMA) in connection with theissue orsale of any securities may otherwise la wfully be communicated (all such persons together being referred to as relevant persons). This offering memorandum is directed only atrelevant persons and must notbe acted on orrelied on by persons who are notrelevant persons. Any investment or investmenta ctivity to which this offering memorandum rela tes is available only to and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this offering memorandum orany of its contents.
The notes are not intended to be offered, sold, or otherwise made a vaila ble to and should notbe offered, sold or otherwise made availa ble to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i)a retail client as defined in point(1 1) of Article 4(1) of Directive201465EU (as amended, MIiFIDID>) (ii) a customer within the meaning of Directive (EU) 201697 (as amended, the Insurance Distribution Directive), where the customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MIFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation; and the expression ofan offer includes the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offeredso as to enable aninvestorto decide to purchase or subscribe forthe notes. Consequently, no key information document required by the PRIIPs Regulation for offering or selling the notes or otherwise making them availa ble to retail investors in the EEA, has been prepared and thereforethe offering or selling ofthenotes or otherwise making them availa ble to any retail investorin the EEA may beunlawfulunderthe PRIPs Regulation.
The notes arenotintended to be offered, sold or otherwise made a vaila ble to and should not be offered, sold or otherwise made a vaila ble to any retail investor in the UK. For these purposes, a retail investor means a person who is one (ormore) of the following: (i) a retail client as defined in point (8) of Article 2 of Regulation(EU) No 2017565 as it forms part of domestic law by virtue of the EUWA; (ii) a customer within the meaning of the provisions of the FSMA and any rules or regulations made under the FSMA to implement Directive (EU) 201697, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 6002014 asit forms part of domestic la w by virtue ofthe EUWA,; or (iii) not a qualified investor as defined in the UK ProspectusRegulation. Consequently, no key information document required by the UK PRITPsRegulation for offeringor selling the securities or otherwise making them availa ble toretail investors in the UK hasbeen prepared and therefore offering or selling the securities or otherwise making them a vaila ble to any retail investor in the UK may be unlawful under the UK PRITPs Regulation.
See Risk Factors beginning on page 16fora description of certain risks you should consider before investing in the notes.
iii
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This offering memorandum contains forward-looking statements. We may from time to time make forward-looking statements in (1) our annual report; (ii) prospectuses, press releases and other written material; or (iii) oral statements made by our officers, directors or employees to analysts, institutional investors, representatives of the media and others. Examples of these forward-looking statements include: e projections ofrevenues, profit (loss), capital expenditures, dividends, capital structure or other financial items orratios; e statements of ourplans, objectives or goals, includingthose relatingto anticipated trends, competition, regulation andrates; e statements about our future economic performance orthatof Chile or other countries in which we have investments; and e statements ofassumptions underlyingthesestatements.
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Words such as believe, could, may, will anticipate, plan, expect, intend, target, estimate, project, potential, guideline, should and similar expressions are intended to identify forward-lookin g statements, butare not the exclusivemeans of identifying these statements.
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Forward-looking statements involve inherentrisks and uncertainties. We caution you that a number of important factors could cause actual results to differ materia lly from the plans, objectives, expectations, estimates and intentions expressed in these forward-looking statements. These factors, some of which are discussed under Risk Factors, include economic and political conditions and government policies in Chile or elsewhere, infla tion rates, exchange rates, regulatory developments and changes in Chilean la w, customer demand, competition, unanticipated miningand production problems, commodity prices, relations with employees and contractors, variances in ore grade, adverse weather conditions, natural disa sters and the outbreak of coronavirus (COVID-19) andits potential impact on our business. We caution you thatthe foregoing list of factors is not exclusivea nd that otherrisks and uncertainties may cause actual results to differ materially from those in forward-looking statements.
You are cautioned not to place undue reliance on these forward-looking statements which reflect our views only as of the date they are made, and we do not undertake any obligation to update them or publicly to release the result of any revisions to these forward-looking statements in light of new information or future developments after the dateof this offering memorandum.
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ENFORCEABILITY OF CIVIL LIABILITIES
CODELCO is a state-owned enterprise organized under the laws of Chile. All of its directors and executive officers and certain experts named in this offering memorandum reside outside the United States (principally in Chile), and allora substantial portion ofthe assets of CODELCO and of such persons are located outside the United States.
Asa result, it ma y not bepossible forinvestors to effect service of process within the United States on, or bring actions or enforce foreign judgments a gainst, CODELCO or such persons in U.S. courts. In addition, CODELCO has been advised by its Chilean counsel, Carey y Cía. Ltda., that no treaty exists between the United States and Chile for the reciprocal enforcement of foreign judgments. There is also doubt as to the enforceability in Chilean courts of judgments of U.S. courts obtained in actions predicated upon the civil liability provisions of U.S. federal securities laws. Chilean courts, however, have enforced judgments rendered in the United Statesby virtue of the legal principles of reciprocity and comity, subject to the review in Chile of the U.S. judgment in order to ascertain whether certain basic principles of due process and public policy have been respected, without reviewing the merits of the subject matter of the case. Ifa U.S. court grants a finaljudgment forthe payment of money, enforceability of this judgment in Chile will be subject to obtainingtherelevantexequatur (i.e., recognition of enforceability ofthe foreign judgment) in a proceeding before the Chilean Supreme Court, accordingto Chilean civil procedure la w in effect at that time and satisfying certain legal requirements. Currently, the most important of these requirements are (except when a treaty between the United States and Chile exists forthereciprocal enforcement of foreign judgments):
e. thejudgmentwillbe enforced if thereis reciprocity, as totheenforcementofjudgments (i.e., the relevant
U.S. court would enforcea judgment ofa Chilean court under comparable circumstances). Ifreciprocity cannotbe pro ven, the foreign judgment will not be enforced in Chile; e if reciprocity cannot be proven, the foreign judgment will be enforced, nonetheless, if: (1) it does not contain anything contrary to Chilean law, notwithstanding the differences in procedural rules; (11) it is not contrary to Chilean jurisdiction and public policy; (iii) it has been duly served, althoughthe defendant may prove that, for otherreasons, he orshe wasprevented from usinga defectin service of processas a defense; and (iv) it is final under the laws of the country where the judgment or arbitral award, as the case may be, was rendered. With respect to service of process, the Chilean Supreme Court has decided that, to detemine that process was duly served, service should be considered valid in the jurisdiction where the case was decided and it can be proven that the defendant had actual knowledge of the suit; and e in any event, the foreign judgment must not be contrary to the public policy of Chile or Chilean jurisdiction and must not a ffect in any wa y any property located in Chile, which, as a matter of Chikan law, are exclusively subject to the jurisdiction of Chilean courts.
If the exequatur is granted, then the judgment may be enforced by a lower court through a collection proceeding under Chilean civil procedure law.
In addition, it may be necessary for investors to comply with certain procedures, includingevidence oftimely paymentofstamp taxes (currently at a rateof 0.066%. per month or fractionthereof elapsed between the issuance and the maturity of the notes, calculated on the principal amount of the notes, with a maximum 0.8% stamp tax on the principal amountof thenotes, which will be paid by CODELCO), to file a lawsuit concerningthe Notes in a Chilean court.
Also, foreign judgments specifically related to properties located in Chile, includingthe attachment of liens on such properties, could be considered to violate Chilean la w because such properties are exclusively subject to Chilean lawandto the jurisdiction of Chilean courts.
Lastly, CODELCO has been advised by Carey y Cía. Ltda. that there is doubt as to the enforceability in original actions in Chilean courts of lia bilities predicated solely upon U.S. federal securities la ws.
The notes, the indenture and the purchase agreement will provide that CODELCO will appoint Cogency Global Inc. in New York City as its agent upon whom process may be served in any action arising out of or based upon, respectively, the notes, the indenture, the purchase agreement orthe transactions contemplated thereby, which may be instituted in any federal or state court having subject matter jurisdiction. See Description of Notes.
Pursuant to the Chilean Mining Code, mining concessions as well as certain raw materials and other property orassets permanently dedicated to the exploration or extraction of minerals cannot be subject to an order of attachment, except with respect to mortgages, in the case that the debtor consents to the attachment in the same enforcement proceeding or when the debtor is a stock corporation. In addition, pursuant to the Chilean constitution (the Constitution), mining concessions corresponding to mining deposits exploited by CODELCO upon its creation in 1976 camnot be subject to attachment norto any act of disposition by CODELCO. Asa result, the rights of holders to attach property of CODELCO in the eventof a default under the notes would be limited by such provisions. See
Regulatory Framework -Mining Regulations.
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PRESENTATION OF FINANCIAL AND STATISTICAL INFORMATION
In this offering memorandum, references to U.S.$, $,U,S. dollars and dollars are to United States dollars andreferences to cents are to United States cents (U.S.$0.01). Referencesto pesos or Ch$ are to Chikan pesos and references to UF are to Unidades de Fomento. References to AUD are to Australian dollars.
References to HKD are to Hong Kong dollars. The UF is an inflation-indexed Chilean monetary unit that is linked to, anda djusted daily to reflect changes in, the Chilean consumer price index duringthepreceding30 days. References to euro orE are to the legal currency of the European Economic and Monetary Union.
Pursuant to Circular No. 368 (Oficio Circular N*368) of October2006, as amended, of the Comisión para el Mercado Financiero (the Chilean securities authority, or CMF), since 2010, all companies with publicly traded securities in Chile have been required to prepare and report consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
The audited consolidated financial statements as ofand forthe years ended December 3 1,2019 and 2020 and the audited consolidated financial statements as of and for the year ended December 31, 2020 and 2021 included herein are referred to as the 2019-2020 Consolidated Financial Statements and the 2020-2021 Consolidated Financial Statements, respectively. The 2019-2020 Consolidated Financial Statements and the 2020-2021 Consolidated Financial Statements (together, the Audited Annual Consolidated Financial Statements) are presented in accordance with IFRS issued by the lASB.
The una udited interim consolidated financial statements as of September 30, 2022 and for the three-month and nine-month periods ended September 30,2022and2021 included herein (the Unaudited Interim Consolidated Financial Statements) are presented in accordance with IAS 34 Interim Financial Reporting. The Unaudited Interim Consolidated Financial Statements and the Audited Annual Consolidated Financial Statements are referred to togetheras the Consolidated Financial Statements.
The accounting policies adopted in the preparation of the Unaudited Interim Consolidated Financial Statements are consistent with those applied in the preparation of the Audited Annual Consolidated Financial Statements.
Unless otherwise indicated, the Consolidated Financial Statements and other financial information concerning CODELCO included herein are presented in U.S. dollars in conformity with Decree Law No. 1,350 of 1976 (Decree Law No. 1,350), published in the Diario Oficial de la República de Chile (the Official Ga zette) on February 28, 1976, as amended by Law No. 20,392 (Law No. 20,392) published in the Official Gazette on November 14, 2009, and for periods after January, 1,2009, in accordance with IFRS. Decree Law No. 1,350 is the Chilean law pursuantto which CODELCO was created and which provides forits governance.
Because the notes offered hereby ha ve not been and will not be registered with the SEC, this offering memorandum does not and is not required to comply with the applicable requirements of the Securities Act, and the related rules and regulations adopted by the SEC, which would apply if the notes offered hereby were being registered with the SEC.
The U.S. dollar is the currency used in the primary economic environment in which CODELCO operates.
Nevertheless, as an international company operating primarily in Chile, as well as in several other Latin American countries, several European countries and China, a portion of CODELCOS*s business is transacted in Chilean pesos and other non-dollar currencies.
The body of generally accepted accounting principles is commonly referred to as GAAP. A non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future financial performance, financial position or cash flows but: (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the issuers statement of income, balance sheet or statement of cash flows (or equivalent statements); or (ii) includes amounts, oris subject to a djustments that have the effect of including amounts, thatare excluded from the most directly comparable measure so calculated and presented.
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In this offering memorandum, CODELCO discloses several non-GAAP financial measures, including Adjusted EBIT,Adjusted EBITDA), cash cost, total costs and expenses and financial debt. Adjusted EBIT is calculated by adding finance cost, impairment charges and income tax expense to profit (loss) for the period.
Adjusted EBITDA is calculated by adding finance cost, income tax expense, depreciation and amortization of assets plus export taxes and impairment charges to profit (loss) for the period. Impairments include charges and reversals related to charges of investment projects, research projects and investmentin associates and joint ventures and exclude impairment charges related to definite-lived tangible assets which show indicators of impairment under Intemational Accounting Standard No. 36. Cash cost is calculated in accordance with the methodology specified by Brook Hunt 82 Associates for the determination of C1 cost (cash cost) and includes all direct cash costs of mining, including costs associated with extraction, leaching, smelting and further processing of copper ores into refined metal, as well as labor, electricity, diesel, finance costs, third -party services, other costs, transportation and physical plant costs associated with those processes, net of income from sales of byproducts. Cash cost is presented as a nominal dollar amount, usually expressed as cents per pound, and excludes provisions, amortization, depreciation and central office costs.
Total cost and expenses includes all cost and expenses that the cash cost calculation includes, plus other non
Under the accounting policies adopted by CODELCO, gross profit is calculated before the provision for a 10% special export tax. Under Law No. 21,174, that repealed Law No. 13,196 (the Copper Reserve Law) CODELCO is required to pa y a special export tax on the sales revenues that CODELCO derives from the export of coppersourced andrelated byproducts produced by CODELCO. Inaddition, CODELCO is subjectto a miningtax at progressive rates of between 5% and 14%in accordance with Law No. 20,026. See Risk Factors-Risks Relating to CODELCOS*s Relationship with the Government of Chile-CODELCO is subject to special taxes for additional information on these special taxes, includingthe miningtax rate effective for 2019,2020,and2021.
Certain figures included in this offering memorandum and in the Consolidated Financial Statements have been rounded for ease of presentation. Percentage figures included in this offering memorandum have in some cases been calculated on the basis of such figures prior to rounding. For this reason, certain percentage amounts in this offering memorandum may vary from those obtained by performin g the same ca lculations using the figures in the Consolidated Financial Statements. Certain other a mounts that appear in this offering memorandum may not sum due to rounding.
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The Observed Exchange Rate (as defined herein under Exchange Rates) reported by the Central Bank of Chile (i) as of January 2,2019 was Ch$694.77 =U.S.$1.00; (ii) as of January 2,2020 was Ch$748.74 =U.S.$ 1.00; (iii) as of January 4, 2021 was Ch$710.95= U.S.$1.00; (iv) as of September 30, 2021 was Ch$803.59 = U.S.$1.00 and (v)as of September 30,2022 was Ch$966.00 =U.S.$1.00. This offering memorandum contains translations of certain Chilean peso amounts into dollars at specified rates solely forthe convenienceofthe reader. These translations should not be construed as representations that the Chilean peso amounts actually represent such dollar amounts or could, at this time, be convertedinto dollars atthe rate indicated. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos. Unless otherwise indicated, such dollar amounts have been converted from Chilean pesos atan exchange rate of Ch$966.00 per U.S.$1.00, which corresponds to the Observed Exchange Rate on September 30, 2022. As of January 30, 2023, the Observed Exchange Rate was Ch$803.14 per U.S.$1.00.
See Exchange Rates.
In this offering memorandum, all tonnage information is expressed in metric tons and all referencesto ounces are to troy ounces, in each case, unless otherwise specified. Except where otherwise noted, tonnage information in this offering memorandum does not include: (1) CODELCOs 49% direct share ofthe El Abra deposit, whichis mined by Sociedad Contractual Minera El Abra and 51% owned by Cyprus El Abra Corporation, a subsidiary of Fre eport- McMoRan Inc., or (ii) CODELCOs 20% share of Anglo American Sur S.A. (Anglo American Sur), unless otherwise specified. See Business and Properties-Copper Production-Associations, Joint Ventures and Partnerships -SCM El Abraand -Anglo American Sur fora description ofthese interests. Certain terms relating to the copper mining business are defined in Glossary of Certain Mining Terms.
Market information regarding CODELCOS*s share of copper production, reserves and relative cost position has been derived by CODELCO from third -party sources, including reports from Wood Mackenzie, and from CODELCO*”s own industry research. Wood Mackenzie publishes periodic reports containing global copper production data and costanalysis by minesite. While CODELCO believesthatits estimates are reliable, such estimates have not been confirmed by independent sources. The Consolidated Financial Statements do not necessarily reflect the value of CODELCOS*s mining concessions or its resources and reserves. Fair value of mining properties acquired through business combinations is reflected in the Consolidated Financial Statements when acquired.
As used in this offering memorandum, Chuquicamata, Radomiro Tomic, Gabriela Mistral El Teniente, Andina, Salvador, Mina Ministro Hales and Ventanas refer to divisions of CODELCO, not the mines having those names, unless otherwise required by context.
SUMMARY
This summary must be read as an introduction to this offering memorandum and any decision to invest in the notes should be basedon a considerationof theoffering memorandum as a whole.
The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this offering memorandum. Except as otherwise disclosed herein or indicated, financial information with respectto CODELCO provided in this offering memorandum has been presented in U.S. dollars and preparedin accordancewithIFRS.
CODELCO is the world’s largest copper producer and one ofthe largest companies in Chile in terms ofrevenues (U.S.$21.0 billion in 2021). As of December 31, 2021, CODELCOSs total assets were U.S.$43.1 billion and equity amounted to U.S.$11.6 billion. As of September 30, 2022, CODELCOSs total assets were U.S.$42.4 billion and equity amounted to U.S.$1 1.8 billion.
CODELCO engages primarily in the exploration, development and extraction of ores bearing copper and byproducts, the processing of ore into refined copper and the international sale of refined copper and byproducts.
CODELCO is 100% owned by the Government of Chile and controls approximately 5.4% of the worlds proved and probable copperreserves, as such terms are defined by the U.S. Geological Survey.
In 2021, CODELCO had an estimated 8.2% share oftotal world copper production, with production amounting to approximately 1.73 million metric tons, including: (1) CODELCO*s share of the El Abra deposit, which is mined by Sociedad Contractual Minera El Abra and owned 49% by CODELCO and 51% by Cyprus El Abra Corporation (a subsidiary of Freeport-McMoRan Inc.); and (ii) CODELCOSs share of Anglo American Sur (of which CODELCO owns a 20% indirect share), andan estimated 7.8% share ofthe worlds molybdenum production, with production amounting to approximately 22,353 metric tons excluding CODELCO*s share of Anglo American Sur.
CODELCOS*s main commercial product is Grade A cathodecopper. In 2021 and forthenine-month period ended September 30,2022, CODELCO derived 93.1% and 90.6% ofits total sales from copperand 6.9% and 9.4% ofits total sales from byproducts ofits copper production, respectively.
CODELCOS>s sales of copperin 202 1 were geographically diversified, with approximately 47.4% of sales made to Asia, including approximately 32.4% to China, as well as approximately 42.1%.to North and South America and 10.4% to Europe. CODELCO*s top ten customers purchased approximately 40.8% ofits total copper sales volumein 2021.
CODELCOSs copper operations are divided into the following eight divisions:
+ TheEl Teniente Division operates the El Teniente mine, which is the world s largest underground copper mineand has been in operation for more than 100 years. The El Teniente Division includes the Caletones smelter. In 2021, this division produced 459,817 metric tons of copper, or 26.6% of CODELCO*s total copper output (including CODELCOSs share of the El Abra deposit and Anglo American Sur), with a cash cost of 108.6 cents per pound, compared to 99.7 cents per pound in 2020, anda total cash cost of U.S.$1,088.3 million in 2021, compared to
U.S.$963.0 million in 2020. During the first nine months 0£ 2022, this division produced 291,090 metric tons of copper with a cash cost of 102.4 cents perpound anda total cash cost ofU.S.$650.9 million.
+ TheRadomiro Tomic Division operates the Radomiro Tomic mine, which began its first full year of production in
1998. In2021, this division produced 326,456 metric tons of copper cathodes, or 18.9% of CODELCO*s total copper output (including CODELCOS”s share of the El Abra deposit and Anglo American Sur), with a cash cost of 138.6 cents per pound, compared to 142.2 cents per pound in 2020, and a total cash cost of U.S.$989.0 million in 2021 compared to U.S.$812.0 million in 2020. Duringthe first nine months of 2022, this division produced 2 15,920 metric tons of copper with a cashcostof 201.5 cents perpoundanda total cash cost of U.S.$950.3 million.
e The Chuquicamata Division operates the Chuquicamata mine, one ofthe largestcopper-producing mines in the world, which began its operations in 1915 and currently includes smelting a nd refining capacities. In 2021, this division produced 319,280 metric tons of copper cathodes, or 18.5% of CODELCO*s total copper output (including
CODELCOSs share of the El Abra deposit and Anglo American Sur), with a cash cost of 116.2 cents per pound, compared to 113.0 cents per pound in 2020, anda total cash cost of U.S.$801.7 million in 2021, compared to
U.S.$975.0 million in 2020. During the first nine months 0£ 2022, this division produced 200,353 metric tons of copper with a cash cost of 120.0 cents perpound anda total cash cost ofU.S.$519.9 million.
The Mina Ministro Hales Division was created in 2010 forthe operation ofthe Mina Ministro Hales orebody, which first began producingcopperat the end of 2013. In 2021, this division produced 181,704 metric tons of copper, or
10.5% of CODELCOS*s total copper output (including CODELCO*s share of the El Abra deposit and Anglo American Sur), with a cash cost 0f89.2 cents perpound, compared to 109.9 cents per pound in 2020, anda total cash cost of U.S.$430.3 million in 202 1, compared to U.S.$399.9 million in 2020. During the first nine months of 2022, this division produced 108,854 metric tons of copper with a cash cost of 1 16.2 cents perpound anda total cash cost ofU.S.$269.6 million.
The Andina Division operates the Andina and Sur-Sur mines with production split among open -pit and underground mines. It does not have independent smelting capacity. Andina has been in operation since 1970. In 2021, this division produced 177,216 metric tons of copper, or 10.3% of CODELCO total copper output (including CODELCOSs share of the El Abra deposit and Anglo American Sur), with a cash cost of 154.9 cents per pound, compared to 152.9 cents per pound in 2020, anda total cash cost of U.S.$584.6 million in 2021, compared to
U.S.$600.4 million in 2020. During the first nine months of 2022, this division produced 139,805 metric tons of copper with a cash cost of 172.2 cents perpound anda total cash cost ofU.S.$512.8 million.
The Gabriela Mistral Division was created in 2013 and operates the Gabriela Mistral mine, which uses SX-EW technology. The Gabriela Mistral mine produced its first copper cathodes in 2008 after a 26-month construction period. In 2021, this division produced 100,908 metric tons of copper, or 5.8% of CODELCO*s total copper output (including CODELCO’s share of the El Abra deposit and Anglo American Sur), with a cash cost of 193.4 centsper pound, compared to 189.0 cents perpound in 2020, anda total cash costofU.S.$430.3 million in 2021, compared to
U.S.$425.4 million in 2020. Duringthe first nine months 0£2022, this division produced 84,224 metric tons ofcopper with a cash cost 0f£265.4 cents perpound and a total cash costof U.S.$492.8 million.
The Salvador Division operates the Salvador mineand concentrator and the smelterrefinery complex at Potrerillos, which has the capacity to treat 671,000 metric tons of concentrate. In 2021, this division produced 52,885 metric tons of copper cathodes, or3.1% of CODELCO*s total copper output (including CODELCO*s share of the El Abra deposit and Anglo American Sur), with a cash cost 0£268.0 cents perpound, compared to 214.6 cents per pound in 2020, and atotal cash cost ofU.S.$3 11.4 million in 202 1, compared to U.S.$265.0 million in 2020. During the first nine months 0£2022, this division produced 21,867 metric tons ofcopper with a cash costof 354.6 cents perpound and a total cash cost of U.S.$169.1 million. As of the date of this offering memorandum, the Inca Pit projectis still under construction. The Potrerillos smelter and refinery would continueto operateupon any cessation ofthe mining operations atSalvador.
The Ventanas Division was created in connection with the acquisition ofthe Ventanas smelterrefinery compkx from
Chiles state-owned mining company Empresa Nacional de Minería (ENAMP) in 2005. In 2021, this division refined 400,000 metric tons of copper, compared to 402,000 metric tons of copper in 2020. During the first nine months o£2022, the Ventanas Division refined 285,800 metric tonsofcopper. Pursuantto theterms ofthe acquisition, CODELCO is required to provide on market terms thenecessary smelting and refining capacity for the treatment of copper concentrate delivered by the small- and medium-sized mining industry that ENAMI serves. In June 2022, CODELCO’s Board of Directors approved the decommissioning of the smelter in the Ventanas Division. In
December 2022, a law amendment was approved in Congress allowing CODELCO to smelt copper concentrates in smelters other than those of the Ventanas Division. In January 2023, the Mining and Energy Commission of the
Upper House approved the articles particular to the bill, setting definitions regarding the future installation of the new smelting ca pacity, and its compatibility with environmental sa fety and the protection of people’s health, among others. The bill was approved by the Senate on January 24, 2023. The billis currently in the Chamber of Deputies forits third constitutionalprocess. As of September 30,2022, the Ventanas Division employed 769 persons.
The Chuquicamata Division, the Radomiro Tomic Division, the Mina Ministro Hales Division, the Ga briela Mistral Division and the Salvador Division form part of CODELCO*”s Northern Operations (Operaciones Norte). The
Andina Division, the El Teniente Division and the Ventanas Division form part of CODELCOs Central Southem Operations (Operaciones Centro Sur). For a description of CODELCOS*s associations with other companies, see
Business and Properties -Copper Production-Associations, Joint Ventures and Partnerships.
Competitive Strengths
CODELCO believes thatit has certain distinguishing competitive strengths:
Copper Reserves. CODELCO controls approximately 5.4% of the worlds proved and probable copper reserves. In 2021,CODELCO>s proved and probable reserves represented atleast 27 years of futureproduction at current levels.
Market Presence. CODELCO is the largest copper producer in the world, with an estimated 8.2% share of the total world copper production and 1.73 million metric tons (including CODELCOS*s share of the El Abra deposit and Anglo American Sur) of production in 2021. CODELCO is also one of the largest producers of molybdenum in the world, with an estimated 7.8% share of total world molybdenum production, producing 21,045 metric tons in 2021 (excluding CODELCOS*s share of Anglo American Sur). CODELCO believes that its significant market presence gives the Company certain advantages in the marketing of its products.
Research and Technological Innovation. CODELCO remains competitive by developing and incorporating new technologies into its production processes, which aim to improve overall operations, including mining processes, efficiency, productivity, environmental protection and worker sa fety.
Stable, Long-term and Geographically Diverse Customer Base. CODELCO has developed long-term relationships with the majority of its customers, includingsomeof the lea ding manufacturers in the world.
Financial Strength. In 2021, CODELCO’s Adjusted EBITDA amounted to U.S.$10.4 billion, total debt to capitalizationas of December 3 1,2021 was 54.8%, and the ratio ofnet financial debt to Adjusted EBITDA was 1.6.
As of September 30, 2022, CODELCO’s Adjusted EBITDA amounted to U.S.$4.7 billion and total debt to capitalizationas of September 30,2022 was 53.5%.
Management Efficiency and Flexibility. CODELCO believes that it has a highly experienced workforce and executive team with a proven track record of managing long-life copper reserves that is able to respond to market changes by adjusting the allocation of its resources and operations among several different methods of production and ore deposits.
One of the Leading Companies in Chile. CODELCO is one of the largestcompanies in Chile in terms ofrevenues as of December 3 1,2021 (U.S.$21.0 billion) and isa key contributorto the budget ofthe Government of Chile. In 2021, CODELCO contributed U.S.$5.5 billion to the Chilean Treasury and accounted for approximately 16.6% of Chile’s total exports. See Management’s Discussion and Analysis of Financial Condition and Results of Opera tions- Liquidity and Capital Resources -Distributions to the Chilean Treasury and Regulatory Framework.
Business Strategy
CODELCO mission is to maximize the value of its mineral resources for the benefit of its shareholder, the
Chilean state, by fully developing its vast mining resources on a timely basis, leveraging the Companys experienced workforce, utilizingits advanced technological assets in key areas and by executing the following key strategic initiatives:
Capital Expenditure Program. We seek to maintain and improve our competitive position in the industry through ourthree-year ca pital expenditure program. Followingthe completion of a number of significant projects in recent years, such as the development of CODELCOs new Mina Ministro Hales, the development of sulfide ores at the Radomiro Tomic mine, the expansion at the Andina mine and the development of the Pilar Norte area at the El Teniente mine, CODELCO intends to continue its development program. Accordingly, the Company expects to make capital expenditures of approximately U.S.$13.4 billion between 2022 and 2024, transforming its main mining operations with a view towards the long-term development of its resources. We expect these expenditures to be funded with a combination of internal and external resources. For a complete list of planned capital expenditures, see Business and Properties-Copper Production-Operations. CODELCO”s expansion and development of major projects between 2022 and 2024 are expected to include: o The gradual transformation of the Chuquicamata mine from an open pit mine to an underground operation, which we expect will ena ble Chuquicamata to maintain its annual copper production atits current level starting in 2019 (an approximate investment of U.S.$1.3 billion between 2022 and 2024). Environmental approvals were obtained in September 2010. On March 25, 2020 and on June 20, 2020, CODELCO announced the temporary suspension of construction ofthis projectas a measureto prevent the spread ofCOVID-19 among employees and contractors. In August 2020, work on the project gradually resumed. In March 2021, the projects design incorporated additional fortification work. Theprojectwas completed in September 2022.
o The reallocation of the Andina plant, which involves maintaining the treatment capacity of the concentrator plant in the long-term (an approximate investment of U.S.$64.0 million between 2022 and 2024). In March 2020, CODELCO announced the temporary suspension of this project as a measure to prevent the spread of COVID-19 among employees and contractors. The new primary crusher plant began operation in the first quarter of 2022. The project is currently under review and the conveyor system should begin operations in late 2023.
o The development of a new production level in the existing El Teniente underground mine (an approximate investment of U.S.$2.0 billion between 2022 and 2024) to maintain El Tenientes annual copper production at its current level. Environmental appro vals were obtained in March 201 1. However, based on geomechanical challenges that needto be addressed, an alternative development plan was approved in January 2018, which will still permit us to maintain our original production goal. Thenew mining level is expected to be completed in 2023. As of September 30, 2022, the project was approximately 75.9% complete.
o The development of the Inca Pit project is designed to extend the life of the current underground mine operation in the Salvador Division and enable it to maintain its annual production at its current level starting in 2021 andthe analysis fora future expansion, which requires an ap proximate investmentof U.S.$1.1 billion between 2022 and 2024. As of September 30,2022, the project was approximately 37.8% complete. As of the date of this offering memorandum, the Inca Pit project is still under construction.
Focus on curbing production costs. For many years, CODELCO was within the first or second quartiles in the industry with respectto costs. This position was primarily attributable to the quality of its ore bodies, its economies of scale and the experience of its workforce and management. Currently, CODELCO is in the third quartile of the industry?s costcurve. The Company intendsto make every effort, through investment and management, to be within the first or second quartiles of the industrys cost curve in the long-term. In 2021, CODELCOSs total costs and expenses increased by 12.5 cents perpound (5.2%) to 254.3 cents per pound, compared to 241.8 cents per pound in 2020 and 233.5 cents perpound in 2019, mainly due to higher production volume and sales and higher input prices, partially offset by foreign exchange rate depreciation of the Chilean peso against the US dollar. For the first nine months 0£2022, CODELCOSs total costsand expenses increased by 35.1 cents per pound (14.4%) to 278.7 cents per pound, compared to 243.6 cents perpound forthe same period in 202 1, mainly due to higher input prices, such as electricity and diesel, appreciation ofthe Chilean peso against the U.S. Dollar and negative foreign exchange difference on lia bilities denominated in Chilean peso. In 2021, CODELCO*s total costs and expenses increased to
U.S.$9.6 billion, compared to U.S.$8.6 billion in 2020, due to higher production volume, partially offset by the depreciation of the Chileanpeso against the U.S. dollar. In 2020, CODELCO’stotal costs and expenses increased to U.S.$8.6 billion, from U.S.$8.2 billion in 2019, dueto higher inputprices and the depreciation of the Chileanpeso.
Forthe first nine months of2022, CODELCO*s total costs and expenses amounted to U.S.$6.5 billion, compared to
U.S.$6.4 billion for the same period in 2021. In 2021, CODELCOSs cash cost of production was 132.7 cents per pound, comparedto 129.4 cents perpound in 2020 and 141.6 cents perpound in 2019. Forthe first nine months of 2022, CODELCOSs cash cost of production was 157.4 cents perpound, compared to 129.9 cents perpound for the same period in 2021. In 2021, CODELCOSS total cash cost was U.S.$4.7 billion, compared to U.S.$4.5 billion n 2020 and U.S.$4.9 billion in 2019. For the first nine months of 2022, CODELCOS*s total cash cost was U.S.$3.6 billion, as compared to U.S.$3.3 billion for the same period in 202 1 (suchtotal cash cost includes certain cash cost incurred at thecorporate level). See Management’s Discussion and Analysis of Financial Condition and Results of Operations-Overview.
e Improvement in Operations. A number of improvement initiatives are underway to adopt best industry practices, most notably in the areas of labor productivity, asset utilizationratesand processefficiency. Together with its capital expenditure program, these initiatives are expected to enhance CODELCOs competitive position. The Company operates in a cyclical business and CODELCO strategy is to ensure that it is able to take full advantage of high copper prices. The Company is developing a number of plans to achieve production targets in the coming years.
These plans mainly focus on reducingthe risk of disruptions to production and providing increased flexibility to its operations.
e Exploration Efforts. CODELCO controls the largest copper reserves worldwide, the Companys single most important long-term competitive advantage. The discovery of new mining resources and improving its ability to locate existing ore bodies and prospects are critical to maintain this preeminentposition in the industry. Accordingly, the Company’s exploration program will continueto be a key part ofits business strategy.
e Investmentin Human Capital. The successful execution of CODELCOS*s business strategy relies on attracting and retaining a world -class management team and professionals of thehighest caliber, as well as promotinga culture of diversity and inclusion. The mining industry faces increased competition for workforce talent. As a result, the Company intends to continue improving career development opportunities forits sta ffand the overall a ttractiveness of CODELCO asa preferred employer.
e Mining Association with Third Parties. CODELCO seeks to continue to develop and operate assets in association with third parties where these associations will add value to CODELCO”s business. A few examples of the Companys willingness and ability to do so are: (i) the association with Freeport-McMoRan Inc. in the El Abra copper mine (CODELCO owns 49%) and (ii) the association with Anglo American ple (Anglo American), Mitsui $ Co., Ltd. (Mitsui) and Mitsubishi Corporation (Mitsubishi Corporation) in Anglo American Sur(CODELCO owns an indirect 20% interest). CODELCO believes its large mining reserve is a strong platform from which to establish such associations.
e Sustainability is an integral partof our strategy. CODELCO has set ambitious sustainability targets, which it hopes to reach by December 2030. The targets include: (1) 70% reduction of greenhouse gas emissions from 20 19 levels; (ii) 60% reduction ofunitary continental water consumption from 201 9 levels; (iii) recycling 65% of industrial waste; (iv) implement online monitoring and infiltration control systems to all Tailing Storage Facilities; (v) increase by 60% the goods and servicesprovided by local suppliers from 2019 levels; and (vi)reduceby 25% particulate matter emissions from 202 1 levels.
Recent Developments
The Chilean Constitution
On July 4, 2021, Chile started the process of draftinga new Constitution bya Constitutional Convention. In September2022, the concrete proposal for the new Constitution was rejected in a national exit referendum. On December 12,2022, the vastmajority ofthe political forces represented in the Chilean parliament subscribed a documenttitled Acuerdo por Chile (Agreementfor Chile). This documentconstitutes a new consensus anda starting point to begin dra ftinga new Constitution.
On January 17,2023, Law No. 21,533 was published in the Official Gazette of Chile, setting forththe procedure fortheela boration and approval of the new Constitution. Law No.21,533 contains 12 fundamental principles and criteria forthe drafting ofthe potential new Constitution. It also provides foran Experts* Commission of 24 members to be appointed bythe Chilean Congress, in proportion to the current political forces and parties represented in Congress, to be in charge of preparing a pre-draftof a constitutional text. This pre-draft will be subject to the discussion of a Constitutional Council (Consejo Constitucional) to be elected on May 7,2023 applyingtherules forthe election ofmembers of the Senate. There will be also a Committee on Technical Admissibility (Comité Técnico de Admisibilidad), also appointed by the Chilean Congress, composed of 14 members, that willresolve any requests against any provisions ofthe pre-draft Constitution approved by the Experts Commission, orthe draft approved by the Constitutional Council on the grounds of contradictingthe 12 fundamental principles and criteria mentioned above.
The proposed new Constitution shall be submitted for appro val or rejection in a referendum to beheld on December 17,
2023.The process of draftinga new Constitution is ongoingand thenew Constitution, if approved, may have animpact on natural resources, la bor and social security legisla tion, among other matters, which in turn may have effects onour business, financial condition orresults of operations, that, asof the date of this offering memorandum, we cannot anticipate.
Loan Agreement
CODELCO is currently negotiatinga U.S.$500.0 million 10-year loan with Export Development Canada (EDC), which is expected to be entered into within a few weeks followingthe date ofthis offering memorandum.
Theterms of theloanareexpected to be similarto those in other CODELCO-EDC loans. See Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.
Appointment of New Executives
On January 26, 2021, CODELCO amnounced the resignation of Rodrigo Cerda Norambuena from his position as Directorof CODELCO.
On January 29, 2021, CODELCO announced the appointment of Raúl Alejandro Puerto Mendoza as General Auditoreffective on March 11,2021.
On February 18,2021, CODELCO announced organizational a djustments, consistingof the elimination of the Vice Presidency of Productivity and Costs, distributing its functions across other areas of the corporation. In consideration of the above, CODELCO announced the appointment of Mauricio Acuña Sapunar as Vice President of Supply, a new departmentreportingto the Executive President, effectiveon April 5,2021.
On March 31, 2021, CODELCO announced the appointment of Felipe Larraín Bascuñán as Director of CODELCO.
On May 10,202 1, CODELCO announced the appointmentof Patricia Núñez Figueroa and Pedro Pablo Errázuriz Domínguezas Directors of CODELCO.
On May 14, 2021, CODELCO announced the appointment of Marco Bastías Villablanca as Vice President of Projects, effectiveon October 1,2021.
On March 10,2022, CODELCO announced theresignation of Juan Benavides from his position as President of the Boardof Directors and Director of CODELCO, effective on March 11,2022
On March 31, 2022, CODELCO announced the appointment of Maximo Pacheco Matte as President of the Board of Directors, effective on March3 1,2022.
On March 31, 2022, CODELCO announced the appointment of Josefina Montenegro Araneda as Director, effective on May 1 1,2022.
On May 20, 2022, CODELCO announced the resignation of Renato Fernández Baeza as Vice President of Corporate Affairs € Sustainability and Marcelo Alvarez Jara as Vice President of Human Resources, effective on September 30,2022.
On May 23, 2022, CODELCO announced the appointment of Alejandra Wood Huidobro and Nelson Cáceres Hernándezas Directors.
On July 12, 2022, CODELCO announced the resignation of Rodrigo Barrera Páez as General Manager of the Andina Division effective on July 12, 2022. In consideration of the above, CODELCO announced the appointment of Roberto Pastén Jeraldo as acting General Manager ofthe Andina Division.
On August 26, 2022, CODELCO announced the appointment of Mary Carmen Llano Aranzasti as Vice President of Human Resources, effective on October 0 1,2022.
On August 26, 2022, CODELCO announced the resignation ofOctavio Araneda as Chief Executive Officer and Executive President. In consideration of the above, CODELCO announced the appointment of André Souganret
Larroquete asChief Executive Officerand Executive President, effective on August29,2022.
On September 28, 2022, CODELCO announced the resignation of Lorena Ferreiro Vidal as General Counsel, effective on September28, 2022. In consideration ofthe above, CODELCO amnounced the appointmentof María Susana Rioseco Zorn as General Counsel.
On September 30,2022, CODELCO announced thea ppointmentof Nicolás Rivera Rodríguezas Vice President Northern Operations, Christian Ca viedes Núñez as General Manager of the Chuquicamata Division, Lindor Quiroga Bugueñoas General Manager of the Andina Division and Julio Díaz Rivera as General Manager of the Radomiro Tomic Division, effective on October 0 1,2022.
On November 16, 2022, CODELCO amnounced the resignation of Marcos Bastías Villa blanca as Vice President of Projects effective on November 30, 2022. In consideration of the above, CODELCO announced the appointment of Francisco Carrasco Jerez as acting Vice President of Projects from December 01, 2022 to December 11, 2022 and the appointment of Julio Cuevas Ross as Vice President of Projects, effective on December 12, 2022.
On December05, 2022, CODELCO announced the appointmentof Nicole Porcile Yanineas Vice Presidentof Corporate Affairs $: Susta inability, effective on December 12, 2022.
Corporate Information
CODELCOSs principal executive offices are located at Huérfanos 1270, Santiago, Chile, postal code 8340424, and its telephone number is (562) 2690-3000. CODELCO was established by Decree Law No. 1,350, published in the Official Gazette on February 28, 1976, as amended by Law No. 20,392, published in the Official Ga zette on November 14,
2009.
The Offering [SOT coccionicnninnnnnnconncnnconrnnnconcnnrnoncorrcno carro carrrarrarcarrarararrarnarraarzar Corporación Nacional del Cobre de Chile.
Securities OffCr O ..occconcciinnaconunnonnnonenrnnrsrnsscascisrecis 5’U.S.$900,000,000 aggregate principal amount of
5.125% notes due2033 (the notes).
Issue PliCO coococininnninnoconinnonnncnnocoo cin cononincnnoniocancarcaranarrarcanarariaranirra TO issue price of the notes is 99.938%, plus accrued interest, ifany, from February 2,2023.
Issue DatO ooccocnccnnnncnnnnnnonncnonconncnnconcnnnrscecrsnranrarcmscss February2,2023.
A AA
The interest on the notes will be payable semi-annually in arrears on February 2 and August 2 of each year, beginning on August 2, 2023.
Interest on the notes will be calculated on the basis ofa 360-day year of twelve 30-day months. See Description of Notes.
Maturity Dat coccion February 2,2033.
Withholding TaX..ococncinnninonrsrrrrrrrrrs Interest will be paid after withholding for or on account of certain taxes imposed by Chile. Under current Chilean law and regulations, payments of interest to holders of thenotes thatare not residents of Chile for purposes of Chilean taxation will generally be subject to Chilean withholdingtax ata rate of 4%. Subject to specified exceptions and limitations, CODELCO will pay Additional Amounts (as defined in Description of Notes- Payment of Additional Amounts) in respect of such withholding tax on interest payments. See Description of Notes-Payment of Additional Amounts and Taxation-Chilean Taxation.
Tax RedemptiON .ccococinnonnonnooninnoccnnsnnnnornnnnarcnnnasrnnanarinarsecnaciea The notes are redeemable at the option of CODELCO in whole, but not in part, atany time at the principal amount thereof, plus accrued and unpaid interest and any Additional Amounts due thereon if, as a result of a change in the laws or regulations affecting Chilean taxation that is announced or becomes effective onora fterthe date of the agreement to purchasethenotes, CODELCO becomes obligated to pay Additional Amounts on interest payments on the notes in respect of withholding or deduction of Chilean taxat a ratein excess of 4%. See Description of Notes-Tax Redemption, Taxation-Chilean Taxation and Risk Factors-Risks Relatingto the Offering.
Optional RedemptiON coccion
Form and Denominati0N ..ccciccinconinninninninncnnonncnconinn coronan coninncnannnons
Payments; TraMSÍeIS cococininnnnnnnnncnerecacererrrnrcnns
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We may redeem thenotes atour option, in whole or in part, at any time and from time to time prior to the date that is three months prior to the maturity date of the notes, ata redemption price equal to the greaterof 100% ofthe outstanding principal amount of the notesto be redeemed anda redemption price based on a make-whole premium, plus accmed and unpaid interestto thedate of redemption.
In addition, we may redeem the notes atour option, in whole or in part, at any time and from time to time, beginning on the date that is three months prior to the maturity date of the notes, at a redemption price equalto 100% of the outstanding principal amount of the notes to be redeemed, plus accrued and unpaid interest to the date of redemption. See Description of Notes-Optional Redemption and Risk Factors -Risks Relating to the Offering.
The notes will be issued in book -entry form only in denominations of U.S.$200,000 and integral multiples ofU.S.$1,000 in excess thereof. Thenotes will be represented by one or more global notes (the Global Notes) registered in the name of a nominee of DTC, as depositary, forthe accountsof its direct and indirect participants, including Euroclear, as operator of the Euroclear system, and Clearstream. See Description of Notes.
Payment of interest and principal amount with respect to interests in Global Notes will be credited by DTC, Euroclear or Clearstream, as the case may be, to the account of the holders of such interests with DTC, Euroclear or Clearstream, as the case may be. Transfers of interests in notes held through DTC, Euroclear or Clearstream will be conducted in accordance with the rules and operating procedures ofthe relevantsystem. There willbe a paying agent.
The notes will constitute direct, general, unconditional and unsubordinated obligations of CODELCO. The notes rank and will rank without any preference among themselves and equally with allotherunsubordinated obliga tions of CODELCO, other than certain obliga tions granted preferential treatment pursuant to Chilean law. It is understood that this provision will not be construed so as to require CODELCO to make payments under the notes ratably with payments being made under any other obliga tions.
¡A
Transfer Restrictions
Further [ssues..
Goveming La w;, Submission to JurisdictiOM…..ccoinininimm..
10
The indenture governing the notes will not contain any restrictions on the amount of additional indebtedness which may beincurred by CODELCO or its subsidiaries; however, as set forth under Description of Notes-Covenants-Limitation on Liens, the notes will contain certain restrictions on the ability of CODELCO and its subsidiaries to incur secured indebtedness. See Description of Notes.
The indenture govemning the notes will contain certain covenants, including, but not limited to, covenants with respect to (i) limitations on liens, (ii) limitations on sale-and-lease-back tra nsactions and (ii) limitations regarding consolidation, merger, conveyance, sale or lease transactions. See Description of Notes-Covenants-Limitation on Liens, -Limitation on Sale-and-Lease-Back Transactions and -Consolidation, Merger, Conveyance, Sale or Lease.
The notes have not been and will not be registered under the Securities Act and are subject to restrictions on resales. See Transfer Restrictions.
In accordance with the terms of the indenture, CODELCO mayissue additional notes of the same series as the notes offered hereby ata future date.
See Description of Notes-Further Issues of Notes. The notes offered hereby and any additional notes of this series will be treated as a single fungible series forall purposes underthe indenture.
We intend to apply to list the notes on the Official List of the Luxembourg Stock Exchange and for trading onthe Euro MTF market ofthe Luxembourg Stock Exchange; however, the notes have not yet been listed.
The notes and the indenture will be governed by the laws of the State of New York. CODELCO will submit to the jurisdiction of the United States federal and state courts located in the Borough of Manhattan in the City of New York in respect of any action arising out of or based on the notes or the indenture. See Description of Notes-Goveming Law; Submission to Jurisdiction; Sovereign Immunity.
Expected RatidBS..ccicinnonincerreeeans
IS
Trustee, Paying Agent, Transfer Agent and Registrar
Luxembourg Listing Agent…
Risk FactOlS coccion
11
The notes offered hereby will be assigned a rating by Moody’s Investors Service, Inc. (Moody’s) and by Standard £ Poor’s rating group (SézP).
CODELCO currently has a foreign currency long-term debt rating by Moody’s of A3 (stabk) and a long-term foreign issuer credit ra ting by SézP of A (stable). A securities rating is not a recommendation to buy, sell or hold securities, is subject torevision or withdrawal at any time by the assigning rating organization and should be evaluated independently ofany otherrating.
We intend to use the net proceeds from the sale of the notes for general corporate purposes.
The Bank of New York Mellon The Bank of New York Mellon SANV,
Luxembourg Branch
Before investing, you should carefully consider the risks set forth under Risk Factors beginning on page 16 of this offering memorandum.
SUMMARY CONSOLIDATED FINANCIAL DATA
The following ta bles present CODELCOs summary consolidated financial data and other data as ofand for each of the periods indicated. This data (otherthan theaverage London Metal Exchange (LME) copper prices) is derived from, and should be read together with, CODELCO”s Consolidated Financial Statements, includingthe notes thereto, included elsewhere in this offering memorandum. This data should also be read together with Managements Discussion and Analysis of Financial Condition and Results of Operations. The Consolidated Financial Statements and other financial information included in this offering memorandum are presented in accordance with IFRS. The unaudited results of operations forthe nine-month periods ended September 30,2021 and 2022 are not necessarily indicative of the results to be expected forthe full year orany other period.
For the nine-month periods ended
For the year ended December 31, September 30, 2019 2020 2021 2021 2022 (in thousands of U.S.$)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Revenue… 12,524,931 14,173,168 21,024,815 14,868,179 11,879,784 Cost of sales’. (10,051,441) (10,565,179) (12,185,688) (8,822,621) (8,340,192) Gross profit . 2,473,490 3,607,989 8,839,127 6,045,558 3,539,592 Other iMCoME …cccccoooocncnononnnonononocnnononannnoón 360,690 97,321 115,741 83,337 39,476 Impairment losses andor reversal of impairment losses determined in accordance with IFRS 9 378 (206) (1,250) (9) (1,182) Distribution co: (17,069) (9,463) (9,389) (7,429) (10,353) Administrative expenses ..oooooocccooncnonnninnanos (409,234) (397,045) (459,278) (322,012) (374,634) Other expenses, by function. (1,747,838) (1,456,821) (2,717,007) (1,748,250) (1,305,710) Other gains……….. 22,672 30,425 37,531 24,032 22,415 Finance income 36,871 40,213 13,657 10,086 29,600 Finance costs .. (479,307) (742,464) (641,009) (448,789) (424,459) Share of profit of associates and joint ventures accounted for using equity method…………… 13.203 39,436 414,845 305,607 53,391 Foreign exchange differences ….ooocconoccocnnnos 153.917 (165,501) 313,736 254,932 129,728 Profit (loss) before tax 407,773 1,043,884 5,906,704 4,197,063 1,697,864 Income tax expense’ (393,245) (787,003) 3,855,336 (2,690,160) (1,206,688) Profit (loss) for the period…….oococciooonnccnoo: 14,528 256,881 2,051,368 1,506,903 491,176 Profit (loss) attributable to owners of the
Pare… 6.637 242,993 1,942,486 1,425,934 471,660 Profit (loss) attributable to non-controlling 80.960 19.516 interestS ………… 7.891 13.888 108,882 > ” Profit (loss) for the period. 14,528 256.881 2,051,368 1,506,903 491,176
As of December 31
2019 2020 2021 As of September 30, 2022
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in thousands of U.S.$) Total CUITENt ASSOÉS conocia 6,050,021 7,758,122 7,801,909 6,509,202 Total property, plant and equipment………… 29,700,164 30,012,945 30,811,432 31,504,559 Investments accounted for using equity method’ 3,483,523 3,418,958 3,546,011 3,534,431 Non-current receivables . 98,544 93,986 104,177 80,220 All other ass coccion 1,012,359 926,375 793,906 784,692 Total assets….. 40,344,611 42,210,386 43,057,435 42,413,104 Total current liabilities 3,922,957 3,439,907 3,938,877 2,674,075 Total non-current liabilitie 24,786,987 27,143,988 27,543,657 27,964,255 Total liabilities…. o 28,709,944 30,583,895 31,482,534 30,638,330 Non-controlling interestS ooo. 919,757 924,942 946,412 919,222 Equity attributable to owners of the parent….. 10,714,910 10,701,549 10,628,489 10,855,552
12
Total equity.
11 634,667 11,626,491, 11574901, 11,774,774,
Total liabilities and equity ….ooooonnonnoccninnnos 40,344,611 42,210,386 43,057,435 42,413,104
As of and for the nine-month period ended As ofand for the year ended December 31, September 30, 2019 2020 2021 2021 2022 (in thousands of U.S.S, except ratios and copper prices)
OTHER ITEMS Depreciation and amortization of ES 2,220,069 2,455,070 2,259,324 1,636,784 1,640,339 Interest expense, MOt..oooonnicicncno (442,436) (702,251) (627,352) (438,703) (394,859) Ratio of earnings to fixed charges (adjusted) O mo. 1.9 2.4 16.2 16.6 11.1 Average LME copper price (U.S. £ per pound) … 272.1 280.3 422.6 416.8 411.1 Adjusted EBITDA’…. 4,042,748 5,289,081 10,378,724 7,426,425 4,697,217 Ratio of debt to Adjusted EBITDAO Linciicinninicicioninicnino 4.3 3.4 1.7 N.A N.A Adjusted EBITDA coverage TAO ccccccacanncnnnnnnnnnnnronono 9.1 7.5 16.5 16.9 11.9
(1) Cost of sales for any period includes direct and indirect costs, depreciation and amortization associated with the production of copper and byproducts, as well as purchase costs of third-party copper, sold by CODELCO in that period.
(Q) Other expenses is comprised principally of costs related to the 10% special export tax paid by the Company, retirement plan and severance indemnities and fixed indirect costs below production level. See note 22.b of the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(3) CODELCO is subject to a mining tax on operating income at progressive rates of between 5% and 14%. The tax is imposed on operating income generated during the operating year. The statutory rate of the mining tax for CODELCO was 5.0% for each year between 2018 and 2020. In addition, CODELCO is subject to the corporate income tax rate of 25% since 2017 (pursuant to the tax reform in 2014) and a 40% tax on net earnings applicable to state-owned enterprises as specified by Decree Law No. 2,398, Article 2. See Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Distributions to the Chilean Treasury for additional information. See note 5 of the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results ofOperations-Liquidity and Capital Resources -Distributions to the Chilean Treasury and Regulatory Framework. See also Risk Factors- Risks Relating to CODELCO’s Relationship with the Government of Chile-CODELCO is subject to special taxes for information regarding the mining tax rate effective in 2016.
(4) Seenote 9 ofthe Consolidated Financial Statements and the Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(5) All other assets includes other non-current financial assets, other non-current non-financial assets, accounts receivable from related parties, non- current, non-current inventories, intangible assets other than goodwill, investment property, non-current tax assets and deferred tax assets.
(6) Forthe purpose of calculating CODELCOS*s ratio of earnings to fixed charges (adjusted), (i) earnings consist of Adjusted EBIT and (ii) fixed
(0)
(8) charges consist of finance cost. The ratio of eamings to fixed charges (adjusted) is calculated by dividing Adjusted EBIT by finance cost.
Adjusted EBIT is calculated by adding finance cost, impairment charges net of reversals (as defined in note (1) of the following table) and income tax expense to profit (loss) for the period. Adjusted EBIT, while not a financial performance measure under IFRS, is presented as an indicator of funds available to service debt. Adjusted EBIT and Adjusted EBITDA data are included in this offering memorandum because such data are used by investors to assess: (i) the operating trends and financial performance of the Company and (ii) the ability of the Company to (a) service its existing debt, (b) incur new debt and (c) fund its capital expenditures. The Company believes that Adjusted EBIT, while providing useful information, should not be considered in isolation as a substitute for profit for the period, as an indicator of operating performance, oras an alternative to cash flow as a measure of liquidity. Additionally, the Companys calculation of Adjusted EBIT may be different than the calculation used by other companies and therefore, comparability may be affected. See notes 8, 20 and 23 of the Consolidated Financial Statements and Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information about impairment charges and reversals and other non-cash charges.
Average price on the LME for Grade A cathode copper during period.
Adjusted EBITDA is calculated by adding finance cost, income tax expense, depreciation and amortization of assets plus export taxes and impairment charges net of reversals (as defined in note (1) of the following table) to profit (loss) for the period. Adjusted EBITDA is presented because itis a widely accepted indicator of funds available to service debt, although it is not an IFRS -based measure of liquidity or performance.
Adjusted EBIT and Adjusted EBITDA data are included in this offering memorandum because such data are used by investors to assess: (i) the operating trends and financial performance of the Company and (ii) the ability of the Company to (a) service its existing debt, (b) incur new debt and (c) fund its capital expenditures. The Company believes that Adjusted EBITDA, while providing useful information, should not be considered in isolation or as a substitute for profit as an indicator of operating performance, or as an alternative to cash flow as a measure of liquidity.
Additionally, the Company’s calculation of Adjusted EBITDA may be different than the calculation used by other companies and therefore, comparability may be affected. See notes 8, 20 and 23 of the Consolidated Financial Statements and Unaudited Interim Consolidated Financial
13
(9)
(10)
Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information about impairment charges and reversals and other non-cash charges.
The ratio of debt to Adjusted EBITDA is calculated by dividing debt by Adjusted EBITDA. Debt is defined as loans from financial institutions plus bonds issued.
Adjusted EBITDA coverage ratio is the ratio of Adjusted EBITDA to finance cost net of finance income. See note 8 above for further information about Adjusted EBITDA and notes 20 and 23 of the Consolidated Financial Statements and Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information about impairment charges and reversals and other non-cash charges.
The following ta ble shows CODELCO*s earnings, Adjusted EBIT, ratio of earnings to fixed charges (a djusted),
Adjusted EBITDA andreconciliation of Adjusted EBIT and Adjusted EBITDA fortheperiods indicated.
For the nine-month periodended
For the year ended December 31, September 30,
2019 2020 2021 2021 2022 (in thousands of U.S.$)
Profit (loss) for the period……..oooo.o…..
14,528 256,881 2,051,368 1,506,903 491,176 Income tax exXpense ..occoooooconononnccnonono
393,245 787,003 3,855,336 2,690,160 1,206,688 Finance costs. 479,307 742,464 641,009 448,789 424,459 Impairments’? – – – – – Adjusted EBITO 887,080 1,786,348 6,547,713 4,645,852 2,122,323 Ratio of earnings to fixed charges : a (adjusted)? 1.9 2.4 16.2 16.6 1.1 Depreciation and amortization of assets'” 2,220,069 2,455,070 2,259,324 1,636,784 1,640,339 Copper Reservo Law! 935,599 1,047,663 1,571,687 1,143,789 934,555 Adjusted EBITDA 4,042,748 5,289,081 10,378,724 7.426.425 4,697,217
(1)
2)
6)
(4)
(5)
Impairments include charges and reversals related to charges of investment projects, research projects and investment in associates and joint ventures and exclude impairment charges related to definite-lived tangible assets which show indicators of impairment under International Accounting Standard No. 36. See notes 8, 20 and 23 of the Consolidated Financial Statements and Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information about impairment charges and reversals and other non-cash charges.
Adjusted EBIT is calculated by adding finance cost, impairment charges net of reversals (as defined in note (1) above) and income tax expense to profit (loss) for the period. Adjusted EBIT, while not a financial performance measure under IFRS, is presented as an indicator of funds available to service debt. Adjusted EBIT and Adjusted EBITDA data are included in this offering memorandum because such data are used by investors to assess: (i) the operating trends and financial performance ofthe Company and (ii) the ability ofthe Company to (a) service its existing debt, (b) incur new debt and (c) fund its capital expenditures. The Company believes that Adjusted EBIT, while providing useful information, should not be considered in isolation as a substitute for profit for the period, as an indicator of operating performance, oras an alternative to cash flow as a measure of liquidity. Additionally, the Companys calculation of Adjusted EBIT may be different than the calculation used by other companies and therefore, comparability may be affected. Seenotes 8, 20 and 23 ofthe Consolidated Financial Statements and Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information about impairment charges and reversals and other non-cash charges.
For the purpose of calculating CODELCOS*s ratio of earnings to fixed charges (adjusted), (i) earnings consist of Adjusted EBIT and (ii) fixed charges consist of finance cost. The ratio of earnings to fixed charges (adjusted) is calculated by dividing Adjusted EBIT by finance cost.
Seenote 9 ofthe Consolidated Financial Statements and the Unaudited Interim Consolidated Financial Statements.
The Copper Reserve Law currently requires the payment ofa 10% special export tax on receivables of the sales proceeds that CODELCO receives and transfers to Chile from the export of copper and related by products produced by CODELCO. For further information, see Risk Factors- Risks Relating to CODELCO”s Relationship with the Government of Chile- CODELCO is subject to special taxes.
14
The following table shows CODELCOs debtand ratio of debtto Adjusted EBITDA and Adjusted EBITDA coverage ratio fortheperiods indicated.
As of and for the nine-month periods As of and for the year ended December 31, ended September 30, 2019 2020 2021 2021 2022 (in thousands of U.S.S, except ratios)
17,264,356 18,076,656 17,241,500 17,317,960 16,739,265
Ratio of debt to Adjusted EBITDA. 4.3 3.4 1.6 N.A N.A
Finance income . 36,871 40,213 13,657 10,086 29,600
Adjusted EBITDA coverage ratio 9.1 7.5 16.5 16.9 11.9
(1) Adjusted EBITDA coverage ratio is the ratio of Adjusted EBITDA to finance cost net of finance income.
15
RISK FACTORS
Prospective purchasers of the notes offered hereby should carefully consider all of the other information contained herein, including the risk factors set forth below. As a general matter, investing in the securities of an issuer, substantially all of whose operations are in a developing country such as Chile, involves a higher degree of risk than investing in securities of issuers with substantially all of their operations in the United States and other jurisdictions.
Risks Relating to CODELCOs Operations Developments relating to the COVID-19pandemic may have a material adverse impact on CODELCOS*s operations.
In December 2019, the outbreak of COVID-19 began in mainland China and has since spread through most countries, negatively affecting global and regional conditions. In March 2020, the World Health Organization (WHO) declaredthe COVID-19 outbreak a pandemic. In responseto the outbreak, go vernmental authorities throughoutthe world imposed lockdowns and other restrictions to contain the virus, and various businesses suspended orreduced operations.
The final impact onthe global economy and financial mark ets is still uncertain, but is expected to be significant.
The COVID-19 outbreak spread into Chile and has caused temporary disruptions to some of CODELCO’s capital projects as part of measures to contain the spread of the virus. The Chilean government maintained a step-by- step gra dual lockdown relief program in forcesince March 2020. On July 8,2021, the Presidentof Chile announced an update of the step-by-step program, which came into effect as of July 15, granting more freedom of movement to vaccinated people, such as allowingthem to attend gyms, restaurants and other public spaces, both openand closed. On October 1,2022, restrictions resulting from the COVID-19 pandemic were lifted. Ifthepandemic continues or worsens, restrictions may be imposed on CODELCO by governmental authorities and CODELCO may encounter operational difficulties related to insufficient personnel, higher costs and expenses associated with dela yed inspections, a ssessments and authorizations. CODELCO may need to adopt additional contingency measures, such as stricter cleaning protocol and further reductions of employees atits operations, or even suspend operations. In addition, business activities all over the world, including manufacturing activities that drive demand for copper and other metals, declined and have been significantly impacted by the pandemic. The existence and continuance of the pandemic in the countries where the purchasers of CODELCO*s products (such as China) are located could result in reduced demand. Due to the pervasive natureof the pandemic, there is uncertainty around its ultimate impact on our business; therefore, thenegative impact on our financial and operating results cannot bereasonably estimated at this time, and CODELCO cannot rule out a material impactin the future. The prolonged pandemic orthe re-imposition of more restrictive measures in Chile could result in the imposition of further quarantines or closures andor importand export restrictions which could further adversely affect the business, financial condition, results of operations or prospects of CODELCO. To the extent COVID-19 adversely affects our business and financial results, it ma y also have the effect of heightening many of the otherrisks described in this Risk Factors section.
CODELCO has in the past recognized significant impairment charges for certain assets and, ifmarket and industy conditions deteriorate, further impairmentcharges may be recognized.
A substantial a mount ofCODELCOSs total assets are property, plantand equipment. Asof December3 1,2021,
70.7% of ourtotal assets were property, pla ntand equipment. Inaccordance with IFRS as issued by the [ASB, we review the carrying amount of our assets to determine whether there is any indication that those assets have suffered an impairment loss. CODELCO uses the value-in-use methodology to ensure that the recoverable amount ofour property, plant and equipment is not impaired. In assessingthe value-in-use, the estimated future cash flows are discounted using a pre-tax discount rate that reflects current market assessments at the time value of money and the risks specific to the asset.
In 2020, CODELCO recognizeda U.S.$24.0 million impairment loss in the value ofthe assets of the Ventanas Division. In 2021, the subsidiary Sociedad de Procesamiento de Molibdeno Ltda. recognized an impairment loss of
U.S.$125,483 before taxes. We may write off capitalized expenses for engineering and other costs for certain projects that donot go forward or certain mining rights that we determine may no longer be commercialized, which we would not expect to have a material effect on the Company s financial results or operating position. Because the impaiment calculation is directly associated with the outlook of copper prices, a downturn in the copper price outlook could require
16 further impairment losses on our plant, property and equipment. Such impairment charges could be material to our financial statements.
CODELCOSs business is highly dependent upon the price of copper.
CODELCOSs financial performance is significantly a ffected by the market prices of copper. These prices have been historically subject to wide fluctuations and are affected by numerous factors beyond the control of CODELCO, including international economic and political conditions, levels of supply and demand, the availability and costs of substitutes, inventory levels maintained by producers and others and actions of participants in the commodities markets.
To a lesser extent, copper prices are also subject to the effects of inventory carrying costs and currency exchange rates.
In addition, the market prices of copper have occasionally been subject to rapid short-term changes. See Overview of the Copper Market.
In 2021, LME copper prices averaged 422.6 cents per pound, an increase from 279.8 cents per pound in 2020 and 272.1 cents per pound in 2019, which we believe was attributable primarily to demand growth in China and the recovery of theeconomy post pandemic. China has been the main driver of copper consumption in recent years, and in 2019, 2020 and 2021, 34.5%, 38.1% and 32.4% respectively, of CODELCO*s sales were made to China. If economic conditions deteriorate in China or other emerging markets, demand from customers in those markets could declineand the market price of copper could fall. A decline in copperprices would have an adverse impacton CODELCO*s revenues and financial results. In 2021, each one-cent change in CODELCO*s a verage annual copper price perpound sold caused a variation in operating profit of approximately U.S.$35.0 million. If CODELCO*s average annual copper price per pound declines significantly foran extended period of time, CODELCO may, subject to other factors such as operating costs, be required to recognizeasset impairments.
In the event of a sustained decline in prices, CODELCO has in the past and could a gain determine to curtail Operations or suspend certain of its mining and processing operations. See Management’s Discussion and Analysis of Financial Condition and Results ofOperations.
CODELCO faces competition in the copper market from other copper producers.
CODELCO faces competition from other copper mining companies and producers of copper around the world.
Although CODELCO continues to focus on reducing costs, there canbe no assurance that competition from lower cost producers will not ha ve a material adverse effect on the business, financial condition, results of operations or prospects of CODELCO.
The mining industry has experienced significant consolidation in recent years, including consolidation among some of CODELCOS*s main competitors, as a result of which an increased percentage of copper production is from companies that also produce other products and are, consequently, more diversified. There canbe no assurance thatthe result of current or further consolidation in the industry will not ha ve a material adverse effect onthe business, financial condition, results of operations or prospects ofCODELCO.
Mostof CODELCO copper output is dependent upon production from three of its main mining complexes.
Three of CODELCO'”s mining complexes produced over 64% of its copper output in 2021 (including CODELCOSs share in the El Abra deposit and Anglo American Sur). The El Teniente Division, includingthe Caktones smelter, produced an aggregate of 459.8 metric tons ofcopperin 2021. The Radomiro Tomic mine produced an aggregate
0£326.5 metric tons of copperand the Chuquicamata mine produced ana ggregate of 3 19.2 metric tons of copper, each duringthe same period. If operations in any of these three mining complexes were significantly reduced, interrupted or curtailed, CODELCOS*s financial condition andits a bility to make the required payments on thenotescould be materia lly and adversely affected. CODELCO cannot assure you that production interruptions will not occur or that any such incident would not materially adversely a ffect its production. See Business and Properties-Operations-Chuquicamata Division, -Ra domiro Tomic Division and -El Teniente Division.
17
The business of mining is subjectto risks, some ofwhich are not completely insurable.
The business of mining, smelting and refining copper is generally subject to a number of risks and hazards, including industrial accidents, labor disputes, unexpected geolo gical conditions, mine collapses, vandalism, theft, changes in the regulatory environment, environmental hazards, weather and other natural phenomena, such as earthquakes, fires and floods. Such occurrences could result in damage to, loss of, or destruction of, mineral properties or production facilities, human exposure to pollution, personal injury or death, environmental and natural resource damage, delays in mining, monetary losses and possible legal lia bility. CODELCO maintains insurance consistent with copper mining industry standards and in amounts thatit believesto beadequate, butwhich may notprovide complete coverage in certain circumstances. Insurance against certain risks (including certain lia bilities for environmental pollution and other hazards as a result of exploration and production) is not generally available to CODELCO or to other companies within the industry.
Under each of CODELCOS*s copper sales agreements, CODELCO or its customer may suspend or cancel delivery of copper duringa period of force majeure. Events of force majeure under the agreements include acts ofnature, strikes, fires, floods, wars, transportation delays, governmental actions or other events thatare beyond thecontrol of the parties. Any suspension or cancellation of deliveries under copper sales agreements that are not replaced by delivery undernew contractsor sales on the spot marketcould have a material adverse effect on the business, financial condition, results of operationsor prospects of CODELCO.
CODELCOS*s water supply could beaffected by geological changes or environmental regulations.
CODELCOSs business is dependent on the availability of water for the production of copper and subject to environmental regulations regarding water usage. In the past, Chile hasexperienced droughts severe enough to a dversely affect the energy sector of the economy in the central and southern regions of Chile. CODELCOs access to water may also be impacted by changes in geology or other natural factors that CODELCO cannot control. If Chile were to experience a drought or CODELCO was otherwise unable to obtain adequate water supplies, CODELCOSs ability to conduct its operations could be impaired.
On April 6, 2022, Law No. 21,435, which reforms the Water Code was published in the Official Gazette (the Water Code Reform). The Water Code Reform reaffirms that water rights are a public asset, acknowledgingthe right to accesswater and sanitation as an essential and inalienable human right. In effect, waterrights granted post Water Code Reform will be limited in time, as the concessions willbe granted fora period of 30 years. Moreover, the concession will be automatically renewed, unless Chiles General Water Bureau sets out that the relevant water right is not being used effectively upon its expiration date orthat a renewal could a ffect the sustainability of the water source. Furthermore, the Water Code Reform added the concept of public interest as a requirement for the granting of new water rights.
Additionally, the Water Code Reform prioritizes human consumption over other uses; recognizes the constitution of rights fornon-extractive uses such as environmental conservation and tourism; restricts the use of certain water use rights in situations ofscarcity; and reforms the current regulation of mining waters, a mon g other matters.
On June 29, 2021, to mitigate the effects of climate change over wa terresources in Chile, the previous President of Chile submitted to Congress a draft bill, independent from the Water Code and its reform, aiming to create a new national institutional framework for water resources. This draft bill is intended to strengthen the planning, regulation, investment in infrastructure and management ofthe wa terresources in Chile, andis expected to create, among others: (i) the Undersecretary of Water Resources within the Ministry of Public Works, which will change its nameto Ministry of Public Works and Water Resources; and (ii) a Commission of Water Resources. Currently, the draft bill is in its first constitutional state of discussion in Congress -in an early development stage- and we cannot predict whether this bill will pass, since (1) Chile elected a new Presidentin March 2022, and this bill was submitted by Chiles previous President; and (ii) it is expected that the water rights discussion will be addressed in a potential new Chilean Constitution. See Summary-Recent Developments-The Chilean Constitution.
The enactment of these laws andor other regulatory projects related to water resources currently under discussion in the Chilean Congress may negatively affect CODELCO”s water supply.
Also, CODELCOS*s activities are subject to compliance with obliga tions, measures and conditions set forth in several environmental authorizations (Resoluciones de Calificación Ambiental), including those related to water consumption and supply. Environmental authorizations for future expansions or modifications of current activities may
18 set forth stricter limitations to water useand supply. Theenactment ofthese laws andor otherregulatory projects related to water resources currently under discussion in Congress may eventually a ffect CODELCOs water supply, which in turn may have a material adverse effecton CODELCOSs financial condition and results of operations.
CODELCOSs compliance with environmental, health and safety laws may require increased costs, including capital commitments, and non-compliance may subject it to significant penalties.
Chile has adopted environmental, health and safety regulations requiring industrial companies operating in Chik, including CODELCO, to undertake programs to reduce, control or eliminate various types of pollutants and to protect natural resources, including water and air, among other requirements. If the Ministerio del Medio Ambiente (the Ministry of the Environment) declares an area to be polluted or potentially polluted, a prevention or decontamination plan is required. Eithertype of plan may contain measuresthatmay increase the costs of developingnew facilities or expanding existing ones in the designated area. Some of the areas where CODELCO operates have been declared polluted. The measures currently included in the prevention or decontamination plansthat govern these areas are subjectto change and may become more stringent over time. CODELCO must comply with certain air quality environmental regula tions regarding particulate matter (PM 10) and sulfur dioxide (SO) in the areas surroundin g the Potrerillos, Caletones, Ventanas and Chuquicamata smelting plants. The Potrerillos, Caletones and Ventanas smelting plants have decontamination plans forsuch pollutants. In the area surroundingthe Chuquicamata smelter, there are decontamination plans for PM ¡o under development and underreview, and a pollution prevention plan for SO” is under development. CODELCO is currently unable to fully assess what may be required of it or the cost of compliance with the revised PM. pollution reduction plans, the SO” prevention plan or any future changes to the other plans covering the areas where CODELCO operates.
As of the date ofthis offering memorandum, the impact of operating in latentand saturated zones has not been maternal to CODELCO); however, it could ha vea materia l effect in the future.
An airemissions standard for smelters was enacted by the Ministry of the Environment in 2013. This standard involves arsenic (As), SO”, PMivand mercury (Hg) emissions. Since 2013, CODELCOS*s cost of complying with this standard was U.S.$2.2 billion. As of the date of this offering memorandum, the Ventanas, El Teniente, Chuquicamata and Salvador smelters meettherequirements of this standard. See Regulatory Framework-Environmental Regulations.
Additionally, in 2015, Supreme Decree No. 10 declared the boroughs of Concón, Quintero and Puchuncaví, where the Ventanas smelting plantis located, as a saturated zone with regards to PM”.5 and as a latent zone with regards to PM 10, and new decontamination and prevention plans were enacted in March 2019. CODELCO estimatesthatthe cost of such plans will be U.S.$27.0 million, which will be incurred overa period of approximately four years.
In May 2022, the Ministry of the Environment approved the Preliminary Draft on Emission Standards Applicable to Heavy Motor Vehicles, which aims to reduce the accumulative exposure of the emissions from heavy vehicles. The preliminary draft recently completed the public consultation phase.
Environmental, health and safety laws and regulations are complex, change frequently and have tended to become increasingly stringent over time. For example, changes to current environmental laws and regulations, and additional environmental laws and regulations, have been adopted, including mine closure legislation that requires financial guarantees, and haverecently been proposed, including green taxes, climate change, environmental crimes and glacier protection laws that could (i) prevent expansion of our operations into certain areas, (ii) require us to obtain additional permits and (iii) result in increased cost and potential delays. Moreover, certain changes to environmental, health and safety laws and regulations are pending and other new laws or regulations may be adopted in Chile in the future. Ina ddition, community and environmental a ctivist groups have protested the developmentof certain mines of our competitors in Chile and may increase demands for socially responsible and environmentally sustainable practices, and their efforts may lead to operational dela ys and the creation or revision of government regulations and policies with respect to the miningindustry in Chile, litigation and increased costs.
Finally, asa result ofthe Paris Agreementreached duringthe21* Conference ofthe Parties to the United Nations Framework Convention on Climate Change in 2015, a number of governments have pledged Nationally Detemined Contributions to control and reduce greenhouse gas emissions. Assuming that the Chilean economy grows at the same rate it has grown over the previous ten years, excluding the years of the global financial crisis, and such growth rate is sufficient, Chile has committed to reducing its CO, emissions per GDP unit by 30% below 2007 levels by 2030 and, subjectto an international monetary grant, reducing its CO, emission per GDP unit by 2030 until itreaches a 35% to45%
19 reduction with respectto the2007 levels. In addition, the Paris Agreementresu lted in increased international pressure for the establishmentofa global carbon price, and on companiesto adopt carbon pricing strategies. The pricing of greenhouse gas emissions may impact our operational costs, mainly through higher price for electricity and fossil fuels as mining is an energy intensive industry. In 2019, during the 25″ Conference of the Parties to the United Nations Framework Convention on Climate Change in Madrid, the Chilean government announced an update to its Nationally Determined Contribution, which includes the reduction of its CO2 emissions per GDP unit by 45%below2016 levels by 2030.
In June 2022, Law No. 21,455 on climate change was published in the Official Gazette. This la w creates a legal framework for the management and implementation of climate change mitigation and adaptation measures, aiming to face its challenges and to decrease greenhouse gas emissions, until reaching greenhouse gas emissions neutrality by2050.
In addition, this law aims to reduce the country s vulnerability and to increase level of resilience to the possible adverse effects of climate change, as a solution to comply with the international commitments assumed by Chile and to ensure access of information on climatechange.
Any of these new laws or regulations could result in significant additional environmental compliance costs or delays in expansion projects. As of September 30, 2022, CODELCO had provisions of U.S.$2.1 billion for future decommissioning and site restoration costs, primarily related to tailing dams, closures of mine operations and other mining assets. CODELCO” operations outside Chile are also subject to extensive international, national and local environmental, health and sa fety la ws and regulations.
Besides the aforementioned laws and regulations, CODELCO’s operations are regulated by several environmental authorizations which set forth specific obligations, conditions and measures that have to be fulfilled.
Environmental authorizations for future expansions or modifications of current activities may set forth obliga tions, conditions and measures that entail increa sed costs. Failure to comply with the applicable environmental regula tions and obligations, conditions and measures can result in civil, administrative, or criminal fines or sanctions, claims for environmental damages, remediation obligations, the revocation of environmental authorizations or the temporary or permanent closure of facilities.
CODELCOSs environmental permits may be revoked, annulled or delayed through judicial action brought by interested parties to challenge environmental licenses (recurso de reclamación) or other remedies set forth in general administrative regulations that are frequently used to seek the revocation of granted environmental a pprovals (solicitud de invalidación).
CODELCO is developing and implementing environmental management systems at each of its divisions to monitor and achieve compliance with applicable environmental la ws and regulations. While CODELCO has budgeted for future capital and operating expenditures to maintain compliance with these la wsand regulations, thereis no guarantee that current levels of expenditures and capital com mitments will be sufficient to achieve future compliance. There also can be no assurance that CODELCO has been or will be at all times in complete compliance with environmental laws and regulations, or that proceedings or civil actions will not be brought, or that fines and other sanctions will not be imposed for such non-compliance in the future. In addition, there can be no assurance that more stringent enforcement of, or changes in, existing la ws and regulations, the adoption of additional laws andregulations orthe discovery of new facts resulting in increased lia bilities would not have a material adverse effect on CODELCOSs business, financial condition, results of operations or prospects.
For further information on environmental matters, and current and proposed environmental la wsand regulations, see Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Environmental and Regulatory Framework -Environmental Regulations.
CODELCO’is subject to legal proceedings and legal compliancerisks that may adversely impact its financial condition, results ofoperations and liquidity.
CODELCO spends substantial resources ensurin g that it complies with local regulations, contractual obligations and other legal standards. Notwithstandingthis, CODELCO is subjectto a variety of legalproceedings and compliance risks in respect of various matters, including tax, environmental- and la bor-related matters that arise in the course of its business and in its industry as well as disputes with go vernmental a gencies. For example, CODELCO is subjectto various laborproceedings in which workers and families of deceased workers a llege that working conditionscaused the workers
20 to contract silicosis. Although CODELCO has undertaken precautionary measures, there have been fatalities involving CODELCO personnel in the pastand there may be additional fatalities in the future. Serious accidents, including fatalities, may subject CODELCO to substantial penalties, civil litigation or criminal prosecution. Claims for damages to persons, including claims for bodily injury orloss of life, could result in substantial costs and lia bilities, which could materially and adversely a ffect CODELCOS*s financial condition, results of operations or cash flows. If CODELCO*s sa fety record were to substantially deteriorate over time or CODELCO were to suffer substantial penalties or criminal prosecution for violation of health and safety regulations, CODELCOS*s contracts may be cancelled or it may not be awarded future business. As of December 3 1,2021, CODELCO estimates a negative effect of approximately U.S.$49.0 million due to a probable unfavorable outcome oflitigation. A negative outcome in an unusual or significant legal proceeding or compliance investigation could also adversely affect our financial condition and results of operations. For infomation regarding CODELCOSs current significant lega lproceedings, see Business and Properties-Comptroller General of the Republic and Business and Properties-Legal Proceedings.
Earthquake damage to CODELCOS*s properties and operations could negatively affect CODELCO*s results.
Chile is located in a seismic area that exposes CODELCO*s operations to the risk ofearthquakes. Chile has been adversely affected by powerful earthquakes in the past, including, most recently, (1) in 2015 when an earthquake struck the coast of Chile, (ii) in 2014 when an earthquake struckthe north of Chile and (iii) in 2010 when a severe earthquake struck the southern central region o£fChile. The 2015 earthquake measured 8.3 on the Richter scale and a ffected the coast of Chile just north of Santiago, with no significant consequences for the rest of the country. The 2014 earthquake measured 8.2 on the Richter scale and affected mainly the Arica and Tarapacá Regions, with no significant consequences for the rest of the country. The 2010 earthquake and its a ftershocks, as well as tsunamis from adjacent coastal waters, caused severe damage to Chiles infrastructure, including roads, bridges, ports and Santiagos international airport, affectingareas across the country.
Although the 2015,2014 and20 10 earthquakes did not have any substantial effect on CODELCO orits results of operations, and although CODELCO*s mining operations are subject to, and designed to withstand, damage from significant seismic events, an earthquake occurring closer to CODELCO*s operations in northern Chile could cause da mage to its mining operations that would not be covered by insurance, except to the extent that its production ceased for more than 30 days. Any such damages caused by an earthquake that were not covered by insurance could have an adverse effect on CODELCOSs results of financial condition, results of operations or cash flow.
Future compliancewith a changing and complex regulation scheme may require changes in CODELCO*s business.
CODELCOSs exploration, mining, milling, smelting and refining activitiesare also subjectto non -en vironmental Chilean laws and regulations (including certain industry technical standards), which change from time to time. Matters subject to regulation include, but are not limited to, concession fees, transportation, production, reclamation, export, taxationand labor standards.
While CODELCO does notbelieve that compliance with such la ws and regulations will have a materia l adverse effecton its business, financial condition, resultsof operationsor prospects, therecan beno assurance that more stringent enforcement of, or change in, existing laws and regulations, the adoption of additional laws and regulations, including increased government supervision and control over the management of CODELCOSs business and its awarding of contracts, orthe discovery ofnew factsresulting in increased lia bilities or costs would nothave a material adverse effect on CODELCOS*s business, financial condition, results of operations or prospects.
CODELCOSs business plans are based on estimates of the volume and grade of CODELCO ore deposits, which could be incorrect.
CODELCOSs ore deposits (its resources and reserves) described in this offering memorandum constitute estimates based on standard evaluation methods generally used in the international mining industry and on assumptions asto production costs and market prices. The actual ore deposits may not conform to geological, metallurgical or other expectations, and the volume and gra de of ore recovered may be below the estimated levels. Lower marketprices, as well as increased production costs, reduced recovery rates and other factors, may render CODELCO’s ore deposíts
21 uneconomic to exploit and may result in revision ofits reserve and resource estimates from time to time. Reserve and resource data are not indicative of future results ofoperations. See Business and Properties-Ore Reserves.
CODELCOS*s business requires substantial capital expenditures.
CODELCOSs business is capital-intensive. Specifically, the exploration and exploitation of copper reserves, mining, smeltingandrefining costs, the maintenance ofmachinery and equipment and compliance with applicable laws and regulations require substantial capital expenditures. CODELCO must continue to invest capital to maintain or to increase the amountof copper reserves thatit exploits and the amount of copperthat it produces. CODELCO expects to makecapital expenditures of approximately U.S.$11.2 billion between 2022 and 2024 on major projects, which it intends to finance through operations, including capitalization a nd retention of profit, in additionto new borrowings from banks and capital markets. See Management’s Discussion and Analysis of Financial Condition and Results of Operations- Liquidity and Capital Resources-Capital Expenditure Program. There can be no assurance that CODELCO will be able to maintain its production levels or generate sufficientcash flow, capitalize a sufficienta mount of its profit or have access to sufficient investments, loans or other financing a lternatives to finance its capital expenditure programata level necessary to continue its exploration, exploitation and refining activities at or aboveits present levels.
CODELCOSs future performance depends on the results of current and future innovation and exploration.
CODELCO has a two-pronged exploration program that is focused on increasing reserves of its existing divisions and exploring for new deposits outside of its current operations. As the ore quality of CODELCO*s reserves continues to decline over time, innovation and exploration are increasingly important to CODELCO*s success.
CODELCO expects to maintain its production levels through its expansion and development projects forthe next three years. See Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Capital Expenditure Program for more detail. While initial results have been favorable, there can be no guarantee that CODELCO”s exploration program will continue to be successful. In addition, there may be some degree of execution risk associated with the expansion of operations into deeper mines or mines at higher altitudes.
CODELCOS’s expansion program could also experience delays or be negatively impacted by higher costs. If CODELCO’s expansion program is not successful, it would materially and adversely affect its copper production levels. Fora description ofCODELCOS*s current development programs, see Business and Properties -Resource Development.
CODELCO has experienced high energy costs and may experience higher energy costs in the future.
Energy represents an important part of CODELCOS*s production costs. The main sources of energy for CODELCOS’s operations are electricity, liquid fuels (such as diesel, fuel oil and gasoline) and natural gas. With respect to liquid fuels and natural gas, these commodities are subject to price fluctuations as a result of external factors. For example, their cost significantly increased due to the COVID-19 pandemic and theongoing warin Ukraine. As a result, CODELCOSs profits and cash flows havebeen adversely affected and may continueto be adversely a ffected in the future.
Any interruption or destruction or loss of data in CODELCOS*s information technology systems due to technical or operational malfunctions or cyber-attacks could have a material adverse effect on its reputation, business, financial condition andresults ofoperations.
CODELCO is subject to a variety ofinfomation technology and system risks as a part of its normal course of operations, including potential breakdown, invasion, virus, cyber-attack, cyber-fraud, security breach, and destruction or interruption of CODELCOSs information technology systems by third parties or CODELCOs own personnel. Although CODELCO has security measures and controls in place that are designed to mitigate these risks, a brea ch ofits security measures ora loss of information could occur and result in a loss of material and confidential information, breach of privacy laws anda disruption toits business activities. In addition, information systems could be damaged or interrupted by natural disasters, force majeure events, telecommunications failures, power loss, acts of war or terrorism, computer viruses, malicious code, physical or electronic security breaches, intentional or inadvertentuser misuse or error, or similar events or disruptions. Any of these or other events could cause interruptions, delays, loss of critical or sensitive data or similar effects, which could have a material adverse impact on the protection of intellectual property, confidential and proprietary information, and on CODELCOS*s business, financial condition and results ofoperations.
22
Labor disruptions involving CODELCO*s employees or the employees of its independent contractors could affect CODELCOS*s production levels and costs.
As of December 31,2021, CODELCO employed 15,528 employees, approximately 89.8% of whom were covered by collective bargaining a greements with labor unions. Most of these collective bargaining a greements have terms of two to three years. CODELCO has experienced material work slowdowns, work stoppages and strikes in the past. In2019, CODELCO experienced a 14-day strike involving 3,200 union workers in the Chuquicamata Division (or approximately 67% of the total work force). The 14-day strike diminished production by approximately 17,600 metric tons. In2021, CODELCO experienced a 21-day strike involvingtwo labor unions from the Andina Division anda 24- day strike involving one labor union also from the Andina Division, both of which diminished production by approximately 12,000 metric tons. In 2022, CODELCO experienced a 1 -day strike involvingtwo la bor unions from the Ventanas Division.
CODELCO negotiated 17 collective bargaining agreements in 2021 and eight additional collective bargaining agreements in 2022. CODELCO negotiated seven collective bargaining agreements and eight collective bargaining agreements in 2020 and 2019, respectively.
CODELCO has experienced work disruptions in the past, and there can be no assurance that a work slowdown or work stoppage will not occur prior to or upon the expiration of the current collective bargaining a greements.
Managementis una ble to estimatethe effect ofany such work slowdown, stoppageor strike on CODELCO” production levels. While none of the strikes described in this risk factor had a material impact in CODELCOSs resultsof operations, work slowdowns, stoppages or other labor-related developments affecting CODELCO could have a material adverse effect on the business, financial condition, results of operations or prospects of CODELCO in the future. In particular, work slowdowns, stoppages and other la bor-related events could increase CODELCO”s independent contracting costs.
In addition, pursuant to the Código del Trabajo (the Labor Code of Chile), CODELCO could be held liable for the payment of labor and social security obligations owed to the employees of independent contractors (or their subcontractors) if the independent contractors (or their subcontractors) do not fulfill those payment obliga tions. For further information on employee and independent contractor matters, including recent work disruptions, see Business and Properties -Employees.
CODELCO’is subjectto an extensive labor reform law -in effect since 201 7-promulgated by the Government of Chile that could affectits business and operating results.
In 2016, the Government of Chile promulgated an extensive la bor reform la w (the Labor Reform Law, which became effective in 2017. The Labor Reform Law prevents Chilean companies from hiring temporary replacements for striking employees and also prevents the replacement of such employees with other existing workers of the company.
This may have an adverse effect on our overall employment and operating costs, and may increase the likelihood of business disruptions in Chile. However, it hasnotbeena practice ofCODELCO toreplace employees on strike, and there has not been an increase in labor disruptions in Chile since the law became effective.
In addition, under the Labor Reform La w, CODELCO and its labor unions negotiate from time to time the minimum services and emergency teams that the labor unions must provide in case of a strike during a collective bargaining process. Currently, and accordingto the Labor Reform Law, the following minimum services may bea greed: (i) services tha tare strictly necessary to protect the physical assets and premisesofthe Company and to preventa ccidents; (ii) services strictly necessary to guarantee therenderingofall services of public utility, and the attention ofthe population and basic needs, including those related to life, safety and health; and (iii) services strictly necessary to guarantee the prevention of sanitary or environmental damage. If there is any disa greement between CODELCO and its labor unions regarding such minimum services and emergency equipment, the parties may resolve such disa greement through administrative proceedings before the Dirección Regional del Trabajo (Regional Labor Board), which are subject to challenge by the parties before the Director Nacional del Trabajo (National Labor Board).
As of December 31,2021, CODELCO employed 15,528 employees, approximately 89.8% of whom were covered by collective bargaining a greements with laborunions. CODELCO currently has positive labor relations with these unions. For example, a major collective bargaining was signed earlier than expected in 2022. However, CODELCO is currently unable to estimate the impact that the Labor Reform Law or simila rreforms will ha ve on its labor rela tions with respect to labor unions, or on its business, financial condition, operatingresults and prospects.
23
Recent bills of law on labor and social security matters could affect CODELCOS*s operations and employee costs.
+ Reform to the Pensions Act: In November 2022, the Chilean government proposed a bill to create a new Combined Pension System and Social Security System to simplify contributory pension assistance, improve the Guaranteed Universal Pension (GUP) and establish benefits and regulatory changes.
Currently, the social security system in Chile is composed of: (i) a mandatory contribution of the employees charge, equalto 10% of the employees monthly remuneration, which is transferred to the employees individual capitalization account with the Pension Fund Administrator (AFP). In caseof dependentemployees, the employer has the obligation to retain the corresponding sums and transfer them to the respective AFP; (ii) a voluntary contribution, that enables employees to voluntarily complement their pension funds; and (iii) a welfare contribution or pension aid (pilar solidario), which is a States contribution to complement the pension funds of the poorest 60% of the population in Chile.
Main topics of the pension reform include: (i) a gradual increase of the GUP from Ch$ 194,000 (U.S.$215 approximately) to Ch$250,000(U.S.$278 approximately) in periodsof three, 13,25 or 37 months as ofthe date in which the law is published, depending on the enactment of the Tax Reform and the conditions in which each beneficiary is retired; (ii) a new contribution by the employer of 6% ofthe employees gross income, in addition tothe aforementioned 10% corresponding to the mandatory contribution of the employees burden- to be implemented in a 6-year period (1 percentage unit per year); and, (iii) the elimination ofthe AFPs and reorganization of the industry in the contributing pension aid.
The bill is on its first constitutional discussion stage in Congress.
+ Reduction of the weekly working schedule: In March 2017, a group of congresspersons (mostly coming from the Communist Party, and includingthe Government’s current General Secretary or Spokesperson) proposed a new bill of lawto reduce the weekly working hours from 45to 40.
In August 2022, the Government reactivated the bills discussion by filing comments -including the laws gradual implementation- and orderingthe extreme urgency forits processing. The draft is currently being discussed at the Chilean Congress.
e Distribution of Profit Sharing: On September2,2021, the Chilean Congress approveda billto change the distribution of profit sharing in companies. According to this bill, companies will ha ve to distribute to their employees between 8% to 15% of their annual net profits, a percentage that will depend on the amounts invoiced by the company duringthe respective annual period. The amount payable to each employee annually is capped at 20 times the monthly minimum wage. Furthermore, companies will have to make monthly payouts equal to 25% of the employees monthly remuneration, capped annually at six times the monthly minimum wage. This monthly payment will be attributable to the annual payment, in case the la tter turns out tobe a larger number.
The dra ftis currently being discussed at the Chilean Congress and has notprogressed since 2021.
+ New Minimum Monthly Income(*MMT): Accordingto the provisions of Law No.21,456, as of January 1, 2023, the MMI increased to Ch$410,000 (U.S.$510.50 approximately) This increase was subject to a minimum 7% annual variation of the CPI upto December2022.
e Others: Due to the economic and social crisis caused by the COVID-19 pandemic, several la bor-related regulations have been enacted, which may increase CODELCOS*s industrial costs. Some of these regulations are linked to measures enacted by Law No. 21,227, which aims to facilitate access to the unemployment insurance fund (the Unemployment Insurance Fund), authorizing withdrawals a ttributable to make up for theloss orreduction of wa ges or employees salaries that, due to the COVID-19 crisis, must sta y at home and are unable to work remotely, and, by Law No. 21,312 that eases certain requirements to draw under the Unemployment Insurance Fund and be entitled to the benefits granted by Law No. 21,227.
Recent bills of law on tax matters could affect CODELCO*s operations and employees costs.
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On July 7, 2022, the Chilean government submitted to the Chilean Congress a tax reform bill which proposes several amendments to the Chilean tax system. Among other changes, the bill proposes the following; (i) repla cing the current partially integrated sy stem for large companies with a new general dual tax system applicable to such companies, which separates the corporate tax from the taxation of its owners; (ii) a reduction of the corporate tax ra te applicable to large companies from 27% to 25%, but with the application of a new development tax of 2% over the companies net taxable income (totheextentnotreduced by investments made in certain limited productivity expenses); (iii) the creation ofa capital income tax ata rate 022%, which is applicable on dividends paid to final taxpayers (except for non-resident taxpayers who areresidents ofa country with which Chile has a tax treaty in force andarethe beneficiary ofthe income); (iv) a progressive limitation tothedeductibility of carryovertax losses, to a 50%of the nettaxable income as determined foreach year in 2027 (80%in 2025, and 65% in 2026); (v)a new annual 2.5%!tax on the deferral of final taxes, applicable to companies the income of which derives more than 50% from passive income (e.g. dividends, interest, etc.); (vi) an increase ofthe single capital gainstax rate applicable to thesale of certain public offering securities that have high stock market presence, from 10% (which became effective as from September 1,2022, pursuant to Law No. 21,420) to 22%; (vii) an increase of the middle and upper personal income tax brackets applicable to Chilean –residentindividuals, andan increase to the maximum rate from 40% to 43%; (viii) the introduction of wealth tax applicable to Chilean-resident individuals overtheir worldwide wealth thatexceeds U.S.$4.9 million; (ix) the elimination ofthe specific mining tax and the esta blishmentof a)a miningroyalty ata rate of 1% applicable to an ad valorem component, and b)a miningroyalty applicable to a mining margin component, which would replace the specific mining tax currently established in articles 64 bisand 64terof the Chile Income Tax Law; (x) the modification to the a dministrative application ofthe general anti avoidance rule (GAAR) by the Chilean Tax Authority; (xi) amendments to Chilean Tax Authority s appraisal powers and (xii) the extension of the scope of Value Added Tax regime.
The tax reform bill project is currently under discussion in Congress. On January 10, 2023, the Ministry of Finance introduced some changes related to the expected effectiveness of some aspects of the tax reform, including an increase on the maximum tax burden for individuals.
The approvalinto law of any of therefoms described above could have the effectof increasing our operations and employees costs.
CODELCO engages in hedging activity from time to time, particularly with respect to its copper production, which may not be successful and mayresultin lossesto CODELCO.
CODELCO from time to time hedges certain future copper delivery commitments and production in order to manage the risks associated with copper price volatility. CODELCO currently does not have any production hedging commitments. See notes 27 and 28 to the Consolidated Financial Statements.
CODELCOSs production hedging activities could cause it to lose the benefit of an increase in copper prices if copperprices increase over the level of CODELCO*s hedege position. The cash flows from and the mark -to market values of CODELCOSs production hedges can be affected by factors suchas the marketprice of copper, copperprice volatility and interest rates, which are not under CODELCOSs control.
CODELCOSs production hedging agreements contain events of default and termination events that could lead to early close-outs of CODELCO”s hedges. These include failure to pay, breach of the agreement, misrepresentation, default under CODELCOSs loans or other hedging agreements and bankruptcy. In the event ofan early termination of CODELCOS*s hedginga greements, the cash flows from the affected hedge instruments would cease and CODELCO and the relevanthedge counterparty would settle allof CODELCOS*s obligations at that time. In that event, there could be a lump sum paymentto bemadeeitherto orby CODELCO. The magnitude and direction ofsuch a payment would depend upon, among other things, the characteristics of the particular hedge instruments that were terminated and the market price of copperand copper price volatility and interest rates atthe time of termination.
In addition to its production hedging activities, CODELCO has hedged a portion of its exchange rate and interest rate exposure by enteringinto forward exchange contracts to hedge against fluctuationsin the UF to U.S. dollar exchange rate forits outstanding UF-denominated bonds. CODELCO also periodically enters into futures contracts with respect to
25 certain sales of its own copper. No assurance can be given that CODELCO will be adequately protected by its hedging activities.
See Business and Properties-Marketing-Pricing and Hedging, notes 27 and 28 to the Consolidated Financial Statements for further information on CODELCO*s hedgingactivity.
Global economic, political and regulatory developments may adversely affect CODELCO.
Revenue from international sales constitutes a material portion of our total revenue, and we anticipate it will continue to forthe foreseeable future. The current U.S. administration has called for substantial changesto United States forcign trade policy, including the possibility of imposing greater restrictions on international trade and significant increases in tariffs on goodsimported into the United States. For example, the United Stateshas recently enacteda series of tariffs on the import of Chinese products. The continued threats of tariffs, trade restrictions and trade barriers could have a generally disruptive impact on the global economy and, therefore, negatively impact our revenues. Given the relatively fluid regulatory environment in China and the United States and uncertainty on how the United States or foreign governments will act with respect to tariffs, international tra de a greements and policies, there could be additional tax or other regulatory changes in the future. Any such changes could adversely impact CODELCOS*s business, financial condition and results ofoperations. If ourrevenues generated from international sales decline significantly as a result, ít could have a material adverse effecton CODELCOS*s business and results of operations.
Risks Relating to CODELCOs Relationship with the Government of Chile
Importantcorporate governance matters, the annual budget and financing programs are determined by or subjectto the approval of the President of Chileand the Ministries of Finance and Mining.
CODELCO is a mining, industrial and commercial state-owned enterprise of indefinite duration with its own legal personality and capital. CODELCOSs relationship with the Government of Chile is through the Ministry of Mining, and is governed by Decree Law No. 1,350, as amended by Law No. 20,392, its byla ws and other applicable legisla tion.
The President of Chile is vested with the authority analogous to that of the shareholders of a corporation (sociedad anónima) under Chilean la w, which may be delegated in whole orin partto the Ministers of Finance and Mining, jointly.
Pursuant to such authority, the President of Chile (i) participates in the designation of the Board of Directors by designating three directors without external input and by electingsix directors on the basis of third -party short lists; (ii) appoints the Chairman of the Board of Directors; and (iii) ma y approve and amend the bylawsof the Company, by means of an executive decree issued jointly by the Ministries of Finance and Mining. In 2021, Gabriel Boric Font was elected as President of Chile. Mr. Borics administration began on March 11, 2022. Senior management and administration of the Company are vested in its Board of Directors and further delegatedto its Chief Executive Officer. Pursuantto Decree Law No. 1,350, CODELCO”s Board of Directors must submit its proposed annual budget to the Ministries of Finance and Mining for approval and possible revision. Inaddition, Decree Law No. 1,350 requires CODELCO to include as part ofits proposed annual budget a debt amortization budget that includes interest and principal payments on CODELCO’s debts, including the notes. CODELCO must also submit a three-year Plan de Negocios y Desarrollo (a Business Development Plan, or BDP) report, approved by the Companys Board of Directors, to the Ministries of Finance and Miningby Marchof each year. Thereis no guarantee that actions taken with respect to the appointment ofCODELCO’s directors, amendments to its bylaws, and revision and approval of its budget, including CODELCOS*s capitalization of profit, will be adopted by the administration of the new Presidenta ndor will be the same asthey would be in a privately owned company. See Management and Regulatory Framework.
CODELCOSs funding through retention of profits is restricted and is subject to the approval of the Ministries of Finance and Mining.
As a state-owned enterprise and accordingto its governing law, CODELCOSs profit is required to be transferred to the Chilean Treasury. Before June30 of each year, the Ministries of Finance and Miningare required to determine, by means ofa jointdecree, the amount, if any, that the Company shall a llocate to thecreation of capitalization and reserve funds as retention of profits. Between2014and2019, the Government of Chile authorized the capitalization by capital injection and retention of profit within CODELCO in an aggregate amountof U.S.$3.3 billion. Although CODELCO currently expects the Ministries of Finance and Mining to make availa ble a substantial amount ofits pre-tax profit overthenext three years, a jointdecree of the Ministries of Finance and Miningis required
26 each year and the amounts approved in any given year, ifany, could vary significantly. Since 2022, the Chilean Government is allowing CODELCO to annually reinvest 30% ofits 2021-2024 profits. This represents a change in CODELCOSs dividend policy, which previously consisted of 100% net-profit distribution policy. This profit- reinvestment plan is expected to strengthen CODELCOS*s financial balance sheet and reduce the need foradditional financial debt.
IFCODELCOSs funding through capitalization and retention of profits, depreciation, amortization and defered taxes are insufficient to fund capital expenditures and if it is unable to otherwise finance planned expenditures, CODELCOS*s business would be adversely affected. See Management’s Discussion and Analysis of Financial Condition and Results ofOperations-Liquidity and Capital Resources. In addition, ifthe Governmentof Chile does not authorize additional capitalization or the retention of profits, our credit rating may be adversely affected, which could have a material adverse effect on our business and financial condition.
CODELCO’is subject to special taxes.
Law No. 21,174, that repealed Law No. 13,196, the Copper Reserve Law, exclusively requires CODELCO to pay a 10% special export tax on receivables of the sales proceeds received and transferred to Chile from the export of copper and related by-products the Company produces. As a result, the Banco Central de Chile (the Central Bank of Chile) retains 10% of the amounts from such sales that CODELCO transfers to its Chilean account. The Copper Reserve Law has an adverse effecton our ability to retain earnings for purposes of capital expenditures. In July 2019, the Chilkan Congress issued a new resolution to repeal the Copper Reserve Law. Under this resolution, CODELCO will remain subject to the 10% special export tax until 2028. Beginning in 2029, the tax will be reduced annua lly by 25% until 2032 when CODELCO willno longer besubjectto such tax. As of April 1,2020, CODELCO is paying the taxes owed pursuant to the Copper Reserve Law on a monthly basis, following a response measure from the Government of Chile to the economic effects of the COVID-19pandemic.
Chiles income tax law (the Income Tax Law) contemplates thin capitalization rules which are applicable to CODELCO. As such, under Article 41 Fofthe Income Tax Law, interest, premiums, remuneration for services, financial expenses and any other contractual surcharges under credit facilities which are paid or credited to an account or made available to related entities (as defined below) of CODELCO in respect ofloa ns or lia bilities, are subjectto a 35% tax (applied to the debtor), if the debtoris considered to be in an excessive indebtedness situation by the years end. The withholdingtax applicable to the interest payments made by CODELCO (for example, the4% Chilean Withholding Tax), can be usedasa credit againstsuch 35% sole tax. Indebtedness will be considered to be excessive when at theend of the corresponding fiscal yearthe total annual indebtedness granted by entities incorporated, domiciled or established in a foreign country orin Chile, eitherrelated ornot, exceeds three times CODELCO’s tax equity, calculated pursuant to the provisions of the Income Tax Law. Only short-term debt (i.e., with ma turity of less than 90 days, including extensions or renewals) with non-related parties may be excluded from the total annual indebtedness calculation. Under the Excessive Indebtedness rules, a lender or creditor will be deemed to be relatedto CODELCO 1f: (i) the beneficiary is incorporated, domiciled, resident or established in one of the territories or jurisdictions listed in Section 41 H of the Income Tax Law; (ii) the beneficiary and CODELCO belong to the same corporate group, or the beneficiary or debtor directly or indirectly, owns or participates in 10% ormore of the capital of the profits of the other, orif the beneficiary and debtor ha ve a common partner or shareholder which, directly orindirectly, owns or participates in 10% ormore of the capital or the profits of one or the other, and that the beneficiary is incorporated, domiciled, resident or established outside Chile; (iii) the indebtednessis guaranteed directly orindirectly by a third -party related to CODELCO, in the terms of clauses (i) or (ii) above, or (iv) hereafter, provided thatsuch third-party is domiciled orresident abroad andisa final beneficiary (beneficiario final) of the financing; (iv) the relevant financial instruments documenting such indebtedness are placed and acquired by independent entities and such indebtedness is subsequently acquired ortransferred to a related entity accordingto subsections (i) to (iii) above; or(v) one party (¡.e., beneficiary or CODELCO) conducts one or more operations with a third -party who, in turn, directly or indirectly conducts one or more similar oridentical operations with a related party of such party, whateverthe capacity in which said third party and the parties intervene in such operations.
The debtor will be required to issue an affidavit in this regard in the form set forthby the Chileantax authorities.
Since the 2012 fiscal year and pursuantto Law No. 20,026, as amended, CODELCO has been subjectto a mining tax (Impuesto Específico a la Actividad Minera) on operatingincome generated duringthe operating year atprogressive rates between 5% and 14%. During2019, CODELCO distributed a total of U.S.$1.0 billion (includingincome tax, and export tax payments and distributions) to the Chilean Treasury. See Managements Discussion and Analysis of Financial
27
Condition and Results of Opera tions-Liquidity and Capital Resources-Distributions to the Chilean Treasury and Regula tory Framework. The statutory rate of the miningtax for CODELCO was calculated at 5% for 2019, 2020 and
2021. However, no assurances can be made that such rate will remain in place.
CODELCOSs corporate tax rate has gra dually increased from 21% in 2014toup to25%since 2017. In addition, CODELCO is subject toa 40% tax onnetearnings applicable to state-owned enterprises as specified by Decree Law No.
2,398, Article 2.
Constitutional amendments could be proposed that would allow private ownership of CODELCO.
CODELCO is 100% owned by the Government of Chile and a constitutional amendment approved by the Chilean Congress would be required to allow private participation in CODELCOs ownership. Although there has been no formal governmental action to permit private investment in CODELCO, no assurance can be given that such a constitutional a mendment will not be proposed to the Chilean Congress in the future. See Regulatory Framework- Overview of the Regulatory Regime.
Risks Relating to Chile
CODELCOS*s growth andprofitability depend on political stability and economic activity in Chile and otheremerging markets.
Almost allof CODELCOSs revenues are derived from its operations in Chile. Accordingly, CODELCO*s results of operations and general financial condition depend in part on Chilean markets for labor and certain materials and equipment, and on factors relatingto Chilean political stability generally.
CODELCOS*s business performance is subject to the effects of inflation and changes in the value of the peso.
Although Chilean inflation has remained low in recent years, Chile has experienced high levels of infla tion in the past. High levels of inflation in Chile could adversely affect the Chilean economy and have an adverse effect on CODELCOSs results ofoperationsif the high inflation is not accompanied by a matching devaluation of the local currency.
There can be no assurance that Chilean inflation will not revert to prior levels in the future. In addition, the measures taken by the Central Bank of Chile to control inflation have often included maintaininga tight monetary policy with high interest rates, thereby restrictingthe availability of credit and economic growth.
The following table shows the annual rate of inflation (as measured by changes in the Chilean consumer price index andas reported by the Instituto Nacional de Estadísticas, orthe Chilean National Institute of Statistics):
Year Inflation (CPI) (in percentages)
2017 2.3
2018 2.6
2019 3.0
2020… 3.0 2022 (through September 30, 2022) 10.8
Source: Chilean National Institute of Statistics
A significant portion of CODELCOs operating costs are denominated in pesos and could therefore be significantly affected by the rate of inflation in Chile. If inflation in Chile were to increase without a corresponding depreciation of the peso, orif the value of the peso were to appreciate relative to the U.S. dollar without the peso experiencing corresponding deflation in Chile, the financial position and results of operations of CODELCO as well as
28 the value of the notes could be materially and adversely affected. See Management’s Discussion and Analysis of Financial Condition and Results ofOperations-Liquidity and Capital Resources.
The variation ofthe U.S. dollara gainstthe peso constitutes CODELCOs main foreign exchange rate exposure.
The mismatch between assets and lia bilities denominated in pesos and UF amounts to a netlia bility forthe Company of
U.S.$2.4 billion (7.6% of the total amount of lia bilities on a consolidated basis) as of December31,2021 and U.S.$2.6 billion (8.4% of the total amount of lia bilities on a consolidated basis) as of December 3 1, 2020. In order to cover this risk, CODELCO has, and currently is, enga ged in hedging transactions to partially mitigate the effects of the volatility of foreign exchange rates. See Risk Factors -RisksR elatingto CODELCOs Operations-CODELCO engages in hedging activity from time to time, particularly with respect to its copper production, which may notbe successful and may result in lossesto CODELCO.
Risks Relating to the Offering
In case ofa default under the notes, the ability of holders to attach property of CODELCO may be limited by Chilean law.
CODELCOSs activities in Chile are dependent on concessions granted by the Chilean Ordinary Courts with respect to CODELCO”s mining rights. These concessions are granted for indefinite terms in the case of exploitation concessions and for two-year periods in the case of exploration concessions (renewable with certain limitations). As a general matter, the Ordinary Courts, through legal proceedings brought by third parties (or by the Chilean Treasury in case of noncompliance with the obliga tionto pay annual fees), havethelegal right to terminate orannul the concessions.
Pursuant tothe Chilean Mining Code, all mining concessions, as well as certain raw materials and other property or assets permanently dedicated to the exploration or extraction of minerals, cannot be subject to an order of attachment, except with respect to mortgages, where the debtor consents to the attachment in the relevant legal proceeding or when the debtor is a stock corporation. In addition, pursuant to the Constitution, mining concessions corresponding to mining deposíts exploited by CODELCO upon its creation in 1976 can be subject neither to attachment norto a ny act of disposition by CODELCO. As a result, the rights of holders to attach property of CODELCO in the event of a default underthe notes would be limited by such provisions. See Regulatory Framework-Mining Regulations.
CODELCOis permitted to incur additional indebtedness ranking equally to the notes or certain secured indebtedness.
The indenture governing the notes will not contain any restrictions on the amount of additional indebtedness which may be incurred by CODELCO or its subsidiaries; however, the notes contain restrictions on the ability of CODELCO and its subsidiaries to incur certain secured indebtedness as set forth in Description of Notes-Limitations on Liens below. As a result, CODELCO is permitted to issue additional unsecured debt thatranks on an equal basis with the notes. If CODELCO incurs any additional unsecured debt that ranks on an equal basis with the notes, the holders of that debt will be entitled to share with the holders ofthe notes in any proceeds distributed in connection with an insolvency, liquida tion, reorganization, dissolution or other winding-up of CODELCO subject to satisfaction of certain debt limitations. This may have the effect of reducing the amount of proceeds paid to the holder of the notes under such an event. The indenture does notrequire CODELCO to make payments underthe notes ratably with payments being made underany other obligations.
If certain changes to tax law wereto occur, CODELCO would have the option to redeem the notes. CODELCO may also redeem the Notes before maturity atits option at the prices set forth in this offering memorandum.
Under current Chilean la wa nd regulations, payments of interest to holders ofthe notes thatare not residents of Chile for purposes of Chilean taxation generally will be subject to Chilean withholding tax ata rate 0f£ 4%. Subject to certain exceptions, CODELCO will pay Additional Amounts (as defined in Description of Notes-Payments of Additional Amounts) so that the amountreceived by the holder a fter Chilean withholdingtax will equal the amount that would ha ve been receivedifno suchtaxes had been applicable. The notes are redeemable atthe option ofCODELCO in whole, but not in part, at any time, at the principal a mount thereof plus accrued and unpaid interest and any Additional Amounts due thereon if, as a result of a change in the laws orregula tions a ffecting Chilean taxation that is announced or becomes effective on or after the date of the agreement to purchase the notes, CODELCO becomes obligated to pay Additional Amounts with respectto intereston such notes in respect ofwithholding or deduction ofChileantax at a rate in excess of 4%. CODELCO is unable to determine whether the Chilean Congress will enact any increase in the
29 withholding tax rate; however, if such an increase were enacted, the notes would be redeemable at the option of CODELCO. See Description of Notes- Redemption-Tax Redemption and Taxation-Chilean Ta xation.
CODELCO may redeem thenotes, in whole orin part, at any time and from timeto timepriorto the date that is three monthspriorto the maturity date ofthe notes at a redemption price based ona make whole premium, plus accued and unpaid interest. We may also redeem thenotes, in whole orin part, atany time on ora fter the date thatis three months prior to the maturity date of the notes, at a redemption price equal to 100% of the outstanding principal amount of the notes to be redeemed, plus accrued and unpaid interest.
An investormaynotbe able to reinvestthe redemption proceeds in other securities with interest rates similarto that applied to the notes redeemed.
Our obligations under the notes will be subordinated to certain statutory liabilities.
Under Chilean bankruptcy la w, the obliga tions under the notes are subordinated to certain statutory preferences.
In the event ofa liquidation, such statutory preferences, including claims for salaries, wa ges, secured obliga tions, social security, taxesand court fees and expenses, will ha ve preference o ver any other claims, including claims by any investor in respect of thenotes.
The market value of the notes may depend on economic conditions in other countries overwhich CODELCO has no control.
The market value of securities of Chilean companies, including CODELCO, is affected to varying degrees by economic and market conditions in other emerging market countries. Although economic conditions in such countries may differ significantly from economic conditions in Chile, investors reactions to developments in any of these other countries may have an adverse effecton the market value ofsecurities of Chilean issuers. International financial markets have in recent years experienced volatility dueto a combination of international political and economic ev ents. There can beno assurance that the deterioration of emerging market economies or other events in or outside of the region will not adversely a ffect the market value of the notes.
The transferability ofthe notes may belimited by the absence of an active trading market and restrictions on transfer under applicable securities law.
The notes have not been registered under the Securities Act or any state securities laws. CODELCO does not intend to list the notes on any national securities exchange orto seek admission ofthenotes for tradingon any securities exchange in the United States; however, we intend to apply to list the notes on the Luxembourg Stock Exchange.
Furthermore, CODELCO does not intend to exchange thenotesfor notes that are registered under the Securities Act. The initial purchasers are not obligated to make a market in the notes. No assurance can be given about the liquidity ofany markets that may develop forthe notes, the ability of holders to sell the notes orthe prices at which the notes couk be sold. Future trading prices of the notes will depend on many factors, including prevailing interest rates, CODELCO’s operating results and the market for similar securities. There can be no assurance that any active trading market will develop for the notes or that holders of the notes will be able to transfer or resell the notes without registration under applicable securities laws.
We cannot assure you that our credit rating, or the credit ratings for the notes, will not be lowered, suspended or withdrawn by the rating agencies.
Our credit ratingis subject to change in the future, and the credit ratings ofthe notes may change after issuance.
Such ratings do not address all material risks relatingto an investment in CODELCO, orits notes, but rather reflect only the views of the ratinga gencies at thetime the ratings areissued. An explanation ofthesignificance ofsuch ratings may be obtained from the rating agencies. CODELCO cannot assure you that such credit rating will remain in effect for any given period of time orthat such ratings will not be lowered, suspended or withdrawn entirely by the rating a gencies, if, in the judgmentof such rating a gencies, circumstances so warrant. Our credit ratingis an important part of maintaining our liquidity. Credit ratings are not a recommendation to buy, sell or hold any security. Each agencys rating shouk be evaluated independently of any other agencys rating, as each agency has different evaluation criteria. Any lowering,
30 suspension or withdrawal of such ratings may potentially increase our borrowing costs, and may have an adverse effect on our financial results and business operations and the marketprice and marketability ofthenotes.
Payments claimed in Chile on the notes, pursuantto a judgmentor otherwise, may be in pesos.
In the eventthat proceedings are brought against CODELCO in Chile, eitherto enforcea judgment oras a result of an original action brought in Chile, CODELCO would not be required to discharge those obliga tions in a currency other than Chilean currency. Such obligation may be satisfied in Chilean currency at the exchange rate in effect on the date on which paymentsare made. As a result, holders of the notes may suffera U.S. dollar shortfall if judgmentin Chile is obtained.
31
USE OF PROCEEDS
The estimated total netproceeds from the offering ofthenotesare U.S.$890,143,801, after deducting commissionsto the initial purchasers, paymentof the Chilean stamp tax ofU.S.$7,200,000 and payment of legal fees and all other expenses related to the offering. CODELCO intends to use the net proceeds from the sale of the notes, for general corporate purposes.
32
CAPITALIZATION
The following ta ble sets forth the capitalization of CODELCO asof September 30, 2022 (1) on an actual historical ba sis, (ii) as adjusted to give effect to the offeringof the notes and application ofthe estimated net proceeds from the offering of the notes as described under Use of Proceeds. This table is qualified in its entirety by reference to, and should be read together with, CODELCO’s Unaudited Interim Consolidated Financial Statements, including the notes thertto, included elsewhere in this offering memorandum.
As of September 30, 2022 Actual As Adjusted (in thousands of U.S.S) Current financial liabilities
Current portion of loans from financial institutions… 6,885 6,885 Current portion of bonds issued 368,403 368,403 Total current financial liabilitics………………… 375,288 375,288 Non-current financial liabilities Bank debt . 970,033 970,033
4.500% Notes due 2023. . – –
2.250% Euro Notes due 2024″ 389,565 389,565
4.000% UF Notes due 20259. 250,684 250,684
4.500% Notes due 2025, 394,598 394,598
2.500% UF Notes due 2026 366,539 366,539
3.625% Notes due 2027. 1,237,208 1,237,208
2.869% Notes due 2029. 129,154 129,154
3.000% Notes due 2029. 1,090,317 1,090,317
3.150% Notes due 2030. 991,412 991,412
3.750% Notes due 2031 797,491 797,491
2.840% Notes due 2034 63,172 63,172
5.625% Notes due 2035 493,036 493,036
6.150% Notes due 2036. 496,896 496,896
3.580% Notes due 2039 44,544 44,544
4.250% Notes due 2042. 734,711 734,711
5.630% Notes due 2043. 934,542 934,542
4.875% Notes due 2044. 962,539 962,539
4.50% Notes due 2047. 1,208,244 1,208,244
4.85% Notes due 2048. 594,752 594,752
4.375% Notes due 2049. 1,187,659 1,187,659
3.700% Notes due 2050. 2,579,290 2,579,290
3.150% Notes due 2051 447,591 447,591 Notes offered hereby! . . 0 900,000 Total non-current financial liabilities………….. 16,363,977 17,263,977 Non-controlling interest …………. 919,222 919,222 Equity Issued capital . 5,619,423 5,619,423 Other reserves 5,302,576 5,302,576 Retained Earnings Accumulated deficit … (66,447) (66,447) Profits distributions to the Chilean Treasury . – – Equity attributable to equity owners of the parent… 10,855,552 10,855,552 Total capitalization 28,514,039 29,414,039
(1) The U.S.Sequivalent of €600.0 million aggregate principal amount of the 2.25% Euro Notes due 2024 has been translated at an exchange rate of
U.S.$1.00=€0.97876 at September 30, 2022.
33
2)
6)
(4)
(5)
(6)
0)
The U.S.Sequivalent of 6.9 million UF aggregate principal amount of the 4.0% UF notes due 2025 has been translated at an exchange rate of
U.S.$1.00=0.028027 UF at September 30, 2022.
The U.S.Sequivalent of 10.0 million UF aggregate principal amount of the 2.5% UF notes due 2026 has been translated at an exchange rate of
U.S.$1.00=0.028027 UF at September 30, 2022.
The U.S.Sequivalent of HKD 500.0 million aggregate principal amount of the 2.84% notes due 2034 has been translated at an exchange rate of
U.S.$1.00= HKD 0.12739 at September 30, 2022.
The U.S.Sequivalent of AUD 70.0 million aggregate principal amount of the 3.580% notes due 2039 has been translated at an exchange rate of
U.S.$1.00= AUD 0.64251 at September 30, 2022.
Net of deferred financing costs, commissions to the initial purchasers and payment of legal fees and all other expenses related to the offering.
CODELCO has no convertible debt securities, warrants exercisable for debt securities or other similar securities outstanding.
34
EXCHANGE RATES
Asa general matter, priorto 1989, Chilean la w permitted the purchase and sale of foreign exchange only in those cases explicitly authorized by the Central Bank of Chile. Law No. 18,840, the Central Bank of Chile Act, liberalized the rules that govern the purchase and sale of foreign currency. The act empowers the Central Bank to determine that certain purchases and sales of foreign currency specified by law must be carried out in the Mercado Cambiario Formal (the Formal Exchange Market). The Formal Exchange Market is formed by the banks and other entities so authorized by the Central Bank. The exchange rate of the transactions conducted in the Formal Exchange Markets freely agreed upon by the parties thereto. For more information, see Foreign Investment and Exchange Controls in Chile. The observed exchange rate for any given day equals the average exchange rate ofthe transactions conducted in the Formal Exchange Market on theimmediately preceding banking day, as certified by the Central Bank (the Observed Exchange Rate). Even though the Central Bank is authorized to carry out its transactions at therates it sets, it generally uses the spotrate forits transactions. Authorized transactions by other banks are generally carried out at the spot rate. Purchases and sales of foreign exchange, which may be effected outside the Formal Exchange Market, can be carried out in the Mercado Cambiario Informal (the Informal Exchange Market). There are no limits imposedon theextent to whichtheexchange ratein the Informal Exchange Market may fluctuate above or below the Observed Exchange Rate.
The following ta ble sets forth, for the periods indicated, the high, low, average and period -end Observed Exchange Ratefor U.S. dollars for each year beginning in 2016 as reported by the Central Bank of Chile. The Federal Reserve Bank of New York does notreport a noon buyingrate for Chilean pesos.
Observed Exchange Rates (Ch$ per U.S.S)
Period High” Low Average? Period-End* MO nono none 730.31 645.22 676.83 667.29
679.05 615.22 649.33 615.22
698.56 588.28 640.29 695.69
828.25 649.22 702.63 744.62
867.83 710.26 792.22 711.24
868.76 693.74 759.27 850.25
852.03 798.86 822.05 810.12
826.93 787.05 807.07 805.25
815.03 777.1 799.19 787.16
856.58 779.33 815.12 856.58
868.06 822.25 849.39 826.26
919.97 787.05 807.07 919.97
1,042.97 911.42 953.71 911.42
945.47 882.11 904.35 882.11 September. 987.07 866.28 921.01 966.00 October. 983.91 931.12 955.89 945.31 November . 948.74 887.46 917.05 905.70 December. 894.82 856.76 875.66 859.51
(1) Rates shown are the actual low and high (as applicable) on a daily basis for periods indicated.
(2) The average annual rates represent the average of average monthly rates for the periods indicated. The average monthly rates represent the average ofthe rates on each day for the periods indicated.
(3) Period ends on January 1 of the following year.
Source: Central Bank of Chile.
The Observed Exchange Rate reported by the Central Bank of Chile as of January 30,2023 was Ch$803.14 perU.S.$1.00.
35
SELECTED CONSOLIDATED FINANCIAL DATA
The following ta blespresent CODELCOs summary consolidated financial data and other data as ofand for each of the periods indicated. This data (other than the average LME copper prices) is derived from, and should be read together with, CODELCO*s Consolidated Financial Statements, including the notes thereto, included elsewhere in this offering memorandum. This data should also be read together with Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Consolidated Financial Statements and other financial information included in this offering memorandum are presented in accordance with IFRS. The unaudited results of operations forthenine-month periodsended September 30,2021 and 2022 are not necessarily indicative of the results to be expected forthefullyearorany other period.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Revenue
Cost of sales’,
Gross profit.
Other incom:
Impairment losses andor reversal of impairment losses determined in accordance with IFRS 9
IN A Administrative expenses ..ooooooccnoncconncinnonos Other expenses, by function? Other gains..
Finance incom
Finance costs.
Share of profit of associates and joint ventures accounted for using equity
Foreign exchange difference:
Profit (loss) before income tax
Income tax expense?
Profit (loss) for the peri0d……ooonccoonccnnn…
Profit (loss) attributable to owners of the parent
Profit (loss) attributable to non-controlling IMtOreStS…ooocomo..
Profit (loss) for the period
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Total current assetS …ooooomoninnonooo
Total property, plant and equipment.
Investments accounted for using equity method” Non-current receivables All other assetsÚ …
Total assets…..
Total current liabilities
Total non-current liab Total liabilities…
Non-controlling interest:
For the nine-month period ended
For the year ended December 31, September 30, 2019 2020 2021 2021 2022 (in thousands of U.S.$) 12,524,931 14,173,168 21,024,815 14,868,179 11,879,784
(10,051,441) (10,565,179) (12,185,688) _ (8822621) _ (8,340,192) 2,473,490 3,607,989 8,839,127 6,045,558 3,539,592 360,690 97,321 115,741 83,337 39,476 378 eos) (1,250) 0) (1,182)
(17,069) (9,463) (9,389) (1,429) (10,353)
(409,234) (397,045) (459,278) (822,012) (874,634)
(1,747,838) (1,456,821) (2,717,007) (1,748,250) (1,305,710)
22,672 30,425 37.531 24,032 22,415
36.871 40,213 13,657 10,086 29,600
(479,307) (742,464) (641,009) (448,789) (424,459)
414,845 305,607 53.391 13,203 39,436
153,917 (165,501) 313,736 254,932 129,728 407,773 1,043,884 5,906,704 4,197,063 1,697,864
(393,245) (287.003) (3,855,336) _ (2,690,160) _ (1,206,688) 14,528 256,881 2,051,368 1,506,903 491,176
6.637 2090 1942486 1,425,934 471,660
7.891 13,888 1os.882 309609 _ 19,516 LaS 256.881 2.051.368 1,506,903 491,176 As of December 31 2019 2020 2021 As of September 30, 2022 (in thousands of U.S.$) 6,050,021 7,758,122 7,801,909 6,509,202 29,700,164 30,012,945 30,811,432 31,504,559 3,483,523 3,418,958 3,546,011 3,534,431
98,544 93.986 104,177 80,220
1,012,359 926.375 793.906 784,692 40,344,611 42,210,386 43,057,435 42,413,104 3,922,957 3,439,907 3,938,877 2,674,075
24,786,987 27.143.988 27.543.657 27.964.255
28,709,944 30,583,895 31,482,534 30.638,30 919,757 924,942 946,412 919,222
36
Equity attributable to owners of the parent… 10,714,910 10,701,549 10,628,489 10,855,552 Total equity. 11.634,66 11,626,491 11,574,901 11,774,774 40,344,611 42,210,386 43,057,435 42,413,104
Total liabilities and equit
As of and for the nine-month period ended As of and for the yearended December 31, September 30, 2019 2020 2021 2021 2022 (in thousands of U.S.S, except ratios and copper prices) OTHER ITEMS Depreciation and amortization of 1.636.784 1,640,339 EST IA . 2,220,069 2,455,070 2,259,324 > > Interest expense, net. (442,436) (702,251) (627,352) (438,703) (394,859) Ratio of earnings to fixed charges (adjusted) O mo. 1.9 2.4 16.2 16.6 11.1 Average LME copper price (U.S. £ per pound) . 272.1 280.3 422.6 416.8 411.1 Adjusted EBITDA%. 4,042,748 5,289,081 10,378,724 7,426,425 4,697,217 Ratio of debt to Adjusted EBITDAO 4.3 3.4 1.7 N.A N.A Adjusted EBITDA coverage ratio 9.1 7.5 16.5 16.9 11.9
(0)
Q)
6)
(4)
16)
Cost of sales for any period includes direct and indirect costs, depreciation and amortization associated with the production of copper and byproducts, as well as purchase costs of third-party copper, sold by CODELCO in that period.
Other expenses is comprised principally of costs related to the 10% special export tax paid by the Company, retirement plan and severance indemnities and fixed indirect costs below production level. See note 22.b of the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CODELCO is subject to a mining tax on operating income at progressive rates of between 5% and 14%. The tax is imposed on operating income generated during the operating year. The statutory rate of the mining tax for CODELCO was 5.0% for each year between 2017 and
2019. In addition, CODELCO is subject to the corporate income tax rate of 24% in 2016 and 25% since 2017 (pursuant to the tax reform in
2014) and a 40% tax on net eamings applicable to state-owned enterprises as specified by Decree Law No. 2,398, Article 2. See Management’s Discussion and Analysis of Financial Condition and Results ofOperations-Liquidity and Capital Resources -Distributions to the Chilean Treasury for additional information. See note 5 ofthe Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources -Distributions to the Chilean Treasury and Regulatory Framework. See also Risk Factors-Risks Relating to CODELCO*s Relationship with the Government of Chile -CODELCO is subject to special taxes for information regarding the mining tax rate effective in 2016.
See note 8 of the Consolidated Financial Statements and the Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.
All other assets includes other non-current financial assets, other non-current non-financial assets, accounts receivable from related parties, non-current, non-current inventories, intangible assets other than goodwill, investment property, non-current tax assets and deferred tax assets.
(6) For the purpose of calculating CODELCOS*s ratio of eamings to fixed charges (adjusted), (i) earnings consist of Adjusted EBIT and (ii) fixed
(0)
(8) charges consist of finance cost. The ratio of earnings to fixed charges (adjusted) is calculated by dividing Adjusted EBIT by finance cost.
Adjusted EBIT is calculated by adding finance cost, impairment charges net of reversals (as defined in note (1) of the following table) and income tax expense to profit (loss) for the period. Adjusted EBIT, while not a financial performance measure under IFRS, is presented as an indicator of funds available to service debt. Adjusted EBIT and Adjusted EBITDA data are included in this offering memorandum because such data are used by investors to assess: (i) the operating trends and financial performance ofthe Company and (ii) the ability ofthe Company to (a) service its existing debt, (b) incur new debt and (c) fund its capital expenditures. The Company believes that Adjusted EBIT, while providing useful information, should not be considered in isolation as a substitute for profit for the period, as an indicator of operating performance, or as an alternative to cash flow as a measure of liquidity. Additionally, the Companys calculation of Adjusted EBIT may be different than the calculation used by other companies and therefore, comparability may be affected. See notes 8, 21 and 22 of the Consolidated Financial Statements and Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information about impairment charges and reversals and other non-cash charges.
Average price on the LME for Grade A cathode copper during period.
Adjusted EBITDA is calculated by adding finance cost, income tax expense, depreciation and amortization of assets plus export taxes and impairment charges net of reversals (as defined in note (1) ofthe following table) to profit (loss) for the period. Adjusted EBITDA is presented because it is a widely accepted indicator of funds available to service debt, although it is not an IFRS-based measure of liquidity or performance. Adjusted EBIT and Adjusted EBITDA data are included in this offering memorandum because such data are used by investors to assess: (i) the operating trends and financial performance of the Company and (ii) the ability ofthe Company to (a) service its existing debt, (b) incur new debt and (c) fund its capital expenditures. The Company believes that Adjusted EBITDA, while providing useful information, should not be considered in isolation or as a substitute for profit as an indicator of operating performance, oras an alternative to cash flow as a measure of liquidity. Additionally, the Companys calculation of Adjusted EBITDA may be different than the calculation used by other
37
(9)
(10) companies and therefore, comparability may be affected. See notes 8, 21 and 22 of the Consolidated Financial Statements and Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information about impairment charges and reversals and other non-cash charges.
The ratio of debt to Adjusted EBITDA is calculated by dividing debt by Adjusted EBITDA. Debt is defined as loans from financial institutions plus bonds issued.
Adjusted EBITDA coverage ratio is the ratio of Adjusted EBITDA to finance cost net of finance income. See note 9 above for further information about Adjusted EBITDA and notes 21 and 22 of the Consolidated Financial Statements and Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information about impairment charges and reversals and other non-cash charges.
The following table shows CODELCO’s eamings, Adjusted EBIT, ratio of earnings to fixed charges (adjusted), Adjusted EBITDA and reconcilia tion of Adjusted EBIT and Adjusted EBITDA forthe periods indicated.
For the nine-month period ended
For the year ended December 31, September 30,
2019 2020 2021 2021 2022 (in thousands of U.S.$)
Profit (loss) for the period. 14,528 256,881 2,051,368 1,506,903 491,176 Income tax expense 393,245 787,003 3,855,336 2,690,160 1,206,688 Finance costs . 479,307 742,464 641,009 448,789 424,459 Impairments’ – – – – – Adjusted EBITO…. 887,080 1,786,348 6,547,713 4,645,852 2,122,323 Ratio of earnings to fixed charges (adjusted)> 1.9 2.4 16.2 16.6 11.1 Depreciation and amortization of assets( 2,220,069 2,455,070 2,259,324 1,636,784 1,640,339 Copper Reserve Law, 935,599 1,047,663 1,571,687 1,143,789 934,555 Adjusted EBITDA….ooooociccionicicccooos 4.042.748 5,289,081 10,378,724 7,426,425. 4,697,217
(1)
2)
6)
(4)
(5)
Impairments include charges and reversals related to charges of investment projects, research projects and investment in associates and joint ventures and exclude impairment charges related to definitely -lived tangible assets which show indicators ofimpairment under International Accounting Standard No. 36. See notes 8, 21 and 22 of the Consolidated Financial Statements and Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information about impairment charges and reversals and other non-cash charges.
Adjusted EBIT is calculated by adding finance cost, impairment charges net of reversals (as defined in note (1) above) and income tax expense to profit (loss) for the period. Adjusted EBIT, while not a financial performance measure under IFRS, is presented as an indicator of funds available to service debt. Adjusted EBIT and Adjusted EBITDA data are included in this offering memorandum because such data are used by investors to assess: (i) the operating trends and financial performance of the Company and (ii) the ability of the Company to (a) service its existing debt, (b) incur new debt and (c) fund its capital expenditures. The Company believes that Adjusted EBIT, while providing useful information, should not be considered in isolation as a substitute for profit for the period, as an indicator of operating performance, or as an alternative to cash flow as a measure of liquidity. Additionally, the Company’s calculation of Adjusted EBIT may be different than the calculation used by other companies and therefore, comparability may be affected. See notes 8, 21 and 22 of the Consolidated Financial Statements and Unaudited Interim Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information about impairment charges and reversals and other non-cash charges.
For the purpose of calculating CODELCOSs ratio of earnings to fixed charges (adjusted), (i) earnings consist of Adjusted EBIT and (ii) fixed charges consist of finance cost. The ratio of earnings to fixed charges (adjusted) is calculated by dividing Adjusted EBIT by finance cost.
Seenote 9 ofthe Consolidated Financial Statements and the Unaudited Interim Consolidated Financial Statements.
The Copper Reserve Law currently requires the payment ofa 10% special export tax on receivables of the sales proceeds that CODELCO receives and transfers to Chile from the export of copper and related by products produced by CODELCO. For further information, see Risk Factors- Risks Relating to CODELCO”s Relationship with the Government of Chile- CODELCO is subject to special taxes.
The following ta ble shows CODELCOSs debt andratio ofdebt to Adjusted EBITDA and Adjusted EBITDA coverage ratio fortheperiods indicated.
As of and for the nine-month period ended As of and for the year ended December 31, September 30,
38
2019 2020 2021 2021 2022 (in thousands of U.S.S, except ratios) Debt. 17,264,356 18,076,656 17,241,500 17,317,960 16,739,265 Ratio of debt to Adjusted EBITD. 4,3 3.4 1.6 N.A N.A Finance income 36,871 40,213 13,657 10,086 29,600 Adjusted EBITDA coverage ratio’ . 9.1 7.5 16.5 16.9 11.9
(1)
Adjusted EBITDA coverage ratio is the ratio of Adjusted EBITDA to finance cost net of finance income.
39
SELECTED OPERATINGDATA
The following table sets forth a summary of the production and sales data ofCODELCO for each ofthe years ended December 31,2019,2020 and 2021 and forthe nine-month periods ended September 30,2021 and 2022. For more information regarding such data, see Business Properties.
For the nine-month period ended Year ended December 31, September 30, 2019 2020 2021 2021 2022 COPPER MINING OPERATIONS Ore Mined (in thousands of dry metric tons): Mina Ministro Hales.. 19,160 19,574 16,492 12,489 14,614 Chuquicamata Division. 65,582 67,172 48,766 37,254 33,649 Radomiro Tomic Division 70,753 72,286 80,597 59,360 60,126 Gabriela Mistral Division . 38,180 36,475 38,030 27,008 28,467 El Teniente Divisi 52,006 53,343 4,979 3,637 2,902 Andina Division. 30,676 33,035 17,337 12,202 14,488 Salvador Division. 10,362 10,882 2,930 2,159 1,894 Total coocoonocicnococicnoncnnocicrnncccnninoos 286.718 292,767 09,132 153,108 156,104 Average Copper Ore Grad: Mina Ministro Hales 0.99% 1.07% 1.31% 1.36% 1.05% Chuquicamata Division. 0.73 0.76 0.64 0.65 0.57 Radomiro Tomic Division 0.48 0.45 0.56 0.55 0.51 Gabriela Mistral Division . 0.42 0.40 0.40 0.38 0.45 El Teniente Division. 0.95 0.94 0.57 0.56 0.53 Andina Division. 0.67 0.72 0.80 0.79 0.80 Salvador Division… 0.63 0.66 1.11 1.13 0.89 Weighted Average 0.67% 0.69% 0.64% 0.64% 0.60% PLANT COPPER PRODUCTION (by division in metric tons Mina Ministro Hales 151,838 170,606 181,704 143,969 108,854 Chuquicamata Division 385,309 400,720 319,280 239,412 200,353 Radomiro Tomic Division. 266,415 260,653 326,456 222,544 215,920 Gabriela Mistral Division 104,087 120,080 100,908 68,804 84,224 El Teniente Division. 459,744 443,220 459,817 341,879 291,090 Andina Division… 170,274 184,437 177,216 129,337 139,805 Salvador Division. 50,561 56,302 52,885 38,884 21,867 Tobal cococincinninninnnnnnninnconcnnancnnoos 1,588,229 1.618.018 1.618.266 1 184.829 1062112 PLANT COPPER PRODUCTION (contained copper in metric tons): ER Cathodes.. 10,228 47,542 60,210 38,138 22,674 SX-EW Cathode: 395,998 384,188 414,556 285,001 287,113 Calcined.. 116,999 100,116 135,913 102,366 95,754 Anodes – Bl 338,769 372,607 388,084 285,646 267,866 White Metal 0 0 4,384 0,331 0,059 [A 726,235 713,565 615,119 473,678 388,647 Total coco ocn nonononononononcnnnono 1,588,229 1,618,018 1,618,266 1,184,829 1,062,112 MOLYBDENUM PRODUCTION (contained molybdenum in metric tons)….. 22,353 27,915 21,045 16,007 16,144 COPPER SALES (in metric tons; includes sales of third-party copper): Cathodes . 1,076,097 1,233,448 1,253,251 910,880 825,110 Fire Refined – – – – – Anodes – Blister 58,491 103,850 106,679 59,939 67,998 Concentrates 721,339 610,599 553,902 406,164 323,341 Total . 1,855,926 1,947,897 1,913,832 1,376,983 1,216,449
40
COPPER EXPORTS (in metric tons; includes sales of third-party copper): Cathodes Blister.
COMCEMEIALES cococccoccanonnnanonnnononannnnnnnnnnon
INVENTORIES OF COPPER AT PERIOD-END (in metric tONS).oooooocccnnnoccccccnonacccnannnn nos
1,009,355 1,143,212 1,133,925 823,362 772,059 57,487 100,638 106,689 59,942 67,998 503,424 399,900 332,753 262,448 206,333 1,570,266 1,643,750 1,573,367 1,145,752 1,046,390
38,375 17,305 12,210 18,393 28,073
41
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with CODELCOs Consolidated Financial Statements, including the notes thereto, included elsewhere in this offering memorandum, as well as the data set forth in Selected Consolidated Financial Data. Except as otherwise disclosed herein or indicated, the Consolidated Financial Statements and other financial information included in this offering memorandum are presented in accordancewithIFRS.
Overview
CODELCO is the worlds largest copper producer and one of the largest companies in Chile in terms of revenues. CODELCO engages primarily in the exploration, development and extraction of ore -bearing copper and byproducts, the processing of ore into refined copperand the international sale of refined copper and byproducts. In 2021, CODELCO derived 93.1% ofits total sales from copper and 6.9% ofits total sales from byproducts ofits copper production, primarily molybdenum, anodic slimes and sulfuric acid.
Since its inceptionin 1976, CODELCO has contributed approximately U.S.$129.9 billion (in 202 1 currency) to the Chilean Treasury. Approximately 66% ofthis amountwas generated in the last 20 years, representing 7.3% of the revenues ofthe Governmentof Chile. In 2020, CODELCO accounted for 16.6%of all Chilean exports.
CODELCOSs financial perfomance is significantly affected by the marketprices of copper. As with prices for other commodities, copper prices have historically been subjectto wide fluctuations. LME copper prices averaged
422.6 cents per pound in 2021 compared to280.3 centsperpound in 2020and 272.1 cents perpound in 2019. Copper prices averaged 411.1 cents per pound in the first nine months o£2022, compared to 416.8 cents perpound in the first nine months of 2021. Since 2020, prices have been affected by the COVID-19 pandemic. As of the date of this offering memorandum, the prices have been affected by a slowdown in demand due to higher inflation following the COVID-19 pandemic. Formore information, see Overview ofthe Copper Market.
CODELCO continues to focus on controlling and limiting production cost increases. For many years, CODELCO was within the first or second quartiles in the industry with respect to costs. This position was primarily attributable to the quality ofits ore bodies, its economiesofscale and theexperience ofits workforce and management.
Currently, CODELCO is in the third quartile ofthe industry s cost curve. The Company intends to make every effort, through investment and management, to be within the first or second quartiles ofthe industrys costcurvein the long- term. In 2021, CODELCO*s total costs and expenses increased by 12.5 cents per pound (5.2%) to 254.3 cents per pound, compared to 241.8 cents per pound in 2020 and 233.5 cents perpound in 2019, mainly due to higher production volume and sales and higher input prices, partially offset by foreign exchange rate depreciation of the Chilean peso againstthe US dollar. For the first nine monthsof2022, CODELCOS*s total costs and expenses increased by 35.1 cents perpound (14.4%)to 278.7 cents per pound, compared to 243.6 cents per pound for the same period in 202 1, mainly due to higher input prices, such as electricity and diesel, appreciation of the Chileanpeso a gainst the U.S. Dollar and negative foreign exchange difference on lia bilities denominated in Chilean peso. The benefits of CODELCOS*s cost saving programs were offset by higher energy and other costs as a result of inflation.
In 2021, CODELCO*stotal costs and expenses increased to U.S.$9.6 billion, compared to U.S.$8.6 billion in 2020, due to higher production volume, partially offset by the depreciation of the Chilean peso against the US.
dollar. In 2020, CODELCOSs total costs and expenses reached U.S.$8.6 billion, an increase compared to U.S.$82 billion in 2019, mainly due to higher input prices and depreciation of the Chilean peso. For the first nine months of 2022, CODELCO*s total costsand expenses amounted to U.S.$6.5 billion, compared to U.S.$6.4 billion for the same period in 2021. In 2021, CODELCOS*s cash cost of production was 132.7 cents per pound, compared to 1294 cents per pound in 2020 and 141.6 cents perpound in 2019. Forthe first nine months of 2022, CODELCO s cash costof production was 157.4 cents per pound, compared to 129.9 cents per pound for the same period in 2021. In 2021, CODELCO’S total cash cost was U.S.$4.7 billion, compared to U.S.$4.5 billion in 2020 and U.S.$4.9 billion in 2019.
For the first nine months of 2022, CODELCO*s total cash costwas U.S.$3.6 billion, as compared to U.S.$3.3 billion for the same period in 2021 (such total cash cost includes certain cash cost incurred at the corporate level). See Management’s Discussion and Analysis of Financial Condition a nd Results of Operations -Overview.
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CODELCO conducts hedging operations from time to time to reduce the risks associated with copper price volatility. CODELCO also periodically enters into futures contracts with respect to certain sales of its own copper.
Since 2005, CODELCO has occasionally hedged certain future copper delivery commitments and production in order to manage the risks associated with copperprice volatility. As of September 30, 2022, CODELCO did not haveany production hedging commitments and, accordingly, there was no related impacton pre -tax income forthe nine-month period ended September 30, 2022. See notes 29 and 30 to the Unaudited Interim Consolidated Financial Statements.
CODELCO has hedged a portion of its exchange rate and interest rate exposure by entering into forward exchange contracts to hedge against fluctuations in the UF to U.S. dollar exchange rate for its outstanding UF-denominated bonds. See Business and Properties-Marketing-Pricing and Hedging and Risk Factors-Risks Relatingto CODELCO’s Operations -CODELCO engages in hedging activity from time to time, particularly with respect to its copper production, which may notbe successful and may result in losses to CODELCO. See also notes 27 and 28 to the Consolidated Financial Statements and notes 29 and 30 to the Unaudited Interim Consolidated Financial Sta tements for further information on CODELCO*s hedgingactivity.
Sale prices for CODELCO*s products are established principally by reference to prices quoted on the LME and the New York Commodity Exchange (COMEX>) in the caseof copper, or prices published in Metals Weekly in the case ofmolybdenum. The substantial majority of copper produced by CODELCO is sold under annual contracts to customers who have long-term relationships with CODELCO. Pricingunder such contracts is based on prevailing average copper prices for a quotation period, generally for the month following the scheduled month of shipment.
Revenue under such contracts is recorded at provisional prices determined at the time of shipment. Usually, an adjustment is then madea fter delivery of thecopper, based on thepricingterms contained in the applicable contract.
CODELCOSs financial performance is also significantly affected by the relationship of copper prices to production costs. In 2021, CODELCO”s annual production, including its investment in El Abra and Anglo American Sur, remained stable at 1.73 million metric tons from 1.73 million metric tonsin 2020 and 1.71 million metric tons n
2019. The production in 2021 was higher at Radomiro Tomic, Ministro Hales and El Teniente offset production declines mainly at Chuquicamata, but also at Andina. The increase in production levels in 2020 were in connection with higher copper output at Ministro Hales, Chuquicamata and Andina were the main drivers of this increase and offset the decline atEl Teniente. The lower production levels in 2019 were in connection with weather disruptions in the northern area of Chile, a 14-day strike atthe Chuquicamata mine and upgrades atthe Chuquicamata and Salvador smelters that suspended operations temporarily.
In 2021, each U.S.$0.01 change in CODELCO*s average annual copper price perpound caused a variation in operating profit of approximately U.S.$35.0 million. CODELCO expects production to decrease in the near future resulting from lower average ore grades and lowerreclamations levels and to stabilize over time. CODELCO continues to develop its project pipeline with the goal of increasingits production marginally in the long-term, by overcoming certain non-permanent disruptions, such as inclement weather and other natural events. See Risk Factors-Risks Relating to CODELCO’s Operations -Earthquake damage to CODELCOS’s properties and operations coukd negatively a ffect CODELCOSs results.
CODELCO continues to develop and refine its mine management practices and programs to limit and reduce its costs. These include the following: (i) improved deposit identification and mining techniques; (ii) the implementation of early retirementplans and workforcereduction programs; (iii) an investment in human capital and continuing to attract and retain a world -class management team and professionals ofthe highest caliber; (iv) improved utilization ofequipmenta nd inputs used in the processes ofcopper production to increase productivity and efficiency; and (v)the development ofkey projects, specifically thenewminelevelat El Teniente, the Andina plant reallocation and the Chuquicamata underground mine projects. Production cash costs are influenced by mining and production practices, as wellas the type ofore from which copperis produced, production levels and marketprices of byproducts, and foreign exchange rates.
In 2021, CODELCO invested U.S.$2.7 billion, mainly in expansion and development projects, including the
Chuquicamata underground mine, the Andina plant reallocation, the new mine level at El Teniente and the upgrade of Chuquicamata, Salvador and El Teniente smelters. See Business and Properties.
43
In addition to selling its current production ofcopper, CODELCO may sell copper in its inventory from past production cycles to meet the demand of its customers. CODELCO also purchases copper from third parties in the spot market forresale. The Company makes these purchases and sales of third -party copperto meetthe requirements under sales contracts and to participate in the spot market for copper based on its evaluation of market conditions.
CODELCO has no long-term commitmentsregardin g third -party copper purchases or sales otherthan pursuant to the joint venture with China Minmetals Non-Ferrous Metals Co. Ltd. (Minmetals), a Chinese state-owned metals company. This joint venture ended in April 2016 and the related selling commitment ended in February 2021. For more information on Minmetals, see Business and Properties-Associations, Joint Ventures and Partnerships.
CODELCO also engages in copper transactions with its a ffilia tes at market terms. Inaddition, CODELCO purchases copper from its a ffiliates for further processing andresale.
The following tables set forth, for the periods indicated, the components of CODELCO*s consolidated financial statements ofoperations expressed as a percentage ofrevenue under [FRS. These tables are qualified in their entirety by reference to, and should be read together with, CODELCOs Consolidated Financial Statements, including the notes thereto, included elsewhere in this offering memorandum:
For the nine-month periods ended Year ended December 31, September 30, 2019 2020 2021 2021 2022 ROVeMUO cooooconcnnconnonnnnnonnronononononnnnnnrannnaninnoos 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales (80.3) (74.5) (58) (59.3) (70.2) Gross profit 19.7 25.5 492 40.7 29.8 Other income 2.9 0.7 0.6 0.6 0.3 Administrative expenses (3.3) (2.8) (Q.2) (2.2) (3.2) Other expenses, by function. (14.0) (10.3) (12.9) (11.8) (11.0) Finance costs ….. (3.8) (5.2) (3.0) (3.0) (3.6) Profit (loss) before income tax. 3.3 7.4 28.1 28.2 14,3 Income tax expense ….oooom… . (3.1) (5.6) (18.3) (18.1) (10.2) Profit (loss) for the period. ….ooonoconnccnnncnnocnnonn 0.1% 1.8% 9.8% 10.1 4.1
The following ta bles set forth, forthe periods indicated, certain price, volumeand cost data:
For the nine-month periods ended
Year ended December 31, September 30, 2019 2020 2021 2021 2022 CODELCO Average Metal Price (per pound) Copper. 2.56 $2.46 $4.36 $4.26 $3.75 Molybdenum. e 11.37 $8.31 $15.31 $14.33 $17.51 CODELCO Sales Volume (in metric tons) Own copper (2). 1,804,005 1,858,920 1,846,164 1,328,457 1,169,897 Third-party copper 172,218 191,668 193,309 143,807 130,391 Total copper 1,976,223 2,050,588 2,039,473 1,472,264 1,300,288 Molybdenum (in oxide and concentrate) …… 23,775 28,755 21,754 16,860 15,233 CODELCO*s Cash Cost of Production (per pound)….. 141.6£ 129.4 132.7€ 129.96 157.46
(1) The average metal price is the weighted average of prices actually paid to CODELCO for its product mix.
(2) Includes wire rod sales and cathodes from CODELCOS*s subsidiaries.
Impactof COVID-19
The COVID-19 pandemic and the resulting economic impact have primarily contributed to a decrease in copperprices in 2020. Howeverin 2021,LME copperprices increased to 422.6 cents perpound compared to 279.8 cents perpound in 2020, which was attributable to the Chinese and global economies recovery from the COVID-19 pandemic during 2021. For the first nine months of 2022, LME copper prices decreased to 411.1 cents per pound
44 from 416.8 cents perpound in the sameperiodof 202 1, dueto global economic uncertainty and lower growth mainly in China due to strong anti-COVID measures that ha ve slowed the recovery. CODELCOSs financial results and prospects are largely dependent onthe prices of copper. If economic conditions further deterioratein China or other emerging markets, demand from customers in those markets could decline and the market price of copper could fall.
A decline in copperprices would haveanadverse impact on CODELCO*s revenues and financial results.
CODELCO has taken steps and implemented several measures to safeguard its employees, businesses and the communities surrounding its operations from the threats posed by the COVID-19 pandemic. Although these steps and measures have not materially affected CODELCO*s production orits financial results in 2020 or 2021, the ultimate impact of COVID-19 on CODELCOSs financial and operating results is unknown and will depend on the duration and spread ofthe pandemic, and will not be fully reflected in CODELCO*s results of operations until future periods.
Results of Operations forthe nine-month Periods Ended September 30,2021 and 2022
The following table sets forth CODELCOs summarized results of operations for the nine-month periods ended September 30,2021 and 2022:
For the nine-month periods ended
September 30, % Change 2021 2022 20212022 (in thousands of U.S.S) Revenue. 14,868,179 11,879,784 (0.1) Cost of sales (8,822,621) (8,340,192) (5.5) Gross profit … 6,045,558 3,539,592 (41.5) Other income . 83,337 39,476 (52.6) Administrative expenses .. (322,012) (374,634) 16.3 Other expenses, by function. 2 (1,748,250) (1,305,710) (25.3) A (448,789) (424,459) (5.4) Share of profit of associates and joint ventures accounted for using 305,607 53,391 (82,5) equity MethOd .ooooocnnnoonononnnononononnononnnronononnnnnnnranrennnnrnnrononnnoo
Foreign exchange differences 254,932 129,728 (49,1) Profit (loss) before income t: 4,197,063 1,697,864 (59.5) Income tax expense (2,690,160) (1,206,688) (55.1) Profit (loss) for the period. 1,506,903 491,176 (67.4) Profit (loss) attributable to owners of parent o 1,425,934 471,660 (66.9) Profit (loss) attributable to non-controlling interestS…..ooooonnccnncnnnccnnocnnonnos 80,969 19,516 (75.9)
Revenue. The following ta ble sets forth CODELCO*s revenue forthe nine-month periods ended September 30,2021 and2022:
For the nine-month periods ended
September 30, % Change 2021 2022 2022 (in thousands of U.S.$)
Revenue. 14,868,179 11,879,784 (0.1) Sales of CODELCO’s own copper. 12,470,592 9,712,414 (Q2.1) Sales of third-party copper .. 1,344,512 1,054,622 (Q1.6) Sales of byproducts and other. 1,053,075 1,112,748 5.7
Revenues decreased by 20.1% to U.S.$11.9 billion in the first nine months of 2022, compared to
U.S.$14.9 billion forthe same period in 2021. This decrease was primarily attributable to a decreasein copper prices and lower production levels. Ourown coppersales decreased by 22.1% mainly due to a decrease in sales volume of
11.9% and lowera veragerealized copperprice. Theaverage LMEcopper prices in the first nine months of 2022 was
411.1 cents perpound as compared to 416.8 cents perpound forthe same period in 2021.
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Third-party copper sales totaled U.S.$1.1 billion in the first nine months of 2022, compared to
U.S.$1.3 billion for the same period in 2021, attributable to decrease on realized copper price and sales volume. In general, changes in the volume of third -party copper sales are dependent upon CODELCO*s need to meetrequirements under sales contracts and, to a lesser extent, purchasing copper under spot market terms if CODELCOs own production is insufficient to coverthe quantities that it has a greed to supply its customers.
Sales of byproducts and other increased by 5.7% to U.S.$1.11 billion in the first nine months of 2022, compared to U.S.$1.05 billion forthe same period in 2021. This increase was primarily due to the 22.2% growth in average realized price of molybdenum.
Costof’sales. CODELCOSs cost of sales in any period includes both the miningand production costs of its own copperand byproducts and the purchase costs of copper, as well as gold, silver and other byproducts, at market prices from third parties and processed and sold by CODELCO in that period. The following table sets forth CODELCOSs total cost ofsales forthe nine-month periods ended September 30,202 1 and2022:
For the nine-month period ended
September 30, % Change 2021 2022 2022 (in thousands of U.S.$)
Cost of sal cinco (8,822,621) (8,340,192) (5.5) Cost ofCODELCO’s own copper (6,929,782) (6,758,991) (2.5) Cost of third-party sales …………. Qe (1,336,521) (1,057,778) (20.9) Cost of byproducts and OtheT…..oooooonocnnnonnnocnnonnnoncnonananonanonncrnncnnns (556,318) (523,423) (5.9)
CODELCOSs total cost of sales decreased by 5.5% to U.S.$8.3 billion (70.2% of sales) in the first nine months of 2022, compared to U.S.$8.8 billion (59.3% of sales) for the same period in 2021, primarily due to lower sales volume and the depreciation of the Chilean peso a gainst the U.S. dollar thatimply higher input prices. Some of the minerals that CODELCO sells are purchased at market prices, and CODELCO also purchases mineral ore from third parties atmarketprices which it processes and sells as copper.
CODELCOSs cost of sales of its own copper decreased by 2.5% to U.S.$6.8 billion during the first nine months of 2022, compared to U.S.$6.9 billion forthe same period in 2021. This decrease is primarily attributable to lower production and higher operational costs as a result ofappreciation of the Chilean peso a gainst the U.S. dollar.
The cost of copper purchased from third parties decreased by 20.9% in the first nine months of 2022 to
U.S.$1.1 billion, compared to U.S.$1.3 billion forthe same period in 2021. The decrease was mainly caused by lower sales volume of third -party copper.
The cost of byproducts and other decreased by 5.9% to U.S.$523.0 million in the first nine months of 2022, compared to U.S.$556.0 million for the same period in 2021, primarily due to lower sale volume of molybdenum, sulfuric acid, gold andsilver.
Depreciation and amortization expenses remained rela tively flat at U.S.$1,640.0 million duringthe first nine months 0£2022, compared to U.S.$1,636.0 million forthesameperiodin 2021.
Gross profit. Gross profit amounted to U.S.$3.5 billion for the first nine-months of 2022, compared to
U.S.$6.0 billion for the same period in 2021. This 41.7% decrease was primarily attributable to the decrease in revenues due to lower copper prices and sales volumeof copper and molybdenum.
Other income. Thelargestcomponents ofother income, are other miscellaneous income, miscellaneous sales and penalties to suppliers. Other income decreased 52.6% to U.S.$39.4 million in the first nine months of 2022, compared to U.S.$83.3 million for the same period in 2021, mainly attributable to the one-time benefit from a debt prepa yment by the subsidiary Gacrux in the same period in 2021, and lower other miscellaneous income and delegated administration (including the recovery of occupational disease insurance (Law 16,744).
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Administrative expenses. Administrative expenses increased to U.S.$374.6 million (3.2% of total revenues) duringthe first nine-months o£2022, compared to U.S.$322.0 million (2.2% oftotal revenues) for the same period in
2021. This increase was primarily attributable to the negative effect of the appreciation of the Chilean peso against the U.S. dollar.
Other expenses, by function. Other expenses, by function amounted to U.S.$1.3 billion (10.9% of total revenues) during the first nine months of 2022, compared to U.S.$1.7 billion (11.8% of total revenues) for the same period in 2021. This decrease was primarily a ttributable to lower paymentsmade pursuantto the Copper Reserve Law and lower mining property value adjustment.
The following ta ble sets forth the principal components of CODELCOS*s other expenses, by function for the periods indicated:
For the nine-month period ended September
30, 2021 2022 (in thousands of U.S.$) ¡E AN 1,143,789 934,555 Bonus for the end of collective bargaining and other employee benefitS…..oooncncnnnnnnnn.. 137,275 43,870 Other non-cash charges 166,815 31,802 ¡TITO AA 300,371 295,483 Total other expenses by fact occ cnc cinc 1,748,250 1,305,710
CODELCOrecorded other expenses of U.S.$1.7 billion and U.S.$1.3 billion in the first nine months o£2021 and 2022, respectively, pursuantto the Copper Reserve Law, which levies a 10% tax on CODELCOs exports of its own copperandrelated byproducts. Under theaccounting policies adopted by CODELCO, this export tax is accounted forin otherexpenses, by function. The decrease of this tax recorded in the first nine months of 2022 compared to the sameperiod in 2021 is primarily attributable to lowerrevenues from CODELCOs own copper sales.
Bonuses for the end of collective bargaining and other employee benefits decreased to U.S.$43.8 million from U.S.$137.3 million, due to a lower amountof bonuses fortheend of collective bargaining in 2022.
Other non-cash charges decreased from U.S.$166.8 million in the first nine months of 2021 to U.S.$31.8 million in the same period of 2022, mainly due to a decrease in mining property value adjustment from U.S.$142.0 million duringthe first nine months 0£ 2021 to U.S.$0.0 million in the first nine months of 2022.
Finance costs. Finance costs decreased to U.S.$424.5 million in the first nine months of 2022, compared to
U.S.$448.8 million forthe same period in 2021. This decrease was primarily attributable to lower average debtamount in 2021 than in 2022 mainly related to loans. The average interest rate was 4.1% as of September 30, 2022. As of September 30, 2022, 94.2% of our debt hada fixed rateand 5.8% hada floatingrate.
Share of profit(loss) of associates and joint ventures accounted for using equity method. CODELCO net equity participation in related companies decreased to a net profit of U.S.$53.4 million in the nine months of 2022, compared to a net profit of U.S.$305.6million forthe same period in 2021. This decrease was primarily attributabl to the decrease of copperprices and sales volumes.
Foreign exchange differences. According to Decree Law No. 1,350, CODELCO maintains its accounting records in U.S. dollars, recording tra nsactions in currencies otherthan U.S. dollars at the exchange rate currentat the date of each transaction and, subsequently, for monetary assets and lia bilities denominated in currencies other than the U.S. dollar, at the closing exchange rate determined by the Central Bank of Chile. CODELCO experienceda gain from foreign exchange differences of U.S.$130.0 million in the first nine months of 2022, compared to a gain from foreign exchange differences of U.S.$255.0 million in the same period of 2021. The gain recorded in the first nine months 0£2022 is primarily a ttributable to the appreciation ofthe Chilean peso against the U.S. dollar duringthe nine- month period ended September 30, 2022 as compared to December 3 1,2021, offsetby lower sales volumes.
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Profit before income tax. Profit before income tax was U.S.$1,698.0 million duringthe first nine months of 2022, compared to U.S.$4,197.0 million for the same period in 202 1, primarily attributable to lower gross profit, lower sales volumes and prices, offset bya positive foreign exchange differences.
Income tax expense. Duringthe first nine months of 2022, CODELCO had a statutory tax rate of 65.0% in accordance with applica ble regulations, comprised of (i)a corporate income tax rate of 25.0% and (ii) a 40% tax on net eamings applicable to state-owned enterprises as specified by Decree Law No. 2,398, Article 2. During 2021, CODELCO was subject to the same statutory tax rate of 65%. CODELCO is also subject to an additional mining tax thatis basedon its operatingincome, and, effective as o£2012 fiscal year, isimposed atprogressive rates ofbetween 5% and 14%. CODELCOSs statutory rate ofthe miningtax for2019,2020and2021 was 5%. CODELCOS*s taxes on income amounted to an expense of U.S.$1,207.0 million during the first nine months of 2022 and an expense of
U.S.$2,690.0 million during the same period in 2021. The decrease in expense from taxes on income was primarily due to the profits before tax generated during the first nine months of 2022.
Profit for the period. As a result ofthe factors described above, CODELCO”s profit aftertax was U.S.$491.0 million duringthe first nine months of 2022, compared to U.S.$1,507.0 million forthe same period in 2021.
Results of Operations for the Three Years Ended December 3 1,2021
The following table sets forth CODELCOs summarized results of operations for the years ended December 31,2019,2020 and 2021:
Year ended December 31, % Change 2019 2020 2021 20192020 20202021 (in millions of U.S.$ Revenue. 12,525 14,173 21,025 13.2% 48.3% Cost of sales (10,051) (10,565) (12,186) 5.1 15,3 Gross profit . 2,473 3,608 8,839 45.9 145 Other income, by function 361 97 116 (73.0) 19.3 Administrative expenses (409) (397) (459) (3.0) 15.7 Other expenses ……….. (1,748) (1,457) (2,717) (16.7) 86.5 Finance costs .. me. (479) (742) (641) 54.9 (13.6) Share of profit (loss) ofassociates and joint ventures accounted for under the equity method. 13 39 415 198.7 963.7 Foreign exchange differences 154 (166) 314 (207.5) 289.0 Profit (loss) for the period before tax 408 1,044 5,907 (156.0) 465.8 Income tax expense ….. (393) (187) (3,855) 100.1 389.9 Profit (loss) for the period. 15 257 2,051 (1,668.2) 698.2 Profit (loss) attributable to owners of
7 243 1,942 (3,561.2) 699.4 Profit (loss) attributable to non-controlling IIAOTOSÉS concoccccccnnanccononon cnc nono conc ncnnnnncns 8 14 109 (76.0) 677.7
Revenue. The following table sets forth CODELCO”s revenues forthe years ended December 3 1,2019, 2020 and 2021:
Year ended December 31, % Change 2019 2020 2021 20192020 20202021 (in millions of U.S.$)
Revenue… 12,525 $14,173 $21,025 13.2% 48.3% Sales of CODELCO’s own copper. 10,402 11,775 17,735 13.2% 50.7% Sales of third-party copper …. 1,006 1,234 1,845 22.7% 49.5% Sales of byproducts and other 1,116 1,163 1,464 4.2% 26.0%
In 2021, revenues increased by 48.3% to U.S.$21.0 billion, compared to U.S.$14.2 billion in 2020. The increase in 2021 was primarily attributable to an increase in CODELCO*s average copper price from U.S.$2.87 per pound in 2020 to U.S.$4.36 per pound in 2021. Ourown copper sales increased by 50.4% in 2021 mainly due to the higher copperprices duringthe year. In2020, revenue increased by 13.2% to U.S.$ 14.2 billion, compared to U.S.$12.5
48 billion in 2019. This increase was primarily attributable to an increase in CODELCO*s average copper price from
U.S.$2.61 perpound in 2019 to U.S.$2.87 perpound in 2020 andan increase in the volume of copper sold by 3.7% asa result of higher production levels. Our own copper sales increased by 13.2% mainly due to an increase in CODELCO*s average copperprice.
Third-party copper sales totaled U.S.$1.8 billion in 202 1 compared to U.S.$1.2 billion in 2020, attributable to higheraverage copperpricesand sales volume. In 2020, third-party copper sales totaled U.S.$ 1.2 billion, compared to U.S.$1.0 billion in 2019 attributable to higher a verage copper prices and sales volume.
In general, changes in the volume ofthird -party copper sales are dependent upon CODELCO’s need to meet requirements under sales contracts and, to a lesser extent, purchasing copper under spot market termsif CODELCO’s own productionis insufficientto coverthe quantities thatit has agreed to supply its customers.
Sales of byproducts and other increased 26.0%!to U.S.$1.5 billion in 202 1, compared to U.S.$1.2 billion in 2020, this increase was primarily due to molybdenum and sulfuric acid sales. In 2020, these sales increased by 9.1% to U.S.$1.2 billion, compared to U.S.$1.1 billion in 2019. This increase was primarily due to the 2.1% increase in molybdenum sales volume and higher prices.
Costofsales. CODELCOSs cost of sales in any period includes both the mining and production costs of its own copperand byproducts and the purchase costs of copper, as well as gold, silver and other byproducts, at market prices from third parties and processed and sold by CODELCO in that period. The following table sets forth CODELCOSs total cost of sales forthe years ended December 31,2019,2020and2021:
Year ended December 31, % Change 2019 2020 2021 20192020 20202021 (in millions of U.S.S)
Cost OL Sl coccion 10,051 10,565 12,186 5.1% 15.3% Cost ofCODELCO’s own copper.. 8,418 8,618 9,611 2.4% 11.5% Cost of third-party sales …… 996 1,227 1,823 23.3% 48.6% Cost of byproducts and other. 637 720 752 13.0% 4,4%
CODELCOSs total cost of sales increased by 15.3% to U.S.$12.2 billion (58.0%.of sales) in 2021 compared to U.S.$10.6 billion (74.5% ofsales) in 2020, primarily dueto higher sales volume, and the depreciation ofthe Chikan peso against the U.S. dollar, which impacted inputprices. Total cost of sales increased by 5.1% to U.S.$10.6 billion
(74.5% of sales) in 2020 as compared to U.S.$10.1 billion (80.3%of sales) in 2019.
Some of the minerals that CODELCO sells are purchased at market prices, and CODELCO also purchases mineral ore from third parties at market prices which it processes and sells as copper.
CODELCOSs cost of sales of its own copper increased by 11.5% to U.S.$9.6 billion in 2021 compared to
U.S.$8.6 billion in 2020 mainly due to higher sales volume. In 2020 cost of sales increased to U.S.$8.6 billion, compared to U.S.$8.4 billion in 2019. This increase is primarily attributable to higher sales volume in addition to higher operational costs as the result the depreciation of the Chilean peso a gainst the U.S. dollar, which increased input prices.
In 2021, the costof copper purchased from third parties increased by 48.6% to U.S.$1.8 billion compared to
U.S.$1.2 billion in 2020, dueto highera verage copper price. In 2020, the cost of copper purchased from third parties increased by 23.3% to U.S.$ 1.2 billion compared to U.S.$996.0 million in 2019, due to higher volume of third party copperandaverage copperprice.
In 2021, cost of byproducts and other increased by 4.4% to U.S.$752.0 million primarily due to the depreciationofthe Chileanpeso againstthe U.S. dollar, which impacted input prices. In2020, costof byproducts and otherincreased 13.0%!to U.S.$720.0 million compared to U.S.$637.0 million in 2019, mainly because of higher saks volume ofbyproducts.
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In 202 1, depreciation and amortization expenses decreased by 8.0% to U.S.$2.3 billion compared to U.S.$2.5 billion in 2020 dueto lower production volume. In 2020, depreciation and amortization expenses increased by 10.6% to U.S.$2.5 billion because ofhigher production volume compared to U.S.$2.2 billion in 2019.
Gross profit. In 2021, gross profit amounted to U.S.$8.8 billion, which isa 145% increase compared to gross profit in 2020 primarily a ttributable to the higher volume sale and higherrevenues due to higher average price received for CODELCOSs product mix. In 2020, gross profit amounted to U.S.$3.6 billion, which is a 45.9% increase compared to gross profit in 2019, higherrevenues were the main driver ofthis growth. In 2019, gross profit amounted to U.S.$2.5 billion.
Other income, by function. The largest components of other income, by function, are material retum and Gacrux debt prepaymentresult. In2021 otherincome, by function increased by 19.6% to U.S.$116.0 million compared to U.S.$97.0 million in 2020 primarily attributable to the income related to the prepayment of the debt ofGa crux by
U.S.$0.21 million. Other income, by function decreased by 73.0% to U.S.$97.0 million in 2020 compared to
U.S.$361.0 million in 2019, primarily attributable to the sale of CODELCO*s 37% equity stake in GNL Mejillones
S.A. in 2019, which did notrepeat in 2020. See note 22a to the Consolidated Financial Statements.
Administrative expenses. In 2021, administrative expenses increased by 15.7% to U.S.$459.0 million (22% of total revenues) compared to U.S.$397.0 million in 2020 due to higher volume sale, partially offset by a positive effectofthedepreciation ofthe Chilean peso againstthe U.S. dollar. Administrative expenses decreased to U.S.$397.0 million (2.8% of total revenues) compared to U.S.$409.0 million (3.3% of total revenues) in 2020 compared to 2019 respectively. This decrease was primarily attributable to the positive effect of the depreciation of the Chilean peso against the U.S. dollar.
Other expenses. In 2021 other expenses amounted to U.S.$2.7 billion (12.9% of revenues) compared to
U.S.$1.5 billion (10.3% ofrevenues) in 2020, and compared to U.S.$1.7 billion (14%.oftotalrevenues) in 2019. This increase was mainly attributable to increase in copper reserve law, an increase in fixed indirectcosts, higher bonuses paid related to collective bargaining processes and mining properties fair va luea djustment.
The following ta ble sets forth the principal components of CODELCOS*s other expenses for the periods indicated:
Year ended December 31,
2019 2020 2021 (in millions of U.S.S)
Copper Reserve LaW .oooconocccoccccoconconncancconccnnnnnnn (936) (1,048) (1,572) Bonus for the end of collective bargaining and Employee BenefitS…oooooonconoocnnoccnconnconnnonccnnnnanos (250) (172) (293) Asset impairments …… – Q4) (125) Other non-cash charges (42) (40) (132) Other expenses ……….. (519) (173) (395)
Mal coccinccononnnononcnornonnoncnonor roo nnor reee (1,748) (1,457) (2,717)
CODELCO recorded other expenses of U.S.$1.6 billion, U.S.$1.1 billion and U.S.$936 million in 2021, 2020, and 2019, respectively, pursuant to the Copper Reserve Law, which levies a 10% tax on receivables of the sales proceeds that CODELCO receives and transfers to Chile from the export ofcopperandrelated byproducts produced by CODELCO. The increase ofthis tax recorded in 2021 compared to 2020 is primarily attributable to higher volume sold and higher copperprices.
Otherexpenses increased to U.S.$595.0 million in 202 1 from U.S.$173.0 million in 2020 dueto an increase in indirect fixed costs. In2021, bonuses forthe end of collective bargaining and other employee benefits increased to
U.S.$293.0 million from U.S.$ 172.0 million in 2020, due to anend-of-strike bonus related to a 21-day strike involving two laborunions from the Andina Division and 24 -day strike involving one labor union also from the Andina Division.
Anda miningproperties fair value adjustment in 2021 by U.S.$125.0 million.
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Finance costs. In 2021, finance costs decreased to U.S.$641.0 million compared to U.S.$742.0 million in 2020, primarily attributable to interest expenses of loans during2021 . Finance costs increased to U.S.$742.0 million in 2020 compared to U.S.$479.0 million in 2019 dueto costs incurred in connection with the consummation of the tender offer in January 2020. CODELCO*s debt level was U.S$17.2 billion as of December 31, 2021, U.S$18.0 billion as of December31,2020andU.S.$17.3 billion as of December31,2019.
CODELCO*s average interest rate was 4.1% as of December 31,2021,4.1% as of December 3 1,2020 and
4.2% asof December31,2019. Asof December31,2021,94.3%0f our debt had fixedrateand 5.7% a floating rate As of December 31, 2020, 91.3% ofour debt had fixed rate and 8.7%a floatingrate. As of December 3 1,2019, 86% of ourdebt had a fixedrateand 14% hada floatingrate. See Selected Consolidated Financial Data for information regarding debt duringthe years ended December31,2019,2020and2021.
Share of profit(loss) of associates and joint ventures accounted for using equity method. In 2021, CODELCOS’s net equity participation in related companies increased to a net profit of U.S.$415.0 million, compared to a net profit of U.S.$39.0 million in 2020. In 2020, CODELCO*s net equity participation in related companies increased to a net profit of U.S.$39.0 million, compared to a net profit of U.S.$13.0 million in 2019. This increase was primarily attributable to an increase in the average copper price which positively impacted Anglo American Sur’s profitability. See note 9 to the Consolidated Financial Statements.
Profit (loss) before tax. In2021, profit before tax increased to U.S.$5.9 billion, compared to U.S.$ 1.0 billion in 2020. This increase was primarily attributable to higher average copper price and sales volume in 2021. In 2020, profit beforetax increase from U.S.$408.0 million in 2019toU.S.$1.Obillion, mainly dueto an increase in the average copper price, mainly in the end ofthe period and higher sales volume.
Income tax expense. In 2021, CODELCO had a statutory tax rate o£ 65.0% in accordance with applicable regulations, comprised of (i)a corporate income tax rate 0f25.0%(a 17% historic corporate tax rate applied to income earned in and priorto 2011 but changed by means ofthe 20 14 tax reform) and (ii) a 40%tax onneteamings applicable to state-owned enterprises as specified by Decree Law No. 2,398, Article 2. During 2020 and 2019, CODELCO was subject to the same statutory tax rate of 65%. CODELCO is also subjectto an additional mining tax that is based on its operating income, and, effective as of fiscal year 2012, is imposed at progressive rates of between 5% and 14%.
CODELCOSs statutory rate of the mining tax for 2021,2020 and 2019 was 5%. CODELCO*s taxes on income amounted to anexpense o£fU.S.$3,855.0 million in 2021, compared to anexpense of U.S.$787.0 million in 2020 and
U.S.$393.0 million in 2019, primarily as a result ofan increase in CODELCOSS pre-tax profit in 2021, which mirrored, to a certain extent, the increase in taxable income. For more information regarding this payment, see note 5 to the Consolidated Financial Statements and Risk Factors-Risks Relating to CODELCO’s Relationship with the Government of Chile -CODELCO is subject to special taxes.
Profit for the period. As a result of the factors described above, CODELCO recorded a profit after tax of
U.S.$2,051.0 million in 2021, U.S.$257.0 million in 2020 and U.S.$15.0 million in 2019.
Liquidity and Capital Resources
CODELCOSs primary sources of liquidity are funds from (i) operations, (ii) domestic and international borrowings from banks and (iii) debt offerings in the domestic and international capital markets. CODELCO is generally required to transfer its profit to the Chilean Treasury. The calculation of profit and other comprehensive income includes certain non-cash generating charges or benefits. Significant non-cash generating charges or benefits are deferred tax expensebenefit and amortization and depreciation recorded against other comprehensive income andor profit and loss. For the nine-month period ended September 30, 2022, non-cash charges were U.S.$246.0 million in amortization and U.S.$ 1,640.0 million in depreciation. Non-cash deferred tax charges ofU.S.$458.0 million were recorded forthe nine-month period ended September 30, 2022. Specifically with respect to deferred taxes, non- cash charges or benefits are generated by recordingthe fluctuation ofthe deferred tax assets and lia bilities, which may be recorded a gainst other comprehensive income in equity orthrough profit and loss. Amortization and depreciation are recorded directly in profit and loss.
In June 2014, the Ministries of Finance and Mining appro ved the capitalization of U.S.$200.0 million through a retention of CODELCOSs profits from 2013. In October 2014, the multi-year capitalization law approved by the
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Chilean Congress was promulga ted and became effective following its publication in the Official Gazette. This law allocates a maximum of U.S.$3 billion to CODELCO in the form of a capital injection by the Chilean Treasury over the period from 2014to 2018. Pursuant to this law, CODELCO must presenta yearly progress report on the BDP for the 2014-2018 period to the Ministries of Finance and Miningand to the Finance Committee ofboth the Upper House and the Lower House of Congress by March 30 of each year. The BDP report details the progress of CODELCO’s investments, including information a bout their financing and execution, covering each of the structural projects and their corresponding investments. The BDP report also discusses CODELCO*s progress with respect to production, costs and results. On the same date that the multi-year capitalization law was promulgated, the President of Chile announced a commitment to authorize the retention by CODELCO of up to an additional U.S.$1 billion of profit (which includes the U.S.$200.0 million that had been authorized in June 2014) overthe 2014-2018 period.
In accordance with this commitment, in June 2015, the Ministries of Finance and Mining approved the capitalization of U.S.$225.0 million of 2014 profit, but charged to 2015 profits. However, due to CODELCO’s operating losses in 2015, this capitalization has not been implemented. Nonetheless, pursuant to the multi-year capitalization la w, the Government of Chile authorized a capital injection of U.S.$600.0 million (out ofthe maximum
U.S.$3 billion forthe 2014-2018 period), which was received in U.S. dollars in December2015. In December2016, the Ministries of Finance authorized the capitalization of U.S.$975.0 million, U.S.$500 million of which related to a capital injection to finance CODELCOs investment plan and was received in December 2016. The remaining
U.S.$475.0 million was authorized pursuant to a new law (Law No. 20,989), effective as of January 2017, which provided for additional capitalization of a maximum of U.S.$950.0 million forboth2016and2017 (up to U.S.$475.0 million for each year) in the event CODELCO does not have the required pre-tax profits to cover the 10% special export tax underthe Copper Reserve Law. In April2017, CODELCO received the U.S.$475.0 million capital injection in U.S. dollars for2016.
Law No. 20,989 also extended the U.S.$3 billion capitalization commitment for the 2014-2018 period to
2019. While CODELCO did not expecta dditional capital injections in connection with Law No. 20,989 during2017, in November2017, the Government of Chile authorized a capital injection of U.S.$520.0 million (out of the maximum
U.S.$3.0 billion forthe newly extended 2014-2019 period), which was received in U.S. dollars in December 2017. In June 2018, the Government of Chile announceda final capital injection of U.S.$1 billion to complete the multi-year capitalization law approved in October 2014. Moreover, in October 2018, the Government of Chile authorized the disbursement of such amount in two installments completed on December 31, 2018 for U.S.$600.0 million and on February 28,201 9 fortheremainin g U.S.$400.0 million.
Since 2014, the Government of Chile has authorized the capitalization by capital injection and retention of profit within CODELCO in an aggregate amount of U.S.$3.5 billion, U.S.$225.0 million of which could not be implemented.
Since 2022, the Chilean Government allows CODELCO to annually reinvest 30% of its 2021-2024 profits.
This represents a change in CODELCOSs dividend policy, which previously consisted of 100% net-profit distribution policy. This profit-reinvestment plan will strengthen CODELCOS*s financial balance sheet and reduce the need for additional financial debt.
See Risk Factors-Risks Relating to CODELCO”s Relationship with the Government of Chile- CODELCOSs funding through retention of profits is restricted and is subject to the approval of the Ministries of Finance and Mining.
Cash flows. In 2021, net cash flows from operating activities increased by 55.9% to U.S.$5.9 billion from
U.S.$3.8 billion in 2020. This increase in netcash flows from operatin g activities resulted primarily dueto the increase in cash received from the sales of goods because of an improvementin CODELCOSs average product portfolio prices and sales volumes. In 2020, net cash flows from operating activities increased by 55.4% to U.S.$3.8 billion from
U.S.$2.4 billion in 2019. Duringthe first nine months of 2022, net cash flows from operating activities totaled U.S.$3.8 billion, which was 18.2% less than in the same period in 2021. Increased payments to suppliers in the period due to higher input, partially offset by local currency depreciation. See note 22 to the Unaudited Interim Consolidated Financial Statements and note28 to the 2019-2020 Consolidated Financial Statements.
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Bank debt. CODELCO*s total financial debt (defined as loans from financial institutions plus bonds issued) asa percentage of its total capitalization was 59.7% as of December 31,2019,60.9% as of December 31,2020and
59.8% as of December31,2021and 58.7% as of September 30,2022. CODELCOSs total outstanding financial debt asof December31,2019,2020and 2021 andas of September 30, 2022 was U.S.$17.3 billion, U.S.$18.1 billion and
U.S.$17.2 billion and U.S.$ 16.7 billion, respectively.
In May 2012, CODELCO entered into a two-tranche U.S. dollar unsecured bilateral loan, each tranche with a commitment fee of 15.0 basis points per annum with a maturity date of (i) ten years for the Japan Bank for International Cooperation loan and (ii) seven years for The Bank of Tokyo-Mitsubishi UFJ, Ltd., to be disbursed by the lenders on a pro rata basis, for the development, construction and operation of a metals processing plant to be constructed in Mejillones and the export of certain metals to Japanese customers pursuant to long-term offtake agreements. The terms ofthe loans are described below:
Availability Credit Amount Interest Rate Period Japan Bank for International Cooperation. U.S.$224.0 million LIBOR plus45.0 basispoints 36months The Bank of Tokyo-Mitsubishi UFJ, Ltd.. U.S.$96.0 million LIBOR plus 55.0 basispoints 36months
As of September 30, 2022, the loans described above were repaid in full at theirrespective maturity dates.
Between October and November 2016, CODELCO rolled over loans with The Bank of Tokyo-Mitsubishi UFJ, Ltd. for U.S.$250.0 million and Export Development Canada for U.S.$300.0 million, increasing the original principalby anadditional U.S.$50 million. The loans mature in five years and the terms are described below:
Credit Amount Interest Rate The Bank of Tokyo-Mitsubishi UFJ, Ltd U.S.$250.0 million LIBOR plus 75.0 basis points Export Development Canada… U.S.$300.0 million LIBOR plus 62.0 basis points
The Bank of Tokyo-Mitsubishi UFJ, Ltd. Loan was fully prepaid in January 2020 and the Export Development Canada Loan was fully prepaid in August 2020.
In April2017, CODELCO entered into a short-term U.S. dollar unsecured bilateral bank loan with Scotiabank $ Trust (Cayman) Ltd. andused the proceeds to prepay a loan from Bank of America N.A. for U.S.$300.0 million in full. In May2017, CODELCO exchanged the short-term loan with Scotiabank $: Trust (Cayman) Ltd. fora five-year
U.S. dollar unsecured bilateral bank loan. In July 2017, CODELCO rolled over a loan with Export Development Canada for U.S.$300.0 million. The new loans mature in five years and the terms and interest rates are described below:
Credit Amount Interest Rate Scotiabank $: Trust (Cayman), Ltd. U.S.$300.0 million LIBOR plus 65.0 basis points Export Development Canada…….. U.S.$300.0 million LIBOR plus 62.0 basis points
As of September 30, 2022, the loan described above with Scotiabank $: Trust (Cayman), Ltd. and the loan described above with Export Development Canada were fully prepaid in December2020.
In October 2018, CODELCO rolled over a loan with Export Development Canada for U.S.$300.0 million.
The loan matures in 2028 and theterms are described below:
Credit Amount Interest Rate Date Loan Drawn Export Development Canada…… U.S.$300.0 million LIBOR plus 121.5 basis points October2018
As of September 30, 2022, U.S$299.0 million was outstanding under the loan described above with Export DevelopmentCanada.
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In December 2018, CODELCO entered into a one-year revolving credit facility with Scotiabank Chile for
U.S.$300.0 million and drew down the full amount. The revolving credit facility may be renewed on a yearly basis and matures in 2023. The tems are described below:
Credit Amount Interest Rate Date Loan Drawn Scotiabank ChilO coccion… U.S.$300.0 million LIBOR plus 72.5 basis points December2018
The loan described above with Scotiabank Chile was fully prepaid in December2020.
Between March and June 2019, CODELCO entered into six up to one-year advances on export exchange contracts (ACC). The loans matured between March and May 2020 and the terms are described below:
Credit Amount Interest Rate Date Loan Drawn Scotiabank Chile……………………. U.S.$100.0 million LIBOR plus 35.0 basis points March 2019
Scotiabank Chile U.S.$65.0 million LIBOR plus 35.0 basis points March 2019 Banco Santander – Chile .. U.S.$100.0 million LIBOR plus30.0 basispoints April 2019 Ttaú Corpbanca …………… .. U.S.$30.0 million LIBOR plus 63.0 basis points June2019 Banco de Crédito e Inversiones U.S.$50.0 million LIBOR plus 39.5 basis points June2019 Banco de Chile…………….c……… U.S.$120.0 million LIBOR plus 66.0 basis points June2019
As of September 30, 2022, none of the loans mentioned above were outstanding, The Scotiabank Chile and Banco Santander Chile loans described above were repaid in full at their respective maturity dates, while the loans described above with Banco de Chile, Banco de Crédito e Inversiones and Itaú Corpbanca were prepaid in full in December2019.
Between June and December2019, CODELCO entered into a bilateral credit facility with EDC. The credit facility included a commitment feeof 50.0 basis points and matures in 2029, CODELCO also entered into a seven-year
U.S. dollar unsecured bilateral credit facility with the Banco Latinoamericano de Comercio Exterior (Bladex). The terms are described below:
Credit Amount Interest Rate Date Loan Drawn Export Development Canada…… U.S.$300.0 million LIBOR plus 121.5 basispoints July 2019 Banco Latinoamericano de Comercio Exterior…
U.S.$75.0 million LIBOR plus 62.0 basis points December2019
As of September 30,2022, U.S.$297.0 million was outstanding under the loan described above with Export Development Canada and U.S.$75.0 million was outstanding under the loan described above with Banco Latinoamericano de Comercio Exterior.
In April2020, CODELCO entered into a three-year bilateral credit facility with The Bank of Nova Scotia for
U.S.$165.0 million, with a commitmentfee 0£30.0 basis points. The terms are described below:
Credit Amount Interest Rate Date Loan Drawn The Bank of Nova Scotia……… U.S.$165.0 million LIBOR plus275.0 basispoints April 2020
This facility was fully prepaid in August 2020.
In May 2020, CODELCO enteredintoa bilateral credit facility with Export Development Canada. The credit facility included a commitment fee 0£32.0 basis pointsand matures in 2027. CODELCO also enteredinto a three-year
U.S. dollar unsecured bilateral credit facility with BNP Paribas, with an advisory fee of U.S.$250,000.00 and a commitmentfee of 5.0 basis points. Theterms are described below:
Credit Amount Interest Rate Date Loan Drawn Export Development Canada…… U.S.$300.0 million LIBOR plus 115.0 basis points May 2020 BNP Paribas. .ocoicnniicaninnniioaiooo] U.S.$100.0 million LIBOR plus 135.0 basis points May 2020
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As of September 30, 2022, U.S$299.0 million was outstanding under the loan described above with Export Development Canada while the BNP Paribas loan was fully prepaid in August 2020.
Other Debt. In July 2017, CODELCO launched a cash tender offer forany andall of its 7.500% notes due
2019, 3.750% notes due 2020 and 3.875% notes due 2021 and a waterfall cash tender offer for its 3.00% notes due
2022,4.500% notes due 2023 and 4.500% notes due 2025, which was financed with the proceeds from a concurrent offering of U.S.$1.5 billion a ggregate principal amount ofits 3.625%notes due 2027 and U.S.$1.25 billion a geregate principal amount of 4.500% notes due 2047. Moreover, in January 2019, CODELCO launched a second cash tender offer for its 3.750% notes due 2020, 3.875% notes due 2021 and 3.00% notes due 2022 and a waterfall cash tender offer for its 4.500% notes due 2023 and 4.500% notes due 2025, which was financed with the proceeds from a concurrent offering of U.S.$1.3 billion aggregate principal amount of its 4.375% notes due 2049. Moreover, in September 2019, CODELCO launcheda third cash tender offer forits 3.750% notes due2020 and 3.875% notes due 2021 anda waterfall cashtender offer forits 3.00%notes due 2022 and 4.500%notes due2023, which was financed with the proceeds from a concurrent offering of U.S.$1.1 billion a ggregate principal a mountof its 3.000% notes due 2029 and U.S.$0.9 billion aggregate principal amount of 3.700% notes due 2050. Moreover, in December 2020, CODELCO launched a fourth cash tender offer for its 3.875% notes due 2021, 3.00% notes due 2022 and 4.500% notes due 2023 and a waterfall cash tender offer forits 4.500% notes due2025 andits 3.625% notes due 2027, which was partially financed with the proceeds from a concurrentoffering of U.S.$0.5 billion a ggregate principal amount of its3.15% notes due2051. On January 14,2020, CODELCO issued notes in anaggregate principal amountof U.S.$2.0 billion, consisting of a U.S.$1.0 billion international debt offering of 3.150% notes due 2030 and a U.S.$1.0 billion international debtofferingof3.700%notes due2050. The notes due 2050 form part of thesame series ofCODELCO’s outstanding U.S.$900.0 million 3.700% notes due 2050 issued on September 30,2019, resultingin a total a ggregate principal amount outstanding of U.S.$1.9 billion in this series. On May 6, 2020, CODELCO issued notes in an aggregate principal amount of U.S.$800.0 million consisting of its 3.150% notes due 2031. On May 8, 2020, CODELCO issued notes in an a ggregate principal a mount of U.S.$131.0 million, consisting of its 4.500% notes due 2023 issued on August 13, 2013. These notes form part of the same series of CODELCO*s outstanding U.S.$335.0 million 4.500%notes due 2023 issued on August 13, 2013, resultingin a total aggregate principal a mount outstanding of U.S.$466.0 million in this series. On October 12,2021,CODELCO launcheda cash tender offer forany andall of its outstanding 4.500% Notes due 2023, 2.250% Notes due2024, andits 4.500% Notes due 2025, which was financed with the proceeds from a concurrent offering of U.S.$780.0 million a ggregate principal amount of its 3.700% notes due 2050. The notes had identical terms, are fungible with and are part ofa single series of senior debt securities with the U.S.$900.0 million a ggregate principal a mount 0£3.700% Notes due 2050 issued on September 30, 2019 and the
U.S.$1,000.0 million a ggregate principal amountof 3.700% Notes due 2050 issued on January 14,2020.
The following ta ble shows amounts due by CODELCO under notes issued in both international a nd local markets as of September 30,2022:
Outstanding Principal Amountand Principal Accrued Interest Interest
Type of Issuance Maturity Amount as of September 30, 2022 Rate
International August 13,2023 U.S.$750 million U.S.$230 million 4.50% International July 9,2024 €600 million U.S.$392 million 2.25% International September16,2025 U.S.$2.00 billion U.S.$395 billion 4.50% Local April 1,2025 6.9 million UF U.S.$251 million 4.00% Local August 24,2026 10 million UF U.S.$367 million 2.50% International August 1,2027 U.S.$1.50 billion U.S.$1.24 billion 3.63% International August 23,2029 U.S.$130 million U.S.$130 million 2.87% International September30,2029 U.S.$1.10 billion U.S.$1.1 billion 3.00% International January 14,2030 U.S.$1.00 billion U.S.$1.00 billion 3.15% International January 15,2031 U.S.$800 million U.S.$804 million 3.75% International November7,2034 HKDS500 million U.S.$65 million 2.84%
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International September21,2035 U.S.$500 million U.S.$494 million 5.63%
International October24,2036 U.S.$500 million U.S.$510 million 6.15% International July 22,2039 AUD7O0 million U.S.$45 million 3.58% International July 17, 2042 U.S.$750 million U.S.$741 million 4.25% International October 18,2043 U.S.$950 million U.S.$959 million 5.63% International November 4,2044 U.S.$980 million U.S.$982 million 4.88% International August 1,2047 U.S.$1.25 billion U.S.$1.21 billion 4.50% International May 18,2048 U.S.$600 million U.S.$605 million 4.85% International February 5,2049 U.S.$1.30 billion U.S.$1.20 billion 4.38% International January 30,2050 U.S.$2.68 billion U.S.$2.60 billion 3.70% International January 15,2051 U.S.$500 million U.S.$451 million 3.15%
The following ta ble sets forththe scheduled maturities of CODELCOs bank and unsecured note obligations asof September 30,2022:
Bank and Unsecured Note Obligations Outstanding (in millions of U.S.$)
Average
More Annual
Less than 3-5 than Interest
Total 1 year 12 years 2-3 years years 5 years Rate Loans from financial LIBOR institUtiONS..coociccioniconnnns 977 0 0 0 75 901 +119% Bonds issued. 15,763 230 392 1,013 1,245 12,883 4.12% Total… 16,740 230 392 1,013 1,320 13,784
In addition to the obligations set forth in the table above, CODELCO was a party to certain commitments primarily to secure the pa yment of (1) deferred customs duties and (ii) sta ff severance indemnities payable upon the retirement of individual employees, amounting to U.S.$20.0 million and U.S.$551.0 million, respectively, as of December 31, 2021 and to U.S.$30.0 million and U.S.$546.0 million, respectively, as of September 30, 2022. See notes 16 and 17 to the Consolidated Financial Statements and to the Unaudited Interim Consolidated Financial Statements. In addition, as of September 30, 2022, CODELCO believes that its net deferred taxes will reverse as follows: deferred tax expense in the amount of U.S.$130.0 million in 2022, U.S.$349.0 million in 2023 and U.S.$32 million in 2024 and U.S.$8.4 billion after 2028 and deferred tax benefit in the amount ofU.S.$362.0 million in 2025,
U.S.$395.0 million in 2026, and U.S.$262.0 million in 2027. CODELCO currently has no hedges related to its production of copper through 2019. See Business and Properties-Marketing-Pricing and Hedging and Risk Factors-Risks Relating to CODELCO”s Operations-CODELCO engages in hedging activity from time to time, particularly withrespectto its copper production, which may not be successful and may result in losses to CODELCO.
CODELCO entered into an agreement with Mitsui on October 12, 2011, pursuant to which Mitsui made availa ble to Inversiones Mineras Acrux SpA (Acrux) a short-term bridge financing facility ofup to U.S.$6.75 billion, guaranteed by CODELCO and subsidiaries of Acrux, as a possible means to fund the exercise of the Sur Option (as defined in Business and Properties-Copper Production-Associations, Joint Ventures and Partnerships).
CODELCO also entered into a separate a greement with Mitsuithat provided CODELCO with the option to repay a portion of the bridge loan from Mitsui through a put option for an indirect 50% stake in the Anglo American Sur interest acquired, assuming a pre-determined value ofU.S.$9.76 billion forthe 49% interestin Anglo American Sur.
The balance of the bridge loan would convert into a non-recourse five-year term loan between Acrux and Mitsui, which would not be guaranteed by CODELCO, and would be repayable only from cash distributions on the Anglo American Sur shares held by Acrux. In addition, CODELCO and Mitsui entered into a 10 -year sale and purchase agreement fortheequivalentof 30,000 tons of fine copper per year subject to market-based pricing terms.
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On August 23,2012, the parties amended and restated the loan a greement described above (the AGR Mitsui Bridge Loan Facility) pursuantto which Oriente Copper Netherlands B.V. (Oriente Copper), an affiliate of Mitsui, agreed to make available to a wholly-owned subsidiary of CODELCO a bridge loan denominated in U.S. dollars. On August 24, 2012, the subsidiary of CODELCO drew down an amount equal to U.S.$1,867.0 million to finance the acquisition by Inversiones Mineras Becrux SpA (Becrux) of equity interests of Anglo American Sur as described below under Business and Properties – Copper Production- Associations, Joint Ventures and Partnerships-Anglo American Sur and to pay certain taxes, costs and expenses relatingto the financing. On October 3 1, 2012, CODELCO and Oriente Copper entered into an agreement to refinance the U.S.$1,867.0 million bridge loan with a U.S.$875.0 million non-recourse term loan with a 3.25% fixed interestrateanda 20-year amortization (the Mitsui Term Loan) that is secured by a pledge of the equity interests in Acrux held by such subsidiary of CODELCO. As part of this refinancing, CODELCO sold to Oriente Copper the equivalentof a 4.5% stakeof Anglo American Sur for U.S.$998.0 million and used the proceeds of this sale to prepay a portion of the bridge loan. On November26, 2016, CODELCO signed a credit a greement with Oriente Copper renegotiatingthe payment of principal at the end of the contract. The terms esta blished an annual interest rate of LIBOR +2.5% with a five-year maturity to be payable in one insta Ilment at maturity with semi-annual interest payments. On May 26, 2017, CODELCO signed a new credit a greement with Oriente Copper renegotiating the following semi-annual payment, which was on the same terms as the first renegotiation donein November2016. In May 2021 the Mitsui Term Loan was fully prepaid.
e Capital Expenditure Program. We seek to maintain and improve our competitive position in the industry through ourthree-year capital ex penditure program. Followingthe completion ofa number of significant projects in recent years, such as the developmentof CODELCOs new Mina Ministro Hales, the development of sulfide ores at the Radomiro Tomic mine, the expansion at the Andina mine and the development of the Pilar Norte area at the El Teniente mine, CODELCO intends to continue its development program. Accordingly, the Company expectsto make capital expenditures of approximately U.S.$13.4 billion between 2022 and 2024, transforming its main miningoperations with a view towards the long-term development ofits resources. We expectthese expend itures to be funded with a combination of internal and external resources. For a complete list of planned capital expenditures, see Business and Properties-Copper Production-Opentions. CODELCO*s expansion and development of major projects between 2022 and2024 are expectedto include: o The gradual transformation of the Chuquicamata mine from an open pit mine to an underground operation, which we expect will enable Chuquicamata to maintain its annual copper production at its current level startingin 2019 (an approximate investment of U.S.$1.3 billion between 2022 and 2024).
Environmental approvals were obtained in September 2010. On March 25, 2020 and on June20, 2020, CODELCO announced the temporary suspension of construction of this project as a measure to prevent the spread of COVID-19 among employees and contractors. In August 2020, work on the project gra dually resumed. In March 2021, theproject’s design incorporated additional fortification work to be completed during 2021. Consequently, a fter adjusting for this additional work and new reinforcement infrastructure the project was 100% complete in September2022.
o The reallocation of the Andina plant, which involves maintaining the treatment capacity of the concentrator pla nt in the long-term (an approximate investmentof U.S.$64.0 million between 2022 and
2024). In March 2020, CODELCO announced the temporary suspension of this project asa measure to prevent the spread of COVID-19 among employees and contractors. The new primary crusher plant began operation in the first quarter of 2022. The project is currently under review and the conveyor system should begin operations in late 2023.
o The development of a new production level in the existing El Teniente underground mine (an approximate investment ofU.S.$2.0 billion between 2022 and 2024) to maintain El Teniente’s annual copper production at its current level. Environmental approvals were obtained in March 2011. However, based on geomechanical challenges that need to be addressed, an alternative development plan was approved in January 2018, which will still permit us to maintain our original production goal. The new mining level is expected to be completed in 2023. As of September 30, 2022, the project was approximately 75.9% complete.
o Thedevelopment of the Inca Pit project is designed to extend the life of the current underground mine operation in the Salvador Division and enable it to maintain its annual production at its current level
57 starting in 2021 and the analysis for a future expansion, which requires an approximate investment of
U.S.$1.1 billion between 2022 and 2024. As of September 30, 2022, the project was approximately
37.8% complete. As of the date of this offering memorandum, the Inca Pit project is still under construction.
CODELCO has already begun investing in the aforementioned projects. In 2021, CODELCO invested
U.S.$2.7 billion principally in expansion and development projects, including the new El Teniente mine level, the Chuquicamata underground mine expansion and, the rea llocation of the Andina mine -plant pursuant to the Andina expansion project, as well as in the upgrade of CODELCO*s smelters to comply with the new emission standards.
CODELCO invested U.S.$2.1 billion and U.S.$3.7 billion in 2020 and 2019, respectively. For an additional description of CODELCO’s principal planned capital expenditures, see Business and Properties-Copper
Production-Operations.
CODELCO expects thatit will ha ve su fficient resources from operations, includingcash flows, capitalization and retention of profits, in addition to new borrowings from banks and the capital markets to fund its anticipated capital expenditures and investments.
As described under Regulatory Framework-Overview ofthe Regulatory Regime below, the Ministries of Finance and Miningare required to determine, by means ofa joint decree, the amount, ifany, thatthe Company shall allocate to the creation of capitalization and reserve funds. In June 2014, the Ministries of Finance and Mining approved the capitalization of U.S.$200.0 million through a retention of profits from 2013 profits. In October 2014, the multi-year capitalization la w approved by the Chilean Congress wa spromulgated and became effective following its publication in the Official Gazette on October 30, 2014. This law allocates a maximum of U.S.$3 billion to CODELCO in the form ofa capital injection by the Chilean Treasury overthe period from2014to 2018. Pursuantto this law, CODELCO must presenta yearly progress report onthe BDP forthe 2014-2018 period to the Ministries of Finance and Mining and to the Finance Committee of both the Upper House and the Lower House of Congress by March 30 of each year. The BDP report details the progress of CODELCOS*s investments, including information regarding their financing a nd execution, covering each of the structural projects and their corresponding investments.
The BDPreport also discusses CODELCOS*s progress with respect to production, costs and results. On the same date that the multi-year capitalization la w was promulga ted, the President of Chile announced a commitmentto authorize the retention by CODELCO ofupto anadditional U.S.$1 billion of profit (which includes the U.S.$200.0 million that had been authorized in June 2014) overthe 2014-2018 period.
In accordance with this commitment, in June 2015, the Ministries of Finance and Mining approved the capitalization of U.S.$225.0 million of 2014 profit, but charged to 2015 profits. However, due to CODELCO’s operating losses in 2015, this capitalization has not been implemented. Nonetheless, pursuant to the multi-year capitalization la w, the Government of Chile authorized a capital injection of U.S.$600.0 million (out ofthe maximum
U.S.$3.0 billion forthe 2014-2018 period), which was received in U.S. dollars in December 2015. In December 2016, the Ministries of Finance authorized the capitalization of U.S.$975.0 million, U.S.$500.0 million of which related to a capital injection to finance CODELCO*s investment plan and was received in December 2016. The remaining
U.S.$475.0 million was authorized pursuant to a new law (Law No. 20,989), effective as of January 2017, which provided for additional capitalization of a maximum of U.S.$950.0 million forboth2016and2017 (up to U.S.$475.0 million for each year) in the event CODELCO does not have the required pre-tax profits to cover the 10% special export tax underthe Copper Reserve Law. In April2017, CODELCO received the U.S.$475.0 million capital injection in U.S. dollars for 2016. Law No. 20,989 also extended the U.S.$3 billion capitalization commitment for the 2014- 2018 periodto 2019. While CODELCO did not expect additional capital injections in connection with Law No. 20,989 during2017, in November2017, the Government of Chile authorized a capital injection ofU.S.$520.0 million (out of the maximum U.S.$3 billion for the newly extended 2014-2019 period), which was received in U.S. dollars in December 2017. In June 2018, the Government of Chile announced a final capital injection of U.S.$1 billion to complete the multi-year capitalization la w approved in October20 14. Moreover, in October 2018, the Govemment of Chile authorized the disbursement of such amount in two insta llments completed on December 31, 2018 for
U.S.$600.0 million and on February 28,201 9 forthe remaining U.S.$400.0 million.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations -Liquidity and Capital Resources and Risk Factors-Risks Relating to CODELCO*s Relationship with the Government of
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Chile -CODELCOSs funding through retention of profits is restricted andis subjectto theapproval of the Ministries of Financeand Mining.
Since 2014, the Government of Chile has authorized the capitalization and retention of U.S.$2.5 billion within CODELCO, U.S.$225.0 million of which has notbeenimplemented.
Since 2022, the Chilean Government allows CODELCO to annually reinvest 30% of its 2021-2024 profits.
This represents a change in CODELCOSs dividend policy, which previously consisted of 100% net-profit distribution policy. This profit-reinvestment plan will strengthen CODLECOS*s financial balance sheet and reduce the need for additional financial debt.
Cash flows from operating activities may be affected by a variety of factors, including copper price levek.
In the event that CODELCO is unable to sell assets or obtain external financing with respect to such capital investments, it may be required to further curtail such expenditures.
Environmental. An important part of CODELCOS*s investment policy isits pollution abatementplan, which includes several environmental projectsundertaken to comply with Chilean law and to achieve its own environmental performance goals. See Regulatory Fra mework-Environmental Regulations.
CODELCO invested U.S.$3.6 billion in environmental projects from 2012 to 2019 and plans to continue implementing its pollution abatement plan through additional capital investments of approximately U.S.$1.0 billion in 2021 through 2022. In 2021, CODELCO invested U.S.$196.0 million in environmental projects, including new phases of the planned enlargements of the Talabre, Ovejería and Carén tailings dams in the Chuquicamata, Andina and El Teniente Divisions and various projects in the Chuquicamata, Ventanas, Salvador and El Teniente Divisions in order to comply with the new regulation on atmospheric emissions from the smelters. This figure includes the investment made in the Gabriela Mistral Division. CODELCOSs planned investment of approximately U.S.$891.0 million in 2022 includes the continuation of the enlargement of the Carén, Ovejería and Talabre tailings dams in the El Teniente, Andina and Chuquicamata Divisions and various projects in the Chuquicamata, Salvador and El Teniente smelters for the abatement of atmospheric emissions, among others. In 2022, planned investments include the continuation of the projects for the abatementofatmospheric emissionsin the Chuquicamata smelter and the continued enlargement ofthe tailingdams, among others.
The following ta ble sets forth CODELCOS*s principal environmental investments in the years 2019-2021:
Environmental Investments (in millions of U.S.$) 2019 2020 2021 Total
Total cocococcnncnnnononnnanonanonnnononnrononnnnnnnnnnnnnonnennnarenrnnnrano 832.9 273.7 196.0 1,302.6
Distributions to the Chilean Treasury. As a state-owned enterprise and according to its governing la w, CODELCOSs profit is due to be transferred to the Chilean Treasury. Before June 30 of each year, the Ministries of Finance and Mining determine, by means ofa jointdecree, thea mount, if any, thatthe Company must allocate to the creation of capitalization and reserve funds. Amounts not allocated to the creation of capitalization and reserve funds are distributed to the Chilean Treasury.
In 2019 CODELCO did not distribute dividends, while in 2020 and2021 CODELCO distributed U.S.$239.0 million and U.S.$2,033.0 million to the Chilean Treasury, respectively. While CODELCO makes advance payments to the Chilean Treasury throughout the year, funded by cash flows from openting activities, it generally has distributions payable to the Chilean Treasury at theend ofeach year. These distributions are paid in the first six-month period of the following year butare reflected in the prior years financial statements.
The following ta ble sets forth amounts paid in taxes (which due to the timing of payments may be different from tax amounts accrued) and payments and profit distributions made by CODELCO to the Chilean Treasury for each of the three years ended December 31,202 1 forthe nine-month period ended September 30,2022.
59
Contributions to the Chilean Treasury (in millions of U.S.$) Nine-month period ended September
Year Ended December 31, 30,
2019 2020 2021 2022 Income tax payments . e 82 29 1,979 696 Copper Reserve Law . e 918 1,025 1,550 1,005 Subtotal… . 1,000 1,054 3,529 1,701 Dividends….. . – 239 2,033 260 TOA occiccccnccionccnnoncon con conconon ronca 1,000 1,293 5,562 1961
Production Hedging. CODELCO has hedged certain future copper delivery commitments and production in orderto manage the risks associated with copper price volatility in the past. CODELCO currently does not have any hedged production commitments and therefore there is no relevant im pact from hedging. See notes 27 and28 to the Consolidated Financial Statements andnotes 29 and 30 to the Unaudited Interim Consolidated Financial Statements.
In 2021, CODELCOS’s production hedging activities hadno negative impacton pre-tax income.
CODELCOSs future production hedging activities could cause it to lose some ofthe benefit of an increase in copperprices if copperprices increase over the level of CODELCOS*s hedge position, as occurred in 2012. The cash flows from the mark-to-market values of CODELCO” production hedges can be affected by factors such as the market price of copper, copper price volatility and interestrates, which arenotunder CODELCOSs control.
CODELCOSs production hedging agreements contain events of default and termination events that could lead to early close-outs of CODELCO’s hedges. These include failure to pay, breach of the agreement, misrepresentation, default under CODELCOS*s loans or other hedging a greements and bankruptcy. In the eventof an early termination of CODELCOS*s hedging agreements, the cash flows from the affected hedge instruments would cease and CODELCO andthe relevant hedge counterparty would settle all of CODELCOS*s obligations at that time.
In thatevent, there could be a lump sum payment to be made eitherto orby CODELCO. The magnitude and direction of such a payment would depend upon, among other things, the characteristics ofthe particular hedge instruments that were terminated and the market price of copper and copper price volatility and interestrates atthetimeof termination.
See Business and Properties-Marketing-Pricing and Hedging, Risk Factors-Risks Relating to CODELCO*s Opera tions-CODELCO engages in hedgin g activity from time to time, particularly with respectto its copper production, which may notbe successful and may result in losses to CODELCO,note 28 to the Consolidated Financial Statements and note 30 the Unaudited Interim Consolidated Financial Statements for further information on CODELCOS’s hedgingactivity.
Exchange Rates and Interest Rates. CODELCO”s main currency exposure is between the Chilean peso and the U.S. dollar due to the fact that a significant portion of CODELCO*s operating costs are denominated in Chilean pesos and paid pursuant to contracts providin g forindexationto Chilean inflation, and approximately 100% of revenue is denominated in U.S. dollars or other foreign currencies. To minimize the risks associated with currency exposures and fluctuations in interest rates, CODELCO enters into interestrate futures contracts and foreign exchange forward contracts which reduce exposure to fluctuations in the Chilean peso to U.S. dollar exchange rate.
As of September 30, 2022, CODELCO had swap contracts in place to hedge the risk of future UFU.S$, HKDU.S.$, AUDU.S.S$and Euro U.S.$exchange rate fluctuations with respect to a notional amount of U.S.$615.0 million, U.S.$64.0 million, U.S.$49.0 million and U.S.$391.0 million, respectively, which were equivalent to, and sufficientto cover, 100% ofCODELCO*s foreign currency-denominated bonds outstanding as of September 30, 2022
As of September30,2022, 94.2% of our debt had a fixedrate and 5.8% had a floatingrate.
60
Controls and Procedures
CODELCO’s management conducted an assessment utilizing The Committee of Sponsoring Organizations (COSO) criteria of the effectiveness ofits internal controls as of the year ended December 31, 2019. Based on the assessment performed, CODELCOs management has notidentified any material weakness in its control environment.
In 2022, CODELCO implementeda control framework based on the Enterprise Risk Management framework of the Committee of Sponsoring Organizations of the Treadway Commission, which is a continuous process carried out by colla borators at all levels of the organization instead of only by one department.
Critical Accounting Estimates
The preparation of the consolidated financial statements in accordance with the IFRS requires the use of certain critical accounting estimates and assumptions that affectthe amounts of assets and lia bilities recognized asof the date of financial statements and the amounts of income and expenses duringthe reporting period. It also requires CODELCO”s management to exercise its judgment in the process of applying CODELCO*s accounting principles.
The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are below. For a full description of CODELCO” accounting policies, see Section II to the Consolidated Financial Statements.
Useful Economic Lives and Residual Values of Property, Plant and Equipment. The useful lives and residual values of property, plant and equipment assets that are used for calculating depreciation are determined based on technical studies prepared by specialists (internal or external). When thereare indicators that could lead to changes in the estimated useful lives of such assets, these changes are determined by using technical estimates considering specific factors related to theuse of theassets.
Ore Reserves. The measurements of ore reserves are based on estimates of the ore resources that are economically exploitable, and reflectthe technical considerations of the Company regarding the amountof resources that could be exploited and sold at prices exceedingthe total costa ssociated with extraction and processing.
CODELCO applies its judgment in determining its ore reserves and, as such, possible changes in these estimates could significantly impact the estimates of net revenues over time. For such reason, these changes would lead to modifications in the usa ge estimates of certain assets and of the amount of certain decommissioning and restora tion costs.
CODELCO estimates its reserves and mineral resources based on the information prepared by the Competent Persons of the Company, as defined and regulated by Chilean La w No. 20,235. The estimates are based on the Joint Ore Reserves Committee (JORC) methodology, taking into consideration the historical information of the cost of goods sold and copperprices in the international market.
CODELCO also periodically reviews such estimates supported by world -class external experts, who certify the determined reserves.
Impairmentof non-financial Assets. CODELCO reviews the carrying amount of its assets to detenmine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the im pairment loss with regard to the carrying amount. In the evaluation of impairment, the assets are grouped into cash generating units (CGUS) to which the assetsbelong. The recoverable amount of these assets or CGUs is calculated as the present value ofthe cash flows expected to be derived from such assets, considering a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. Ifthe recoverable a mount ofthe assets is less than their carrying amount, an impairment loss exists.
CODELCO defines the CGUs andalso estimates the timing and cash flows that such CGUs should generate.
Subsequent changes in the grouping ofthe CGU, or changes in the assumptions supporting the estimatesof cash flows or the discountrate, could impactthe carrying a mounts of the corresponding assets.
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Estimates of factors influencing the calculation of cash flows, such as the price of copper or treatment charges and refining charges, among others, are determined based on studies conducted by the Company, which are in tum supported by certain standards over time. Any changes to these criteria may impact the recoverable amount of the assets on whichis performing the impairment tests. CODELCO*s evaluations and definition ofthe CGUs are made at the levelof each ofits currentoperating divisions.
CODELCO has assessed and defined the CGUs thatare constituted at the level ofeach ofits currentoperating divisions.
The review for impairmentincludes its subsidiaries, associates andjointarrangements.
Provisions for Decommissioning and Site Restoration Costs. CODELCO is obligated to incur decommissioning and site restoration costs when an environmental disturbance is caused by the development or ongoing production of a mining property. Costs are estimated onthe basis of a formal closure plan and are reassessed annually oras of the date such obligations become known.
Significant estimates and assumptions are made in determiningthe provision for decommissioningand site restora tion costs, as there are numerous factors that will a ffectthe ultimate lia bility payable. In orderto establish such estimates, CODELCO: (i) creates a defined list of minesites, installa tions and other equipment assigned to this process, considered at the engineering level profile; (ii) eva luates the assets that will be subject to removal and restoration, weighted by a structure of market prices of goods and services, andreflectingthe best knowledge at the timeto cany out such activities; and (iii) examines the techniques and more efficient construction procedures to date. In addition, CODELCO must make certain assumptions about the exchange rate for tra dable goods and services and the discount rate applied to updatethe relevant cash flows over time, which reflects thetime value of money and includes therisks associated with lia bilities, which is based on the currency in which disbursements will be made.
The provision as ofa reporting da te represents management’s best estimate ofthepresent value ofthe future decommissioning and site restoration costs required. Changes to estimated future costs are recognized in the statement of financial position by adjustingthe provision for decommissioning and site restoration costs as well as the associated asset measured in accordance with IAS 16, Property, Plantand Equipment. Any reduction in the decommissioning and site restoration lia bility, and therefore any deduction from the decommissioning and site restoration asset, may not exceed the carry inga mount of that asset. Ifit does, any excess overthe carrying value is immediately a ccounted foras profit orloss.
If the change in estimate results in an increase in the decommissioning and site restoration lia bility, and therefore an addition to thecarrying value ofthe asset, the entity is required to consider whether this is an indication of impairment of the asset as a whole and test forimpairment in accordance with IAS 36 Impairment of Assets.If the revised assetnet of decommissionin g and site restoration provisions exceeds the recoverable value, that portion of the increase is charged directly to profit or loss statement. Any decommissioning and site restoration costs thatarose asa result of the productionphase ofa mineshould be expensedas incurred.
The costs arising from the installation ofa plant or other site preparation projectsare discounted at net present value, provided for and capitalized at the beginning ofeach project, as soon as the obligationto incur such costs arises.
These decommissioning costs are charged to profit over the life of the mine through depreciation of the asset. The depreciationis included in operating costs, while the unwinding ofthe discount in theprovision is included in finance costs.
Accrual for Employee Benefits. Employee benefits costs for severance payments and health benefits for services rendered by the employees are determined based on actuarial ca Iculations using the projected credit unit method and are charged to profit or loss on anaccrual basis.
We use assumptions to determinethe best estimate for these benefits. Such estimates, as well as a ssumptions, are determined together with an external actuary. These assumptions include demographic assumptions, mortality and morbidity, discountrateand expected sa lary increases and rotation levels, among other factors. Although we believe thattheassumptions used are appropriate, a change in these assumptions could a ffect profit.
62
Acrruals for open invoices. The substantial majority ofcopper produced by CODELCO is sold under annual contracts. Pricing on such contracts is based on prevailing monthly average pricesquotedon the LME fora quotation period, generally the month following the scheduled month of shipment. CODELCO uses information on future copper prices, through which it recognizes adjustments to its revenues and trade receivables due to its provisional invoicing. These adjustments are updated on a monthly basis. At the end of each month, CODELCO estimates and accounts for any change in the provisional sales price usin g information availa ble atthe time financial sta tements are generated. However, the amount estimated may differ from the amount received atsettlement. Revenueis recorded at the time control of the asset is transferred to the customer according to the shipment or dispatch of the products, in conformity with the agreed-upon conditions and are subject to variations related to the content andor sales price at their liquidation date. Notwithstandingthe foregoing, there are certain contracts under which control of the product is transferred to the client based onreceipt ofthe product at thebuyers destination point, and forthese contracts revenue is recorded atthe moment ofsuch transfer.
Sales contracts include a provisional price at the shipment date, which final price is generally based on the price recorded in the LME. In the majority of cases, the recognition of sales revenue for copper and other commodities is based on the estimates ofthe future spread of metal price on the LME andor thespotprice atthe date ofshipment, with a subsequent a djustment made upon final determination and presented as part of Revenue. The terms of sales contracts with third parties contain provisional pricing arrangements whereby the selling price for metal in concentrate is based on prevailing spot prices on a specified future date a fter shipment to the customer (the quotation period).
As such the final price willbe fixed onthe dates indicated in the contracts. Adjustments to the sales price occurs based on movements in the LME up to the date of final settlement. The period between provisional invoicing and final settlement can be between one and nine months. Changes in fair value over the quotation period and up until final settlementare estimated by reference to forward market prices forthe applicable metals.
Sales in the national market are recorded in conformity with the regulations that govern domestic sales as indicated in Articles 7, 8 and 9 of Law No. 16,624, modified by Article 15 of Decree Law No. 1,349 of 1976, on the determination ofthesales price forthe internal market.
Additionally, we recognize revenue for providing services, mainly related to the processing of mineral bought from third parties. Revenueis recognized when the performance obliga tion has been satisfied.
See Business and Properties-Marketing-Pricing and Hedging for information regarding hedge accounting.
Fair Value of Derivatives and Other Instruments. Management may use its judgment to choosean adequate and proper valuation method for the instruments that are not quoted in an active market. In the case of derivative financial instruments, assumptionsare based on the observable market inputs, a djusted in conformity with the specific features ofthe instruments.
Lawsuits and Contingencies. We assess the probability of lawsuits and contingency losses on an ongoing basis according to estimates performed by our legal advisors. No provision is recognized for cases in which management and our legal a dvisors believe that (1) a fa vorable outcome will be obtained, (ii) the probability of a loss is remote or possible, but not probable, or, if probable, (iii) the amount ofthe obliga tion cannot be measured relia bly.
Applicationof IFRS 16: includes thefollowing;:
+ Estimationof theleaseterm.
e Determineifitis reasonably certain thatan extension or termination option will be exercised.
e Determinationoftheappropriaterate to discountlease payments.
Revenuerecognition: We determine appropriaterevenue recognition for our contracts with customers by analyzing the type, terms and conditions of each contract ora greement with a customer. As part of theanalysis, the management mustmake judgments about whether an a greementor contract is legally enforceable, and whetherthe
63 agreementincludes separate performance obliga tions. In addition, estimates are required to allocatethe total price of the transactionto each perfomance obliga tion based on the stand-alone sellingprice ofthe promised goods or services underlying each performance obliga tion. (We apply the constrainton variable consideration as defined in IFRS 15, if applicable). Althoughthe abovementioned estimates have been made based on the bestinfomation available as ofthe date ofissuance ofthese consolidated financial statements, it is possible that new developments could lead us to modify these estimates in the future. Such modifications, if applicable, would be adjusted prospectively, as required by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
64
BUSINESS AND PROPERTIES
CODELCO is the worlds largest copper producer and one of the largest companies in Chile in terms of revenues(U.S.$21.0 billion in 2021). As of December 3 1,2021, CODELCO>s total assets were U.S.$43.1 billion and equity amounted to U.S.$11.6 billion. As of September 30, 2022, CODELCOSs total assets were U.S.$42.4 billion and equity amounted to U.S.$11.8 billion.
CODELCO enga ges primarily in the exploration, development and extraction of ores bearing copper and byproducts, the processing of ore into refined copper and the international sale of refined copper and byproducts.
CODELCO is 100% owned by the Governmentof Chile and controls approx imately 5.4% ofthe worlds proved and probable copperreserves, as such terms are defined bythe U.S. Geological Survey.
In 2021, CODELCO had an estimated 8.2% share of total world copper production, with production amounting to approximately 1.73 million metric tons, including; (i) CODELCOS*s share ofthe El Abra deposit, which is mined by Sociedad Contractual Minera El Abra and owned 49% by CODELCO and 51% by Cyprus El Abra Corporation (a subsidiary of Freeport-McMoRan Inc.); and (ii) CODELCO*s share of Anglo American Sur(of which CODELCO owns a 20% indirect share), and an estimated 7.8% share of the worlds molybdenum production, with production amounting to approximately 22,353 metric tons excluding CODELCO*s share of Anglo American Sur.
CODELCOS*s main commercial product is Grade A cathode copper. In 2021 and forthe nine-month period ended September 30,2022, CODELCO derived 93.1% and 90.6% ofits total sales from copper and 6.9% and 94% of its total sales from byproducts of its copper production, respectively.
The following table sets forth certain production, cost and price information relating to CODELCO for the three-year period ended December31,2021 andthe nine-month period ended September 30,202 1and2022:
Copper Production, Cash Costof Production and Price Information (excluding El Abra and Anglo American Sur) (production in thousands of metric tons and cash costs and prices in cents per pound)
For the nine-month periods ended
Year ended December 31, September 30, 2019 2020 2021 2021 2022 CODELCO*s Copper Production 1,588 1,618 1,618 1,185 1,062 CODELCOS*s Cash Cost of Production. 141.6 129.4 132.7 129.9 157.4 Average LME Price! 272.1 280.3 422.6 416.8 411.1
(1) Price for Grade A cathode copper.
CODELCOSs mission is to maximize the value of its mineral resources forthe benefit ofits shareholder, the Chilean state, by fully developingits va stminingresources on a timely basis, leveragingthe Company s experienced workforce, utilizing its advanced technological holds in key areas and by executing the following key strategic initiatives: e Capital Expenditure Program. We seek to maintain and improve our competitive position in the industry through ourthree-year capital expenditure program. Followingthe completion ofa number of significant projects in recent years, such as the developmentof CODELCOs new Mina Ministro Hales, the development of sulfide ores at the Radomiro Tomic mine, the expansion at the Andina mine and the development of the Pilar Norte area at the El Teniente mine, CODELCO intends to continue its development program. Accordingly, the Company expectsto make capital expenditures of approximately U.S.$13.4 billion between 2022 and 2024, transforming its main miningoperations with a view towards the long-term development ofits resources. We expectthese expenditures to be funded with a combination of internal and external resources. For a complete list of planned capital expenditures, see Business and Properties-Copper Production-Opentions. CODELCOS*s expansion and development of major projects between 2022 and2024 are expectedto include:
65 o The gradual transformation of the Chuquicamata mine from an open pit mine to an underground operation, which we expect will enable Chuquicamata to maintain its annual copper production at its current level startingin 2019 (an approximate investment of U.S.$1.3 billion between2022 and 2024).
Environmental approvals were obtained in September 2010. On March 25, 2020 and on June20, 2020, CODELCO announced the temporary suspension of construction of this project as a measure to prevent the spread of COVID-19 among employees and contractors. In August 2020, work on the project gra dually resumed. In March 2021, theproject’s design incorporated additional fortification work to be completed during 2021. Consequently, a fter adjusting for this additional work and new reinforcement infrastructure the project was 100% complete in September2022.
o The reallocation of the Andina plant, which involves maintaining the treatment capacity of the concentrator pla nt in the long-term (an approximate investmentof U.S.$64.0 million between 2022 and
2024). In March 2020, CODELCO announced thetemporary suspension ofthis project asa measure to prevent the spread of COVID-19 among employees and contractors. The new primary crusher plant began operation in the first quarter of 2022. The project is currently under review and the conveyor system should begin operations in late 2023.
o The development of a new production level in the existing El Teniente underground mine (an approximate investment ofU.S.$2.0 billion between 2022 and 2024) to maintain El Teniente’s annual copper production at its current level. Environmental approvals were obtained in March 2011. However, based on geomechanical challenges that need to be addressed, an alternative development plan was approved in January 2018, which will still permit us to maintain our original production goal. The new mining level is expected to be completed in 2023. As of September 30, 2022, the project was approximately 75.9% complete.
o Thedevelopment of the Inca Pit project is designed to extend the life of the current underground mine operation in the Salvador Division and enable it to maintain its annual production at its current level starting in 2021 and the analysis for a future expansion, which requires an approximate investment of
U.S.$1.1 billion between 2022 and 2024. As of September 30, 2022, the project was approximately
37.8% complete. As of the date of this offering memorandum, the Inca Pit project is still under construction.
Improvement in operations. A number of improvement initiatives are underway to adopt best industry practices, mostnotably in the areas of labor productivity, asset utilization rates and process efficiency. Together with its capital expenditure investment program, CODELCO expects these initia tives to enhance its competitive position.
CODELCO operates in a cyclical business and its strategy is to ensure that it is able to take full advantage of high copper prices. CODELCO is developinga number of plans to achieve production targets in the coming years. These plans mainly focus on reducing therisk of disruptions to production and providing increased flexibility to its operations.
Exploration Efforts. CODELCO controls the largest copperreserves worldwide, the Company s single most important long-term competitive advantage. The discovery ofnew mining resources and improvingits ability to locate existing ore bodies and prospects are critical to CODELCO maintaining its preeminent position in the industry.
Accordingly, the Company s exploration program will continue to be a key partof its business strategy.
Investment in Human Capital. The successful execution of CODELCO”s business strategy relies on continuingto attract andretain a world -class management team and professionals of the highest caliber. The mining industry faces increased competition for workforce talent. As a result, the Company intends to continue improving career developmentopportunities forits sta ffa nd the overall attractiveness of£CODELCO as a preferred employer.
Mining Association with Third Parties. CODELCO seeks to continue to develop and operate assets in association with third parties where these associations will add value to CODELCO*s business. A few examples of the Companys willingness and ability to do so are (i) the association with Freeport-McMoRan Inc. in the El Abra copper mine (CODELCO owns 49%) and (ii) the association with Anglo American, Mitsui and Mitsubishi Corporationin Anglo American Sur(CODELCO owns an indirect 20% interest). CODELCO believes its large mining reserve is a strong platform from which to establish such associations.
66
Copper Production General
The copper deposits in CODELCOs mines exist in two principal forms-sulfide ore and oxide ore. The majority of CODELCO’s mines, including Chuquicamata and El Teniente, yield primarily sulfide ore. The ore extracted from the Radomiro Tomic deposit is copper oxide and sulfides. CODELCO produces refined copper from oxide and sulfide ore using different processes. CODELCO believes that havingthese two different forms of copper deposits gives it a high level of flexibility to respond to market changes by adjustingits production and utilizin g the refiningprocesses described below.
Sulfide Ores. Sulfide oresare found in CODELCO*s open-pit and underground mines. In open-pit mines, the process of producing copper from sulfide ores begins at the mine pit. Waste rock and ores containing copper are first drilled and blasted and then loaded onto diesel-electric trucks by electric shovels. Waste is hauled to dump areas. In underground mines, copper ore is deposited on rail cars and transported to a crushin g circuit where gyratory crushers break the ore into sizes no largerthan three-fourths of an inch. In both types of mines, the ore is then transported to rod and ball mills which grind it to the consistency of powder. In the conventional concentratorsmelterrefinery process for sulfide ore, this finely ground ore is agitated in a water and chemical solution and pumped as a watery mixture to the flotation separator. The solution is then aerated, producinga froth which carries the copper mineras, but not the waste rock, to the surface. The frothis skimmed offand filteredto produce copper concentrates. The waste rock, called tailings, is sent to a tailings storage facility. The copper concentrates (which contain a copper grade of approximately 30%) are then sent to the smelter.
At the smelter, the concentrates are blended with fluxes and fed into reverberatory furnaces or a Teniente converter (a technologically advanced type of converter designed by CODELCO) where they are melted, producing matte and slag. Matte from reverberatory furnaces containsapproximately 45% copper, and matte from a Teniente converter contains approximately 75% copper. Slag is a residue of the smelting process containing iron and other impurities, which the Company disposes of with its otherindustrial solid waste. The matte is transferred by la dles to the con verters and is oxidized in two steps. First, the iron sulfidesin the matte are oxidized with silica, producing slg thatis returned to the reverberatory furnaces. Second, the impurities in the matte sulfide are oxidized to produce blister copper. The blister copper contains approximately 98.5% copper. Someof the blister copperis sold to customers. The remainderis transferred tothe electrolytic refinery.
Afteradditional treatmentin the anode furnace, the copperis cast into anodes and then moved to the refinerys electrolytic tank house. This anode copperis approximately 99.0% copper. In the electrolytic tank house, anodesare suspended in tanks containing an acid solution and copper sulfate. An electrical currentis passed through the anodes and chemical solution to deposit clean copper on pure copper plates. The resulting refined copper cathodes are 99.99% copper. Silver and small amounts of other metals contained in the anodes settle on the bottom of the tanks and are recoveredin a separate process.
Oxide Ores. Oxide ore is scarcer than sulfide ore, and is typically found closerto the surfaceof the earth. A different process (called the SX-EW process) is used to produce refined copper from oxide ores, which CODELCO employs at its SX-EW facilities in Chuquicamata, El Teniente, Salvador, Gabriela Mistral and Radomiro Tomi. In the first step of the SX-EW process, copper oxide ore is mined, crushed and deposited into large piles. The piles are leached fora period of several days with a solution of sulfuric acid, resulting in the effusion from the piles ofa solution with a high-concentration of copper. The copper solution is collected into large pools, from which copper is then recovered by solventextraction, followed by a second recovery method called electrowinning, to produce high -grade copper cathodes. The SX-EW process involves lower overall refining costs, and can be used with a lower grade ofore, than the traditional concentratorsmelterrefinery process. The SX-EW process also enables CODELCO to recover copper by re-leaching waste material left over from prior copperextractions.
Operations
CODELCOSs copper operations are divided into the following eight divisions:
+ TheEl Teniente Division operates the El Teniente mine, which is the worlds largest underground copper mine
67 and has been in operation for more than 100 years. The El Teniente Division includes the Caletones smelter. In 2021, this division produced 459,817 metric tons of copper, or 26.6% of CODELCOSs total copper output (including CODELCOSs share of the El Abra deposit and Anglo American Sur), with a cash costof 108.6 cents per pound, compared to 99.7 cents per pound in 2020, and a total cash cost of U.S.$1,088.3 million in 2021, compared to U.S.$963.0 million in 2020. During the first nine months of 2022, this division produced 291,090 metric tons of copper with a cash costof 102.4 cents perpoundand a total cash costof U.S.$650.9 million.
The Radomiro Tomic Division operates the Radomiro Tomic mine, which beganits first full year of production in 1998.In 2021, this division produced 326,456 metric tons ofcopper cathodes, or 18.9% of CODELCO total copper output (including CODELCO*s share of the El Abra deposit and Anglo American Sur), with a cash cost of 138.6 cents perpound, compared to 142.2 cents per pound in 2020, and a total cash cost of U.S.$989.0 million in 2021 compared to U.S.$812.0 million in 2020. During the first nine months of 2022, this division produced 215,920 metric tons of copper with a cash cost of 201.5 cents per pound and a total cash cost of U.S.$9503 million.
The Chuquicamata Division operates the Chuquicamata mine, one of the largest copper-producingmines in the world, which began its operations in 1915 and currently includes smeltingand refining capacities. In 2021, this division produced 319,280 metric tons of copper cathodes, or 18.5% of CODELCOS*s total copper output (including CODELCO s share of the El Abra deposit and Anglo American Sur), with a cash cost of 1 162 cents per pound, compared to 113.0 cents per pound in 2020, and a total cash cost of U.S.$801.7 million in 2021, compared to U.S.$975.0 million in 2020. During the first nine months of 2022, this division produced 200,353 metric tons of copper with a cashcostof 120.0 cents perpoundand a total cash costof U.S.$519.9 million.
The Mina Ministro Hales Division was created in 2010 for the operation of the Mina Ministro Hales ore body, which first began producing copper atthe end of 2013. In 2021, this division produced 181,704 metric tons of copper, or 10.5% of CODELCO*s total copper output (including CODELCO*s share of the El Abra deposit and Anglo American Sur), with a cash costof 89.2 cents perpound, compared to 109.9 cents per pound in 2020, and a total cash cost of U.S.$430.3 million in 2021, compared to U.S.$399.9 million in 2020. During the first nine months of 2022, this division produced 108,854 metric tons of copper with a cashcost of 116.2 cents per pound and a total cash cost ofU.S.$269.6 million.
The Andina Division operates the Andina and Sur-Sur mines with production split among open-pit and underground mines. It does not have independent smelting capacity. Andina has been in operation since 1970. In 2021, this division produced 177,216 metric tons of copper, or 10.3% of CODELCO*s total copper output (including CODELCO s share of the El Abra deposit and Anglo American Sur), with a cash costof 154.9 cents per pound, compared to 152.9 cents per pound in 2020, and a total cash cost of U.S.$584.6 million in 2021, compared to U.S.$600.4 million in 2020. During the first nine months of 2022, this division produced 139,805 metric tons of copper with a cash costof 172.2 cents perpoundand a total cashcostof U.S.$512.8 million.
The Gabriela Mistral Division was created in 2013 and operates the Gabriela Mistral mine, which uses SX-EW technology. The Gabriela Mistral mine produced its first copper cathodes in 2008 after a 26-month construction period. In 2021, this division produced 100,908 metric tons of copper, or 5.8% of CODELCO*s total copper output (including CODELCO*s share ofthe El Abra deposit and Anglo American Sur), with a cash cost of 193.4 cents perpound, compared to 189.0 cents perpound in 2020, and a total cash cost of U.S.$430.3 million in 2021, compared to U.S.$425.4 million in 2020. During the first nine months of 2022, this division produced 84,224 metric tons of copper with a cashcostof 265.4 cents perpoundand a total cash costof U.S.$492.8 million.
The Salvador Division operates the Salvador mine and concentrator and the smelterrefinery compkx at Potrerillos, which has the capacity to treat 671,000 metric tons of concentrate. In 2021, this division produced 52,885 metric tons of copper cathodes, or 3.1% of CODELCOS*s total copper output (including CODELCO’s share of the El Abra deposit and Anglo American Sur), with a cash cost of 268.0 cents per pound, compared to
214.6 cents per pound in 2020, and a total cash cost of U.S.$311.4 million in 2021, compared to U.S.$265.0 million in 2020. Duringthe first nine months o£2022, this division produced 21,867 metric tonsof copper with a cash cost of 354.6 cents per pound and a total cash cost of U.S.$169.1 million. As of the date of this offering memorandum, the Inca Pit project is still under construction. The Potrerillos smelter and refinery would continue
68 to operate upon any cessation of the mining operations at Salvador.
e The Ventanas Division was created in connection with the acquisition of the Ventanas smelterrefinery complex from ENAMI in 2005. In 2021, this division refined 400,000 metric tons of copper, compared to 402,000 metric tons of copperin 2020. Duringthe first nine months of 2022, the Ventanas Division refined 285,800 metric tons of copper. Pursuant to the terms of the acquisition, CODELCO is required to provide on market terms the necessary smelting and refining capacity for the treatment of copper concentrate delivered by the small- and medium-sized mining industry that ENAMI serves. In June2022, CODELCO*s Board of Directors approved the decommissionin g of the smelterin the Ventanas Division. In December2022, a law amendment wasapproved in Congress allowing CODELCO to smelt copper concentrates in smelters other than thoseofthe Ventanas Division.
In January 2023, the Miningand Energy Commission of the Upper House approved the articles particular to the bill, setting definitions regarding the future installation ofthe new smelting capacity, and its compatibility with environmental sa fety and the protection of people’s health, among others. The bill was approved by the Senate on January 24,2023. The bill is currently in the Chamber of Deputies forits third constitutional process. As of September 30, 2022, the Ventanas Division employed 769 persons.
The Chuquicamata Division, the Radomiro Tomic Division, the Mina Ministro Hales Division, the Gabriela Mistral Division and the Salvador Division form part ofCODELCO*s Northern Operations (Operaciones Norte).
The Andina Division, the El Teniente Division and the Ventanas Division form p art ofCODELCO*s Central Southern Operations (Operaciones Centro Sur). Fora description ofCODELCO*s associations with other companies, see Business and Properties-Copper Production-Associations, Joint Ventures and Partnerships
Beginningin late 2010, CODELCO implemented a corporate reorganization plan which divided the management of CODELCOS’s operations into Northern Operations (Operaciones Norte) and Central Southern Operations (Operaciones Centro Sur), to supervise the divisions in the north and center-southern regions, respectively. The reorganization was intended to simplify the organizational structure by causing all corporate administrative and support functions to report to a single vice president, and the productive divisions to concentrate on maximizing production, controlling costs and implementing sa fety measures. The Chuquicamata Division, the Radomiro Tomic Division, the Mina Ministro Hales Division and the Salvador Division are now supervised by the Vice President of Northern Operations (Operaciones Norte). The Andina Division, the El Teniente Division and the Ventanas Division are now supervised by the Vice President of Central Southern Operations (Operaciones Centro Sur).
CODELCO’s copper production, includingits shareof the El Abra deposit and of Anglo American Sur, increasedto 1,727,896 metric tons duringthetwelve months of2021 from 1,727,300 metric tons in 2020 and from 1,706,013 metric tons in the twelve months of2019. Each ofthese increases was mainly due to higher copper production at Radomiro Tomic, Ministro Hales and El Teniente, partially offsetby production declines mainly at Chuquicamata, but also at Andina. Molybdenum production decreased by 25.0% in 2021 compared to2020, from 28,350 metric tons to21,264 metric tons.
The ta ble below shows the production of copper from CODELCOs mines, as compared to private sector production in Chile, for the three-year period ended December 31, 2019, 2020 and 2021 and the nine-month period ended September 30,2021 and 2022:
Production of Copper from Chilean Mines (CODELCO and Private Sector) (in thousands of metrictons)
For the nine-month period ended September
Year ended December 31, 30, % Change 2019 2020 2021 2021 2022 20212022 El Teniente Division. 460 443 460 342 291 (14.9) Radomiro Tomic Division. 266 261 326 223 216 (3.0) Chuquicamata Division.. 385 401 319 239 200 (16.3) Mina Ministro Hales 152 171 182 144 109 (24.4) Andina Division… … 170 184 177 129 140 8.1 Gabriela Mistral Division ……………. 104 102 101 69 84 22.4
69
Salvador DiviSiOM….ooonnnnnnnnnnnnnccnnn 51 56 53 39 22 (43.7)
El Abra. 40 35 36 26 32 23.5 Anglo American Sur? . . 78 74 74 55 42 (23.1) CODELCO Total Production……… 1,706 1,727 1,728 1,265 1,136 (10.2) Chilean Private Sector? ……………. 4,081 4,006 3,897 2,909 2,757 (5.2) Total Chilean Production ………….. 5,787 5,733 5,625 4,174 3,893 (6.7)
(1) CODELCOSs figures presented for El Abra include 49% of the mines total production (the share of production which corresponds to CODELCO*s 49% direct ownership interest in the mine). The balance of El Abra’s production is included in the private sector figures.
(Q) CODELCOSs figures presented for Anglo American Sur include 20% of the mines total production (the share of production which corresponds to CODELCO’s 20% ownership interest in the mine). The balance of Anglo American Sur production is included in the private sector figures.
(3) Source: Chilean Copper Commission.
The ta ble below shows the breakdown ofCODELCOs own copperoutputforthe three-year periods ended December31,2019,2020 and 2021 andthenine-month period ended September 30, 2022:
Copper Outputof CODELCO (excluding El Abra and Anglo American Sur) (in thousands of metrictons)
For the nine- month period ended Year ended December 31, September 30,
2019 2020 2021 2022 Cathodes….. 406 432 475 310 Blister and anod 339 373 388 268 Calcines … 117 100 136 96 COMCEMÉIALOS coccocccccnnnnononcnnrnnonicrnncncnnincos 726 713 615 389
Total… e 1,588 1,618 1614 106:
The following ta ble sets forth CODELCOS*s initial capital expenditures budget forthe period 2022-2024 by division, and for the executive offices, as approved by the Companys Board of Directors as part of CODELCO’s BDPreport, which is subjectto the approval of the Ministries of Finance and Mining (ca pital expenditures are subject to changeat the discretion ofCODELCO). The capital expenditures budgetis subject to an annual review and therefore may be subjectto change.
Estimated Division Investment (in millions of U.S.$)
Chuquicamata 2,161 El Teniente 3,149 Andina… 1,255 Radomiro Tomic . e 1,488
1,417 Mina Ministro Hales. 336 Gabriela Mistral .. 161 Ventanas ……… 105 Executive Offi ces 391 Subsidiaries……. 21 Deferred expenses 2,912
70
(1) Includes equipment replacement and facilities repair, contributions to subsidiaries and other.
The following ta ble sets forth the estimated investment cost for each of CODELCOSs principal expansion and development projects in each division (projects are subject to change atthe discretion ofthe Company):
Estimated
Division Project Status Investment (in millions of U.S.$) El Teniente. New mining level (2023) Execution” 3,821 Chuquicamata .. Chuquicamata Underground (2019) Execution 4,642 Andina… Reallocation Plant (2020) Execution 1,427 Salvador .. Inca Pit (2021) Execution 1,371
Total …………… 11,261
401
(1) Expenditures have been invested in projects in the execution stage.
Nonetheless, the figures a bove reflect the estimated investments that CODELCO expected to make under its 2021 updated BDP report. CODELCO continues to reformulate the Andina expansion project, which could decrease the medium-term capital expenditure program. Therefore, this medium-term period more reliably reflects CODELCO*”s commitments than a longer-term period, especially considering current industry trends.
El Teniente Division
Mining Operations. The El Teniente Division is the largest division ofCODELCO, based on 2018 production, and operates the El Teniente underground mine located 80 kilometers southeast of Santiago. With the production of 443,220 metric tons in 2020, it is the worlds largest underground copper mine. For infomation regarding the new mine levelat the El Teniente mine, see Summary -Competitive Strengths.
The El Teniente deposit is also a porphyry-type ore body. The deposit covers a vertical span of over 1,500 meters. A tabular subvertical dacite porphyry intrusion two kilometers long by 200 meters wide is well exposed in the northern part of the deposit, and a quartz-diorite stock is located at the southeast side. Wall rock are mostly andesites, which arestrongly mineralized, containinga high concentration ofchalcopyrite and bornite. Thesize of the deposit is at least three kilometers north-south and close to one kilometer wide.
El Teniente primarily produces concentrates that are smelted at the Caletones smelter. In addition to the principal mineatEl Teniente, the division performs mining operations at several other areas of the main deposit, with a production of approximately 140,000 metric tons of ore per day. The Esmeralda area of the mine is the main producing mine area, producing approximately 36,750 metric tons ofore per day.
As of September 30, 2022, the El Teniente Division employed 3,845 persons. Duringthe nine-month period ended September 30, 2022, the El Teniente Division produced 291,090 metric tons ofcopper with a cash costof 1024 cents perpoundanda total cash cost of U.S.$650.9 million, as compared to a production of 341,879 metric tons with a cash costof 106.6 cents perpoundanda total cash costof U.S.$794.0 million duringthe first nine months of2021.
In 2021, this division produced 459,817 metric tons of copper, with a cash cost of 108.6 cents per pound, compared to 443,220 metric tons of copper, with a cash cost of 99,7 cents perpound in 2020, and a total cash costof
U.S.$1,088.3 million in 2021, compared to U.S.$963.0 million in 2020. In 2019, the El Teniente Division produced 459,744 metric tons ofcopperat a cash cost of 100.7 cents perpoundanda total cash cost ofU.S.$1.01 billion.
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Copper Production and Cash Cost-El Teniente Division (productionin thousands of metric tons and cash costin cents per pound)
For the nine-month period ended Year ended December 31 September 30.
2019 2020 2021 2022 Copper Production .. 460 443 460 291 Cash Cost 100.7 99.7 108.6 102.4
Smelting Operations. The El Teniente Division includes the Caletones smelter, which has the capacity to smelt 1.25 million metric tons of concentrate per year. The El Teniente mine supplies 1.29 million metric tons of concentrate per year to the Caletones smelter. The balance of concentrate processed by the smelter is brought by railwa y from the Andina Division, 300 kilometers a way.
The Caletonessmelter operatestwo Teniente modified converters, three Pierce Smith Converters and several refining furnaces and gas treatment plants. El Teniente has no electrolytic refining plant, and smelter outputis sold as fire-refined copper oranodes to be refined at other facilities such as the Ventanas refinery or Chuquicamata.
Radomiro Tomic Division
The Radomiro Tomic deposit lies five kilometers north of the main pit at Chuquicamata. Radomiro Tomic began production at the end of 1997, The Radomiro Tomic mine isa state of the art facility, and the world s largest producer of copperusingthe highly efficient SX-EW process.
During the first half of 2010, the Sulfide Phase 1 project was completed, which enables the treatment of 100,000 metric tons per day of sulfides from Radomiro Tomic in the Chuquicamata processing plants.
As of September 30, 2022, the Radomiro Tomic Division employed 1,278 persons. During the first nine months of 2022, this division produced 215,920 metric tons of copper with a cash cost o£f201.5 cents perpound and a totalcashcostof U.S.$950.3 million compared to 222,544 metric tons anda cashcostof 143.7 cents per pound and a total cash cost ofU.S.$699.0 million duringthesame periodin 2021.
In 2021, this division produced 326,456 metric tons of coppercathodes with a cash cost of 138.6 centsper pound and a total cash cost of U.S.$989.0 million compared to 260,653 metric tons of copper, a cash cost of 1422 cents perpoundand a total cash cost of U.S.$8 12.0 million in 2020. In 2019, this division produced 266,415 metric tons of copper at a cash cost of 154.3 and a total cash cost of U.S.$901.0 million compared to a cash cost of 1543 cents perpound.
Copper Production and Cash Cost-Radomiro Tomic Division (production in thousands of metric tons and cash costin cents per pound)
For the nine-month period ended Year ended December 31, September 30, 2019 2020 2021 2022 Copper Production Radomiro Tomic. 266 261 326 216 Cash Cost Radomiro Tomic 154.3 142.2 138.6 201.5
Chuquicamata Division
Mining Operations. Located in the Atacama Desert, 1,200 kilometers north of Santiago and 240 kilometers east of the Chilean city of Antofagasta, the Chuquicamata mine has been in continuous operation since 1915. The Chuquicamata mine is an open-pit operation that produces predominantly sulfideconcentrates, which are smelted and
72 refined on site. The pit size of the Chuquicamata mine is almost nine kilometers long in a north-south direction by five kilometers wide and onekilometer deep.
The Chuquicamata deposit is a porphyry-type ore body. The most important feature of the ore body is a north-south regional fault, the west fissure fault, which cuts the ore on the west side and creates a sharp limit on the deposit. An oxideore zone wasa large partof the deposit and has been almost totally mined out. The mine containsa supergene enrichment layer (a redeposit of copper, by natural forces, from higher to lower layers), which has a thickness of almost 800 meters near the center of the mine. Five kilometers north of Chuquicamata, the ore body narrows and merges with the Radomiro Tomic ore body. For information regarding the transformation of the Chuquicamata mine from an open pit mine to an underground operation, see Summary-Competitive Strengths.
Smelting Operations. Chuquicamata utilizes one Outokumpu flash furnace, five Pierce Smith converters and two Teniente converters to process 1.25 million metric tons of 29.6% copper concentrate per year. Chuquicamata performs all sta ges ofcopper production from the mining process through ca thodeproduction.
Asof September 30, 2022, the Chuquicamata Division employed 3,827 persons and produced 200,353 metric tons of copper with a cash cost of 120.0 cents per pound and a total cash cost of U.S.$519.9 million, compared to 239,412 metric tons with a cash cost of 1 14.9 cents perpoundand a total cash costof U.S.$594.0 million during the first nine months 0£ 2021. In 2021, this division produced 319,280 metric tons of copper cathodes, with a cash cost of 116.2 cents per pound, compared to 400,720 metric tons of copper ata cash cost of 113.0 cents per pound and a totalcash costof U.S.$974.7 million in 2020 and, compared to 385,309 metric tons of copperata cash cost of 120.5 cents perpoundanda total cash cost of U.S.$996.0 million in 2019.
Copper Production and Cash Cost-Chuquicamata Division (production in thousands of metric tons and cash costin cents per pound)
For the nine-month period ended Year ended December 31, September 30, 2019 2020 2021 2022 Copper Production Chuquicamata . 385 401 319 200 Cash Cost Chuquicamata 120.5 113.0 116.2 120.0
Mina Ministro Hales Division
Mining Operations. The Mina Ministro Hales Division was created in September2010 forthe operation of the Mina Ministro Hales ore body, and delivered its first tons of copper duringthe lastquarterof2013.
As of September 30,2022, Mina Ministro Hales employed 786 persons and produced 108,854 metric tons of copper with a cashcostof 116.2 cents perpoundanda total cash cost of U.S.$269.6 million, compared to 143,969 metric tons with a cash cost 081.8 cents perpound anda total cash cost ofU.S.$251.0 million duringthe in the first nine-months o£2021.
In 2021, this division produced 181,704 metric tons of copper, with a cash cost of 89.2 cents per pound, compared to 170,606 metric tons of copper, with a cash cost of 109.9 cents perpound in 2020, anda total cash cost 0£U.S.$430.3 million in 2021, comparedto U.S.$399.9 million in 2020, and comparedto 151,838 metric tons of fine copperata cash cost of 123.6 cents perpound and a total cash costof U.S.$400.0 million in 2019.
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Copper Production and Cash Cost-Mina Ministro Hales Division (productionin thousands of metric tons and cash costin cents per pound)
For the nine-month period ended Year ended December 31, September 30, 2019 2020 2021 2022 Copper Production 152 171 182 109 Cash Cost…….. 123.6 110.0 89.2 116.2
Smelting and Refinery Operations. The processing of minerals will be carried out in a standalone concentrator with processing capacity of 50,000 tons per day. Copper concentrates will be processed in a new roasting plant. The project also includes a new acid plant.
Gabriela Mistral Division
The Gabriela Mistral ore body is located in Chiles Second Region and began production in May 2008. On January 1,2013, CODELCO created the Gabriela Mistral Division, which operates the Gabriela Mistral mine. Gabriela Mistral uses SX-EW technology and produced its first copper cathodes in May 2008 after a 26-month construction period ata costof U.S.$1.0 billion.
As of September 30, 2022, the Gabriela Mistral Division employed 480 personsand produced 84,224 metric tons of copper with a cash cost of 265.4 cents perpoundand a total cash costof U.S.$492.8 million, as compared to 68,804 metric tons with a cash cost of 199.9 cents per pound and a total cash cost of U.S.$200.0 million during the first nine months 0£2021.
In 2021, this division produced 100,908 metric tons of copper, with a cash cost of 193.4 cents per pound, compared to 102,080 metric tons of copper ata cash cost of 189.0 cents per pound in 2020, and a total cash cost of
U.S.$430.3 million in 202 1,comparedto U.S.$425.4 million in 2020. Compared to 104,087 metric tons of copperat a cash costof 231.8 cents perpoundanda total cash costof U.S.$532.0 million in 2019
Copper Production and Cash Cost-Gabriela Mistral Division (production in thousands of metric tons and cash costin cents per pound)
For the nine-month period ended
Year ended December 31, September 30, 2019 2020 2021 2022 Copper ProductiON….oooconocnconnnonnnconanononcnnnnnananonnnnnnos 104 102 101 84 ¡CASA 231.8 189.0 193.4 265.4
Andina Division
Mining Operations. The Andina Division operates the Andina mine and the Sur-Sur mine, which are located 50 kilometers northeastof Santiago. Production atthe Andina Division is split among open-pit and underground mines.
Forinformation regarding the Andina plant reallocation project, see Summary-Competitive Strengths. The Andina Division does not operate a smelter. Its production is processed atthe Caletones smelter of El Teniente, atthe Ventanas refinery orat the Salvador Division, and someofiits concentrate is sold to ENAMI or otherpurchasers.
As of September 30, 2022, the Andina Division employed 1,413 persons and produced 139,805 metric tons of copper with a cash cost 0f 172.2 cents perpound and a total cash costof U.S.$512.8 million, as compared to 129,337
74 metric tons with a cash cost of 145.1 cents perpoundanda total cash costof U.S.$400.0 million duringthe first nine months of 2021. In 2021, this division produced 177,216 metric tons of copper, with a cash cost of 154.9 cents per pound, and a total cash cost of U.S.$584.6 million compared to 184,437 metric tons of copper with a cash cost of
152.9 cents per pound and a total cash cost of U.S.$600.4 million in 2020. In 2019 the Andina Division produced 170,274 metric tons ofcopper with a cash cost of 184.6 cents perpoundanda total cash cost ofU.S.$669.0 million.
The Río Blanco-Los Bronces porphyry-type deposit, one of the largest copper ore bodies in Chile, is partially owned by the Andina Division. The northwest portion of this deposit is owned by the Andina Division; Anglo Sur owns and operates the mines at Los Bronces and El Soldado along with the Chagres smelter and various mineral resources, including Los Sulfatos and San Enrique Monolito, located in the southwest portion of the deposit. The deposit is characterized by plentiful tourmaline and breccia rock bodies mineralized with copper sulfides, mostly calcopyrite. CODELCO*s portion of the deposit is four kilometers in length, in the northwest to southeast direction, with a maximum width of almostone kilometer.
Copper Production and Cash Cost-Andina Division (production in thousands of metric tons and cash costin cents per pound)
For the nine-month period ended Year ended December 31, September 30, 2019 2020 2021 2022 Copper Production 170 184 177 140 Cash Cost……….. 184.6 152.9 154.9 172.2
With the aim to increase the processing output of the Andina Division, CODELCO completed the Andina Phase I Expansion Project in 2010. While the Andina Division had plans to continue investingto expand the mineand increase copper production by an additional 350,000 tons of copper per year, the Company is currently reformulating its plans in orderto create an alternative that should require less investment, while at thesame time seekingto minimize the environmental impact and prolongthelife of the Andina Division.
Salvador Division
Mining Operations. The Salvador Division is the smallest of CODELCO*s divisions. The complex includes the mine and concentrator at Salvador and a smelterrefinery at Potrerillos. The Salvador mine is located 900 kilometers north of Santiago and 120 kilometers east ofthe Chilean porto f Chañaral. Concentrates are transported 67 kilometers from the mine to the smelter at Potrerillos via pipeline and truck.
The Salvador Division has the smallest basereserve ofore amongallof CODELCOS*s divisions. The Salvador deposit is a typical medium-sized porphyry -typeore body. There is an 80-to 200-meterthick leached capping covering a lensoid-shaped enrichment la yerroughly one kilometer in dia meterthatattains a maximum thickness of about 250 meters. This enrichment la yer is almost completely mined out. Miningis currently focused on the primary ore located underneath the secondary enrichment (the so-called Inca levels).
As of September 30, 2022 Salvador employed 1,498 persons and produced 21,867 metric tons ofcopper with a cash costof 354.6 cents perpoundanda total cash costof U.S.$169.1 million.
In 2021, this division produced 52,885 metric tons of copper cathodes, with a cash cost of 268.0 cents per pound, compared to 56,302 metric tons of fine copperata cash cost of 214.6 cents perpoundand a total cash costof
U.S.$265.0 million in 2020 and 50,561 metric tons of fine copper ata cash cost of 232.7 cents perpoundand a total cash cost of U.S.$257.0 million in 2019. As of the date of this offering memorandum, The Inca Pit project is still under construction.. The Potrerillos smelter and refinery would continueto operate upon any cessation ofthe mining operations atSalvador.
75
Copper Production and Cash Cost-Salvador Division (production in thousands of metric tons and cash costin cents per pound)
For the nine-month period ended Year ended December 31, September 30, 2019 2020 2021 2022 Copper ProductiON…..ooooccoocccoonnconanonncnononinnos 51 56 53 22 Cash Cost… 232.7 214.6 268.0 354.6
Smelting Operations. The smeltinga nd refining operations located at Potrerillos. This fa cility includes one Teniente converter and four Pierce Smith converters fora rated annual capacity of 671,000 metric tons of concentrate.
CODELCO increased ca pacity of the Potrerillos smelterin 2004.
Ventanas Division
Smelting and Refinery Operations. The Ventanas Division was created in connection with the acquisition of the Ventanas smelterrefinery complex from ENAMI in 2005. In2021, this divisionrefined 400,000 metric tons of copper, compared to 402,000 metric tons of copper in 2020. During the first nine months of 2022, the Ventanas division refined 285,800 metric tons of copper. Pursuant to the terms ofthe acquisition, CODELCO is required to provideon market terms the necessary smelting and refining capacity for the treatment of copper concentrate delivered by the small- and medium-sized mining industry that ENAMI serves. In June 2022, CODELCO*s Board of Directors approved the decommissioning of the smelter in the Ventanas Division. In December 2022, a law amendment was approved in Congress allowing CODELCO to smelt copper concentrates in smelters other than those ofthe Ventanas Division. In January 2023, the Miningand Energy Commission of the Upper House approved the articles particular to the bill, setting definitions regarding the future installation ofthenew smelting capacity, and its compatibility with environmental safety and the protection of people’s health, among others. The bill was approved by the Senate on January 24, 2023. The bill is is currently in the Chamber of Deputies for its third constitutional process. As of September 30, 2022, the Ventanas Division employed 769 persons.
Associations, Joint Ventures and Partnerships
CODELCO has undertaken several projects, business ventures and associations with certain private sector miningand non-mining enterprises, including: e SCMElAbra: In 1994, CODELCO (49%) formed a company, SCM El Abra, with Cyprus El Abra Corporation
(51%), a subsidiary of Freeport-McMoRan Inc., to develop the El Abra mine in northern Chile. The mine is a porphyry copper open-pit facility located 105 kilometers north ofthecity of Calamaatan altitude o£3,900 meters above sea level. Constructed ata cost ofU.S.$1.1 billion, it is designed to produce 225,000 metric tons of copper per year and includes one of the world s largest SX-EW facilities. The El Abra project was origina lly financed by a U.S.$850.0 million syndicated loan, which was repaid in full in 2004.
o In 2009, SCM El Abra approved resuming construction activities for the Sulfolix Project, which had been deferredas a result of marketconditions at the end of 2008, to extract and process (by the lea ching process) sulfide ores, which is expected to extend mine life by 13 years and enable El Abra to produce at least 125,000 metric tons of fine copper per year. This project contains approximately 1.2 billion metric tons of leachable oxide and sulfide copper, with an average ore grade of 0.43%. The project started producing sulfides, shifting from an oxide operation, duringthe first quarter of2011 and includes milling mine ores until 2024, andis expected to generate the la st cathode in 2029 by leachingheap remains. The Sulfolix Projectrequires approximately U.S.$565.0 million of initial equity and an additional U.S.$160.0 million to sustain the operations. The project is financed by SCM El Abra s retained earnings.
o In2021,SCM El Abra produced 72,653 metric tons of fine copper with a cash cost of 2.72 cents per pound. For the nine-month period ended September 30, 2022, the production was 64,442 metric tons of fine copper with a cashcostof 3.24 cents perpound.
76 o The project had delivered total dividends of U.S.$6.0 million in 2019 and CODELCO had received
U.S.$3.0 million in dividends in 2019. The project did not deliver dividends in 2020. The project had delivered total dividends of U.S.$0.4 million in 2021,and CODELCO had received U.S.$0.2 million in dividends in 2021. Asof September30, 2022, the carrying value of SCM El Abra s ownership interest was equal to U.S.$652.4 million.
Anglo American Sur: On December 19, 2008, CODELCO purchased from ENAMI for U.S.$175.0 million an option to purchase upto49%.oftheequity interestsof Anglo American Sur, a wholly -owned subsidiary of Anglo American, fora price to be determined by a prescribed formula based ona multiple of historic earnings (the Sur Option). Anglo American Sur owns and operates themines at Los Bronces and El Soldado, the Chagres Smelter and various mineral resources, including Los Sulfatos and San Enrique Monolito. In October201 1, CODELCO announced that it had arranged for a bridge loan of up to U.S.$6.75 billion from Mitsui that would allow it to exercise the Sur Option and indicated its intentto exercise the Sur Option duringthe next window forits exercise, which would occurin January 2012. On November 9,2011, Anglo Americanannounced that it had sold 24.5% of the equity interests of Anglo American Sur to affiliates of Mitsubishi Corporation. Following this sale, CODELCO announced that it retainedthe right to acquire up to 49% of the equity interests of Anglo American Surand requested from the Santiago Court of Appeals a legal order preventing further sales ofequity interests of Anglo American Sur until CODELCO was able to exercise the Sur Option. The requested legal order was granted and, on January 2, 2012, CODELCO exercised the Sur Option to purchase 49%of the equity interests of Anglo American Sur. Priorto and afterthe exercise ofthe Sur Option, Anglo Americanand CODELCO were involved in additional lega lproceedings relatingto the exercise ofthe Sur Option, which were ultimately settled pursuant to the settlement agreement described below.
o On August 23, 2012, CODELCO and Anglo American entered into a settlementa greement to settle their respective claims in relationto the Sur Option. In connection with this settlement agreement, CODELCO and Anglo American a greed that Becrux, then a wholly -owned subsidiary of Acrux, an entity owned by CODELCO and Mitsui in the manner described below, would acquire 29.5% of the equity interests in Anglo American Sur pursuantto the following tra nsactions: , On August 24, 2012, Becrux acquired (i) shares representing 24.5% of the equity interests of Anglo American Sur for a purchase price of U.S.$1.7 billion, which was financed through a draw down by an affiliate of CODELCO on the AR Mitsui Bridge Loan Facility described under Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Other Debt; and (ii) shares representing 0.94% of the equity interests of Anglo American Sur fora purchaseprice of U.S.$206.8 million, which was financed by cash contributions made by Mitsui; and , On September 14, 2012, Becrux acquired shares representing 4.0% of the equity interests of Anglo American Sur for a purchase price of U.S.$893.2 million, which was financed by cash contributions made by Mitsui.
o As part ofthe settlementagreement, Anglo American Sur transferred to CODELCO certain undeveloped miningproperties, Los Leones and Profundo, which are located totheeastofCODELCOs Andina mine, and the shareholders of Anglo American Sur entered into a shareholders agreement that provides a framework forthe ongoing governance of Anglo American Sur, which includesboard representation and participation in certain decisions for Becrux.
o Immediately following the acquisition 0f29.5%oftheequity interests of Anglo American Sur, affiliates of CODELCO and Mitsui owned approximately 83% and 17%, respectively, of the equity interests of Acrux. In connection with the refinancing of the AS¿R Mitsui Bridge Loan Facility described above under Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Other Debt, an affiliate of Mitsui exercised its right to acquire from an affiliate of CODELCO at the closing of the refinancinga number of equity interests of Acrux representing a 4.5% stakein Anglo American Sur fora purchase price equal to U.S.$998.0 million.
This amount was used to prepay a portion of the bridge loan previously drawn down by an affiliate of CODELCO under the AK%R Mitsui Bridge Loan Facility in connection with the transactions described m above. Following the consummation of this transaction, affiliates of CODELCO and Mitsui owned approximately 67.8% and 32.2%, respectively, of the equity interests of Acrux. Consequently,
CODELCO indirectly owns a 20% interestin Anglo American Sur.
o On November26, 2016, CODELCO signeda credit agreement with Oriente Copper, an affiliate of Mitsui, renegotiating the payment of principal at the end of the contract. The tems established an annual interest rate of LIBOR +2.5% with a five-year maturity to be payable in one insta llment at maturity with semi- annual interest payments. On May 26, 2017, CODELCO signed a new credit agreement with Mitsui renegotia ting the followin g semi-annual payment, which was on the sameterms as the first renegotiation done in November 2016.
o On December 21, 2017, CODELCO and Mitsui agreed to merge Acrux into Becrux, as the surviving entity. The reorganization did not affecttheinterest that CODELCO and Mitsui indirectly hold in Anglo American Sur.
o Anglo American Sur fine copper production was metric 369,980 tons in 2021 with a cash cost of 165 cents perpound, compared to 370,535 tons in 2020 with a cashcostof 155 cents perpoundand 389,194 tons in 2019 with a cash cost of 139 cents per pound. In the nine-month period ended September 30, 2022, the production was 211,783 metric tons of fine copper with a cash cost of 230 cents per pound.
Anglo American Sur distributed U.S.$84.4 million in 2019, U.S.$22.7 million in 2020, U.S.$270.5 million in 2021 and U.S.$138.4 million as of September 30, 2022 in cash dividends to Becrux, which is an indirectly owned subsidiary of CODELCO. As of September 30, 2022, the carrying value of equity of Anglo American Sur was equal to U.S.$2.8 billion. As of December3 1,2021, the carrying value of equity of Anglo American Sur wasequal to U.S.$2.8 billion. CODELCO has a 20% indirect participation in Anglo American Sur. See Risk Factors. A substantial a mount of our total assets are property, plant and equipment
SCM Purén: CODELCO (35%) and Compañía Mantos de Oro (65%), a subsidiary of Kinross Gold Corp. own SCM Purén. SCM Puréns miningactivities, located in the Atacama Region, east ofthe city of Copiapó, began in November 2005, ha ving produced over 801,839 ounces of equivalent gold. In 2015, the company distributed
U.S.$2.5 million in dividends to CODELCO. During 2019, 2020, 2021 and the first nine months of 2022, this company did not issue dividends. SCM Purén mines two gold and silver ore bodies through open pits. Currently, SCM Purén is eva luatinga second phase ofthe project.
Agua de la Falda S.A.: CODELCO (42%) and Minera Meridian Limitada (58%), a subsidiary of Yamana Gold
Inc., own Agua de la Falda S.A., which was created to exploreand exploit the Agua de la Falda deposit that was in production until 2005. This company has completed its feasibility study of the Jerónim o gold deposit, which contains over2 million ounces of gold. The results of this study ha ve not been satisfactory and the partners are studying alternatives forimprovement.
Inca de Oro S.A.: CODELCO (33%) and PanAust Minera Limited (67%) own Inca de Oro S.A., which was createdin 2009to explore, exploit and process mineral resourcesin Chile and abroad. Theproduction of Inca de Oro S.A. is currently halted pending new marketopportunities.
Deutsche Giessdraht GmbH: CODELCO (40%) and Aurubis AG (60%) own Deutsche Giessdra ht GmbH, a German corporation located in Emmerich, Germany. The company, which has been in existence since 1975, produces continuous copper cast wire rod. CODELCO indirectly supplies copperto Deutsche Giessdraht GmbH.
On July 31,2018, CODELCO sold its 40% ownership stake in Deutsche Giessdraht GmbH toits partner Aurubis AG afterreceivingapproval of the transaction by Germanys federal antitrust regulator (Bundeskartellamt). The sale included ana greement which allowed CODELCO to produce wire rod until December 31,2018to fulfillits sales contract obliga tions thatexpired attheend of2018.
GNL Mejillones S.A.: Due to the decrease and eventual termination of natural gas supply from Argentina, electrical power generation companies have experienced diminished electricity generation. For this reason, CODELCO and Suez Energy Andino S.A. through GNL Mejillones constructed an LNG re-gasification plant,
78 which has been operating since the beginningof 2010. GNL Mejillones has the capacity to receive, process and store natural gas, with a send-out capacity of 5.5 million of cubic meters of gas per day, originating in Trinidad and Tobago and purchased from SUEZ Global LNG Ltd. under a long-term supply contract. The LNG storage tank is currently in operation. GNL has entered into a long-term agreement with E-CL for there-ga sification and stora ge of approximately 15 trillion BTU (British Thermal Unit).
o GNL Mejillones provides gas required by the electricity power plant in the Sistema Interconectad o del Norte Grande, known as the Sistema Eléctrico Nacional (formerly known as SING), which supplies power to CODELCOSs operations. The project partners have financed this project under existing take-or-pay contracts with CODELCO and other mining companies.
o As of June 30,2019, CODELCO owned 37% of the outstandin g shares ofthe company, and Suez Energy Andino S.A. owned the remaining 63% ofthe shares.
o On August 6,2019, CODELCO completed the sale ofits 37% stake in GNL Mejillones S.A. to Ameris Capital AGF, foran amount ofU.S.$193.5 million.
Planta Recuperadora de Metales SpA: In December 2012, CODELCO (34%) together with LS Nikko (66%) formed Planta Recuperadora de Metales SpA (PRM, the purposeof whichis to process intermediate products derived from refining and processing copper and other metals, in order to recover copper, other metals and byproducts contained in these substances and transform them into commercial products, and also trading and distributing all classes of goods or supplies relatingto such process. This entity developed and built a processing plant located in Mejillones, in the Antofagasta Region, which began its commissioningprocess during2016. A
20-year contract regulates the treatment of anodic slimes produced at CODELCO refineries forthe recovery of precious metals.
Salar de Maricunga SpA: In April2017, CODELCO formed Salar de Maricunga SpA (Sa lar de Maricunga) to develop projects for the exploration and exploitation of lithium in Chile. In March 2018, Salar de Maricunga entered into a special lithium operating contract with Chiles Ministry of Mining for the exploration and development of a lithium project in the Maricunga salt flat in the northern Atacama Region of Chile. In 2019, CODELCO started to gather environment and social data in orderto prepare thesubmission of an Environmental Impact declaration for exploring the Maricunga salt flat. In July 2019, CODELCO subscribed a non-binding MOU with Minera Salar Blanco S.A., which expired in 2021. In November 2020, CODELCO was granted the environmental authorizationto explore lithium resourcesin someof its miningrights in Maricunga saltflat. This year CODELCO has continued to wait forthe approvals of the different sectorial permits necessary to begin the exploration work in the Maricunga salt flat. The exploration campaign has been ongoing since January 2022. In addition, CODELCO is seeking alternatives to consolidate the main mining propertiesof the Maricunga sa kt flat, based ona public-private alliance model, accordingto the guidelines ofthe National Lithium Policy.
Technology and Research and Development Partnerships and Associations: CODELCO has entered into associations with companies and organizations thatare world leaders in research and developmentto increasethe integration of knowledge and innovation into mining processes. The following is a representative list of such associations: o CODELCOTec SpA: CODELCO established CODELCOTec SpA (formerly, BioSigma S.A.) (CODELCOTEec) in 2002 with the Japanese company JX-Nippon Mining and Metals Corporation (JX-Nippon Mining) and has since increased its participationto 99% following the exit of JX-Nippon Mining in 2016. CODELCOTec’s mission today is the development of mining and metallurgy technological innovations, commercial development of processesand technology in the field of genomis, proteomics, and bioinformatics for the mining sector, and, in general, application of systems based on microorganisms, analysis, research, invention a nd creation, development, and implementation of new applications, processes, and uses for copper, molybdenun, lithium, and other byproducts of mining processes, insofar as they are directly related to greater use of copper. CODELCOTec’s mission also includes technological monitoring of copper substitutes, representation of domestic or foreign companies and individuals or legal entities, sale and purchase, distribution, trading, import and export of such
79 substitutes and other activities rela tingto the foregoing.
Kairos Mining S.A.: Kairos Mining S.A. is a company created in 2006 in association with Honeywell Chile S.A., which owns 60% (CODELCO owns the remaining 40%). Kairos Mining S.A.s purpose is to provide services for the automation and control of industrial and mining activities, and to supply related technology and software licenses;
Ecosea Farming S.A.: CODELCO, through its subsidiary Innovaciones en Cobre S.A., was a 9132% shareholder in EcoSea Farming (EcoSea), a technology -driven company setting the standard for aquaculture on a global scale. The companys objective was to incorporate the use of metallic copper alloy meshes for fish cultivation systems, in order to take advantage of the various benefits of copper: antimicrobial, antifouling, anti-predator, mechanically strong and infinitely recyclable. In addition, EcoSea discovered new properties that allow for lower operational costs and the expansion of offshore aquaculture in exposedareas. During2018, CODELCO sold the technology a ssets of EcoSea to a group of investors and EcoSea was liquidated and dissolved.
The following ta ble sets forththe major miningand exploration a greements to which CODELCO isa party asof September30,2022:
Major Mining and Exploration Agreements (As of September 30,2022)
Partner Type Mining Co-participation in Chile SCM El Abra Freeport-McMoRan Inc. (USA) Copper Agua de la Falda S.A. Meridian Gold Inc. (USA) Gold SCM Purén Compañía Mantos de Oro (Chile) GoldSilver Inca de Oro S.A. PanAust Minera Limited (Australia) Copper Anglo American Sur S.A. Inversiones Anglo American SurS.A. (England); affiliates of Copper Mitsubishi Corporation (Japan); and Mitsui $: Co., Ltd. (Japan) Exploration Agreement Projects Chile Puntilla Galenosa Pucobre (Chile) Copper Cuña Project Anglo American Sur S.A Copper International Liberdade Pan Brazilian (Brazil) CopperGold JV CODELCO-Xstrata Xstrata Do Brasil (Brazil) Copper Grupo Propiedades Empresa Nacional Minera de Ecuador (Ecuador) Copper
CODELCO reports its inventory of mining assets, distinguishing mineral resources and mineral reserves, accordingto Chilean and international regulation. The system described below for categorizing mineral ore, which is widely used within the mining industry, is codified in Chilean Law No. 20,235 and is regulated by an independent Chilean private entity called the Comisión Calificadora de Competencias en Recursos y Reservas Mineras (the Commission for the Qualification of Competencies in Mineral Resources and Reserves, or CQCMRR). The
CQCMRR is part ofthe Committee for Mineral Reserves International Reporting Standards (CRIRSCO).
Geological Resources
Geological resources are concentrationsor occurrences of materials in such form, quantity (tonnage and ore grade) and quality, based on specific geological evidence and knowledge, which allow for the calculation of the amount, ore grade and quality of the material with somelevelof confidence. Geological resources are identified and evaluated through exploration, reconnaissance and sampling. They are estimated based on geological knowledge about the deposit, which is based on scientific concepts concerningthe formation of minerals such as oxides, sulfides and mixed ores, as well as available knowledge concerning the geological continuity of the mineralized sectors. This is
80 based on technical parameters, such as robustness ofthe genetic-geological model, andits validation through drillings.
Geological resources are further categorized as measured, indicated and inferred.
A resource is considered to be measured if CODELCO*s knowledge of the resource is extensive and direct; if CODELCO*s knowledge of the resource is substantial but less extensive, it is considered to be indicated; and if CODELCO*s knowledge of the resource is only indirect, it is considered tobe inferred.
Mineral Resources
Once CODELCO has achieved increased knowledge about its geological resources, itis able to generate a long-term mining plan for the exploitation of such resources, which are then considered to be mineral resources.
Mineral resources, as wellas geological resources, are sub-categorized as measured, indicated and inferred.
Ore Reserves
Ore reserves are defined as the economically mineable part of mineral resources. They include diluting materials and allowances for losses, which may occur when the material is mined. Appropria te assessmentsand studies have been carried out, which take into accountra tionally assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments address at thetimeofreporting whether extraction is justified. Ore reserves are sub-divided in order of increasing confidence from probable ore reserves to proven ore reserves. Ore reserves are a subset of mineral resources in the same way as mineral resources are a subset of geological resources. The following dia gram sets forth the relationships among the different categories of resources and reserves:
Resources and Reserves, CODELCO GEOLOGICAL RESOURCES
Mining Plan Life – of – mine
EXPLORATION
The modifying factors: Consideration of mining, metallurgical, economic, marketing, legal, environmental, social and government facto!
Chilean Code: CH20.235
Based on the methods and categories described above, CODELCO*s proved and probable reserves include
47.8 million metric fine tons ofcopper as ofDecember3 1, 2021, an amount that represents at least 27 years of future production at current levels. In 2020 and 2019, CODELCO” proved and probable reserves included 49.1 and 50.1 million metric fine tons of copper, respectively. As of December 31, 2021, CODELCO*s mineral resources include
135.2 million metric fine tons of copper, and its identified geological resources include 393.6 million metric tons of copper, fora cut-off grade of0.2%copper.
8l
The following table sets forth the amount CODELCO*s copper holdings by division according to the methodology described above, as ofDecember31,2021:
Mineral Resources
Grade Fine
Tonnage? _copper copper
Radomiro Tomic ……. 5,292 0.43 22.8
Chuquicamata ……….. 2,619 0.62 16.2
Ministro
Hales… 1,578 0.84 13.3
Gabriela 519 0.33 1.7
Salvador . 1,743 0.52 9.0
Andina. 4,924 0.75 36.8
El Teniente. 4,546 0.78 35.4 ExplorationBusin
2,813 0.62 17.5
24,034 0.64 152.8
(1) Geological resources cut-off grade 0.2% copper.
Q) Mineral resources with variable cut-off grade.
(€) In millions of metric tons.
(4) Includes artificial geological resources
Geological Resources’ Grade Fine Tonnage> copper copper? Andina. 21,969 0.62 135.2 El Teniente. 16,313 0.56 92.1 Other depos 3,035 0.34 10.5 Made resource: 4,883 0.39 19.1 Total… . 77,018 0.51 393.6
(1) Geological resources cut-off grade 0.2% copper.
Q) Mineral resources with variable cut-off grade.
(€) In millions of metric tons.
(4) Includes artificial geological resources
The following ta ble sets forththe copper holdings of the world and of CODELCO using the U.S. Geological Survey systemas ofDecember31,2021:
World CODELCO CODELCO (in millions of tons) (in millions of tons) share (%) Geological Resources… 2,100 393.6 18.74% Proved and Probable Reserves 880 47.8 5.4%
(1) As defined by the U.S. Geological Survey (January 2022) and with reference to identified resources.
(2) Refers to copper holdings that are measured, indicated and inferred.
Each year, the Board of Directors must approve a long-term BDP of the Company. The first three years are subject to the approval of the Ministries of Finance and Mining. This plan must include the annual investment and financing a mounts in addition to theannual profits that the Company is estimated to generate duringthe period. The Ministries of Finance and Miningjointly issue a decree, pursuant to which a portion of CODELCO s profit may be allocatedby CODELCOto the creation of capitalization and reserve funds.
The 2022 BDP enables CODELCO to develop a long-term mining plan. CODELCO reviews theterms of the BDP annually to update or modify it for changes in business trends.
The 2022 BDP uses inferred resources to define CODELCOSs strategic vision for long-term resource development. However, theincorporation of such resources increases gra dually overtime, and the inferred resources become proved and probable reserves.
In the early stages ofthe 2022 BDP, production is almost exclusively based on proved and probable reserves and mining projects are at advanced stages of engineering or at the investment stage. Mining projects must support
82 their economic evaluation based on pre-defined minimum proved and probable reserves in order to be approved for investment.
Resource Development
CODELCO controls approximately 5.4% ofthe world’s proved and probable copperreserves, as such terms are defined by the U.S. Geological Survey.
Potential geological resources, which have been identified by our internal exploration division as the result of projects carried out through 2020, comprise resources incorporated at different stages of exploration and have not been added into CODELCO*s copperholdings.
CODELCOSs total potential geological resources, according to our internal estimates, are approximately 7,402 million of metric tons ofore with a 0.65%average copper ore grade, and equivalentto 47.8 million metric tons of fine copper. As explorations progress and further estimates are completed, these resources could be incorporated into CODELCO”s copperholdings.
Production Costs of Copper
CODELCOSs production costs include all costs and expenses incurred in connection with the mining and production ofits copper mix and related byproducts. These production costs do not include administrative and operatingcosts incurred in connection with the processing of other copper products purchased from third parties.
In 2021, CODELCOS*s total costs and expenses increased by 12.5 cents perpound (5.2%) to 254.3 cents per pound, compared to 241.8 cents per pound in 2020, mainly due to higher input prices and lower production volume, offset by foreign exchange rate depreciation of the Chilean peso a gainst the US dollar. For the first nine months of 2022, CODELCOS*s total costs and expenses increased by 35.1 cents per pound (14.4%) to 278.7 cents per pound, compared to 243.6 cents perpound for the same period in 202 1, mainly dueto higherinputprices, such as electricity and diesel, appreciation of the Chilean peso against the U.S. Dollar and negative foreign exchange difference on lia bilities denominated in Chileanpeso.
In 2021, CODELCO*s total costs and expenses increased to U.S.$9.6 billion, compared to U.S.$8.6 billion in 2020, due to higher production volume, partially offset by the depreciation of the Chilean peso a gainst the U.S.
dollar. For the first nine months of 2022, CODELCOSs total costs and expenses amounted to U.S.$6.5 billion, compared to U.S.$6.4 billion forthe same period in 2021.
In 2021, CODELCOS*s cash costof production was 132.7 centsper pound, compared to 129.4 cents per pound in 2020 and 141.6 cents per pound in 2019. Forthe first nine months of 2022, CODELCO*s cashcost of production was 157.4 cents perpound, compared to 129.9 cents perpound for the same period in 2021.
In 2021, CODELCOSS total cash cost was U.S.$4.7 billion, compared to U.S.$4.5 billion in 2020 and
U.S.$4.9 billion in 2019. For the first nine months of 2022, CODELCOS*Ss total cash cost was U.S.$3.6 billion, as compared to U.S.$3.3 billion forthe same period in 2021 (such total cash cost includes certain cash cost incurred at the corporate level). See Management’s Discussion and Analysis of Financial Condition and Results ofOperations- Overview.
In 2013, CODELCO also implementeda productivity and cost structured projectintended to lower costs and increase production. The initiativeis comprisedof: (1) performance optimization to minimize operational disruption; (ii) budget optimization to identify expendable and necessary contracts to control the budget for third -party services costs; (iii) energy and input costs optimization marked by a review of energy and main inputs contracts; and (iv) a review of hygienic factors and costs, such as tra vel expenses and consulting services. Moreover, CODELCO has also created a new Vice President for Productivity and Costs position with the aim of increasing productivity, reducing costs and enhancingthe costcontrol program.
The ma in energy sources for CODELCO*s operations are electricity, liquid fuels (such as diesel, fuel oil and gasoline) and natural gas. Since 2004, there has beena restricted supply of natural gas from Argentina. CODELCO’s
83 production costs have increased due to these shortages, havingto rely on electricity generated from more expensive sources, such as diesel, oil or coal, and these increased costs have ad versely affected CODELCOS*s results of operations.
Notwithstanding the foregoing, CODELCO has renegotiated some of its PPAs during2022 to progressively shiftthe power supply towards renewable energy sources which should help to decrease electricity costs.
In late 2009 andearly 2010, asa pallia tive measure given the adverse effects of Argentina s restriction and in order to stabilize future energy costs, CODELCO entered into electrical supply agreements at competitive prices for a 15-year period for its facilities in the Chuquicamata Division and for a 30-year period for facilities in the middle-southregion of Chile, respectively. The latest was renegotiated during 2022 to progressively shift the power supply towards renewable energy sources. Both agreements includethe creation ofnew electrical generation capacity based on coal. Furthermore, in 2018 CODELCO entered into an extension ofthe Chuquicamata Division contract for an additional 1 1 years. This new agreement, effectiveas 0£2025, provides forthe creation ofnew electrical generation capacity based on renewable sources.
In August 2011, CODELCO entered into two energy and power supply a greements with NorgenerS.A. for the Mina Ministro Hales Division and the Radomiro Tomic Division. CODELCO began to receive energy under these contracts in 2011 for Mina Ministro Hales and began in 2017 for Radomiro Tomic, in each case la sting until 2028.
During 2014, AES Gener S.A. took over Norgener S.A., assigening CODELCOS*s contractto AES Gener S.A, now AES Andes S.A. Both energy and power supply agreements were amended and restated on December 29, 2022.
Additionally, on that same day, CODELCO and AES Andes S.A. entered into a new energy and power supply agreement forrenewable sources, which became effective as of January 1,2023, until December 3 1,2040.
In 2022, CODELCO and AES Andes S.A. renegotiated their agreements to replace the current supply of power based on coal with renewable energy. Similarly, during 2018, CODELCO and Engie Energía Chile S.A.
renegotiated an electrical supply a greement. The contracts that were renegotiated by CODELCO with AES Andes
S.A. and Engie Energía Chile S.A. guaranteed thatby 2026, 70% of CODELCOS*s electricity requirements will come from renewable sources, granting CODELCO independence from the constant fluctuation of commodity prices and any additional associated costs. Additionally, in early 2010, CODELCO entered into a five-year supply contract for liquid fuels with the main Chilean fuel distributors. In 2015, a fterthe expira tion of this contract, CODELCO entered into a new five-year supply contract for liquid fuels.
In April 2012, CODELCO renewed a contract with Pacific Hydro, involving the purchase of power generation ofthe Coya and Pangal hydroelectric plants, for 12 years. Since CODELCO*s sale ofthe Coya and Pangal hydroelectric plants to Pacific Hydro in 2004, Pacific Hydro and CODELCO have entered into similar supply contracts to purchase the injected energy produced by these hydroelectric plants. Moreover, on January 2023, CODELCO launchedan electricity supply tender process to contract 2,500 GWhyear approximately.
In addition, in January 2023, CODELCO launched an electricity supply bidding process to procure approximately 2,500 GWhyear.
CODELCO continues to develop and refine its mine management practicesand programs to limit and reduce its costs. These initiatives include the following; (i) improved deposit identification and mining techniques; (ii) the implementation of early retirement plans and workforcereduction programs; (iii) an investment in human capital and continuing to attract and retain a world-class management team and professionals ofthe highest caliber; (iv) improved utilization ofequipmenta nd inputs used in the processes of copper production to increase productivity and efficiency; and (v)the development ofkey projects, specifically thenew mine level at El Teniente, the Andina plant reallocation and the Chuquicamata underground projects.
Marketing General
Fourof CODELCO*s wholly-owned subsidiaries and 12 of its sales representatives cover over 35 countries around the world. The following table shows the breakdown of CODELCOS*s sales by product type including third-party products forthe three years ended December 31,2019,2020and 2021 andthe nine-month period ended September 30,2021 and 2022:
84
Copper Sales by Product Type (in thousands of metrictons)
For the nine-month period ended Year ended December 31, September 30, 2019 2020 2021 2022 Cathodes …………. 1,076 1,233 1,253 825 Blisters and Anode: 58 104 107 68 Concentrates . 721 611 554 323 1,856 1,948 1,914 1,216
CODELCOSs marketing strategy is focused in three majorareas: e Establishing long-termrelationships. CODELCO encourages sales through annual contracts and direct long-tem relationships with copper consumers.
e Quality and sales service. CODELCO focuses on product quality and sales service based on timeliness, scheduling and conditions of product delivery.
e Diversification. CODELCO hasa geographically diversesales portfolio.
Pricing and Hedging
The substantial majority of copper produced by CODELCO is sold under long-term contracts of at least one year to customers that have long-term relationships with CODELCO. The specific commercial terms of these contracts are negotiated annually by the parties for the following calendar year. Recently, andas part ofa revamped commercial strategy, CODELCO has agreed to sell copper undera rolling deal format known as evergreen contracts with certain key customers. CODELCO*s evergreen contracts have an initial duration of three years from the effective dateand, unless terminated by either party, are automatically renewed foran additional year at the end ofthe original term. The main advantage of evergreen contracts is to lock-in sales to key customers (and for customers to have a guaranteed supply of raw material from a key supplier) overa longer period of time. For both annual and evergreen contracts, the premium overthe base price is negotiated annually and the base price is the LME cash settlement averaged over the quotation period, which accordingto CODELCOs commercial policy is the month following the contractual or scheduled month of shipment (referred toas M+1). Products thatare notcommitted under long-term contracts (which represent a small percentage ofCODELCOSs annual volume) aresold throughout the year at the prevailing conditions of the spot market to either consumers or merchants.
CODELCO applies a premium policy in sales of its Grade A cathodes. Premium amounts for different markets are adjusted in accordance with prevailing ocean freight costs and keyed to the standard terms ofpaymentin different markets, as well as to the individual characteristics and competitive conditions of those markets. For 2021, the base premium for CIF shipments (including shipping and insurance costs) to Rotterdam was set at U.S.$98 per metric ton, compared to U.S.$98 per metric ton in 2020 and U.S.$98 per metric ton in 2019. The base premium for 2022 isU.S.$128 permetric ton.
CODELCO sells its copper concentrates under long-term contracts. These contracts generally have three-year terms with fixed volume. As a general rule, contra cts covering one-third of the terms on one-third of the volumeare negotiatedona yearly basis. Thesale price is based on world metal prices andis generally tied tothe LME settlement prices for Grade A copper ca thodes minus certain treatment and refining charges.
Molybdenum is sold mainly to steel producers and merchants under annual sale contracts. Sales prices are based on prevailing monthly a verages of molybdenum dealer oxide highlowprices as quoted in Metals Week fora quotation period, generally the month followingthe scheduled month of shipment.
85
CODELCO has hedged certain future copper delivery commitments and pro duction in orderto manage the risks associated with copper price volatility in the past. CODELCO currently does not have any hedged production commitments and therefore there is no relevant impact from hedging. See notes 29 and 30 to the Unaudited Interim Consolidated Financial Statements.
CODELCO also periodically enters into futures contracts with respect to sales of its own copperin orderto provide protection a gainst fluctuation in the sale price paid by them in connection with such sales.
See Risk Factors-Risks Relating to CODELCO’s Operations-CODELCO engages in hedging activity from time to time, particularly with respect to its copper production, which may not be successful and may result in losses to CODELCO, notes 27 and 28 tothe Consolidated Financial Statements and notes 29 and 30tothe Unaudited Interim Consolidated Financial Statements for further details regarding CODELCO*s hedginga ctivity.
Major Export Customers
As discussed above, most of CODELCO*s customers receive shipments on a monthly basis. Consequently, CODELCOSs sales volume is relatively consistent throughout the year. CODELCOSs sales of copper in 2021 were geographically diversified, with approximately 47.4% of salesmadeto Asia, including approximately 32.4%to China, as well as approximately 42.1% to North and South America and 10.4%!to Europe. CODELCO “stop ten customers purchased approximately 40.8% ofits total copper sales volume in 2020.
The following table shows CODELCOS*s copper sales for the three years ended December 31, 2021 to CODELCOS*s top exportmarkets and in Chile:
CODELCOS*s Copper Sales by Destination (in thousands of metrictons)
2019 2020 2021 ¡AA 656 754 626 United States 273 278 356 South Korea . 113 99 114 Chile. 251 323 349 France .. 79 64 0) 73 90 93
1 48 22
30 19 19
42 31 43
74 68 73
48 44 33
3 8 11
22 37 22
5 1 1
Mexico . 31 13 10 Malaysia 6 9 4 Thailand 8 5 12 Vietnam 6 – 3 Canada. – 3 0 Others 135 105 61 Total… 1,889 1,971 1,931
(1) In 2020, CODELCO sold 19 thousand metric tons to Peru and 19 thousand metric tons to Finland.
The sales to China increased in 2020 compared to 2019 primarily driven by stronger demand at the end of the yearrelatedto thereco very in the economy of China a fterthe COVID-19 pandemic.
Competition
CODELCO believes that competition in the copper marketis based upon price, quality ofproduct and timing of delivery. CODELCOS’s products compete with other materials, including aluminum and plastic. CODELCO
86 competes with other mining companies and private individuals in connection with the acquisition of mining concessions and mineral lea ses and in connection with the recruitment andretention of qualified employees.
Employees
As of December 3 1,2021, CODELCO employed 15,528 employees as compared to 15,867 employees asof December 31, 2020. CODELCO spent U.S.$9.3 million during 2021 on staff development and training. A total of 476,185 hours of training were held, with 13,601 employees attending multiple courses.
As of December 31, 2021, approximately 89.8% of CODELCO*s employees were covered by collective bargaining agreements with labor unions. Most of these collective bargaining a greements ha ve terms of two to three years.
In 2021, CODELCO negotiated four collective bargaining a greements and signed one additional collective bargaining agreement signed. CODELCO experienced a 21-day strike involving two labor unions from the Andina Division and 24-day strike involving one labor union also from the Andina Division. In 2020, CODELCO negotiated collective bargaining agreements on schedule without any conflicts or work stoppages. As of September 30, 2022 CODELCO negotiated all the collective bargaining agreements with no conflicts, nor there were work stoppages, except for one-day strike onthe Ventana Division related to the decommission of thesmelter.
CODELCO has experienced material work slowdowns, work stoppages and strikes in the past.
As of September 30, 2022, there were 20,830 employees of regular independent operating contractors and 25,853 employees of contractors involved in the development of CODELCO*s investment projects.
Work slowdowns, stoppages and other labor-related events could increase CODELCO”s independent contracting costs, which could havea material adverse effect onthe business, financial condition, results ofoperations or prospects of CODELCO. See Risk Factors-Risks Relating to CODELCO’s Operations-Labor disruptions involving CODELCO”s employees or the employees of its independent contractors could affect CODELCO’s production levels and costs. In addition, pursuant to the Labor Code of Chile, CODELCO could be held lia ble for the payment of labor and social security obligations owed to the employees of independent contractors (or their subcontractors) if the independent contractors (or their subcontractors) do not fulfill those payment obliga tions.
CODELCO has agreed with a Government of Chile agency to provide a framework to facilitate this agency’s supervision ofthe la bora nd social security obliga tions owed bythe independent contractors to theiremployees.
As part of its compensation plan, CODELCO offers each employee the opportunity to partially finance the purchaseofa first home orto obtain other personal loans granted through each employee ?s severance plan. Such home loans ha ve a term ofup to 15 years, and such personal loans have a term of less than one y ear. Loans of both kinds provide for interest rates of actual inflation plus a margin of between 1% and 5%. As of September 30, 2022, an aggregate principal amount ofU.S.$138.0 million of these loans was outstanding.
Number of Employees by Division?
January to December Variation (%) January to September
Divisions 2019 2020 2021 20202021 2022
Chuquicamata …. 5,155 4,244 3,791 (10.7) 3,827 Radomiro Tomic 1,220 1,220 1,212 (0.7) 1,278 Gabriela Mistral . 501 457 468 2.4 480 Mina Ministro Hales 117 766 763 (0.4) 786 Salvador 1,517 1,438 1,470 2.2 1,498 Andina… 1,623 1,500 1,436 (4.3) 1,413 El Teniente. 4,154 3,939 3,927 (0.3) 3,845 Headquarters 578 577 818 41.8 951 Ventanas …. Qe 845 823 762 (7.4) 769 Shared Services (Vice Presidency of Projects) 982 860 843 (Q.0) 874 Internal Auditing e 42 43 38 (11.6) 42 Total 17,395 15,867 15,528 Q.1) 15,763
87
(1) Average number of employees for the periods presented.
Chilean Law No. 20,123 of 2007 (the Chile Subcontracting Law) governing subcontractors pro vides incentives for companies to ensure that contractors and subcontractors comply with la bor, health and safety regulations and standards with respectto their own employees. The Chile Subcontracting Law gives companies theright to request that contractors provide information on the status of their payment of labor and social security obligations to their employees priorto the companys payment ofamounts dueto contractors. Additionally, companies have the right to withhold payments dueif the contractors cannot provide evidence that they have fulfilled their labor and social security obligations. Finally, companies are required to pay contractors pending la bor and social security obligations with the amounts withheld from the contractors. It also regulates the provision of temporary services by contractors and subcontractors, enablingthe creation of specialized and regulated companies for this specific purpose (Empresas de Servicios Transitorios) and defining the specific events under which companies may hire for temporary services.
Occupational Health and Safety
CODELCO, through its structural project on occupational safety and health, has established occupational health and safety performance indicators aimed at a voiding serious and fatal accidents and occupational illnesses. In 2022 and through the date of this offering memorandum, there were two fatalities involving CODELCO personnel and CODELCO contractors. In2019,2020and 2021 there was one fatality in each ofthe periods mentioned involving CODELCO persomnelorcontractors.
In 2019, the current total number of lost time accidents was 108 and the accident frequency was 0.70 accidents per million hours worked. The total number of lost time accidents in 2020 was 95 and the accident frequency rate was 0.83 accidents per million hours worked and in 2021 losttime accidents was 94 and the accident frequency was 0.75 accidents per million hours worked. As of September 30, 2022, the current total number of lost time accidents is 58 and theaccident frequency is 0.57 accidents per million hours worked.
Comptroller General ofthe Republic
During 2017, the Comptroller issued three declarations (Opinions No. 15.759 and No. 18.850, both from 2017,andFinal Auditor Report(Informe Final de Auditoria) No. 9002016, from a 2016 audit) that affect CODELCO.
Two of these declarations are opinions related to labor relations that: (1) query whether CODELCO could provide greater benefits to its employees than those currently established by la w and (ii) state that, although CODELCO may continue to engage in collective bargaining with its employees, the Comptroller reserves the right to eva luate the amounts agreedupon. The third declaration was the result of an audit report, which maintained that CODELCO was subject to the provisions of the Public Procurement Law (Law No. 19,886) that relates to: (i) the prohibition on contracts between related parties and (ii) the mandatory public tender of contracts through the rules that apply to public services. CODELCO has filed administrative appeals a gainst all three declarations issued, and subsequently filed an action ofannulmenta gainst the three declarations issued by the Comptroller. The action ofannulment was denied and in October2020 CODELCO appealed the decision. In December2022, CODELCO withdrew theappeal a fter signing a joint agreement with the Comptroller.
Legal Proceedings
CODELCO is party to various legal proceedings in the ordinary course ofbusiness. Otherthan as disclosed in this offering memorandum, CODELCO is not currently involved in any litigation or arbitration proceeding, including any proceedin g that is pending orthreatened of which we are aware, which we believe will ha ve, or has had, a material adverse effect on the Company. Other legal proceedings that are pending a gainst or involve us and our subsidiaries are incidental to the conduct of our and their business. We believe that the ultimate resolution of such other proceedings individually or on an aggregate basis will not have a material adverse effect on our consolidated financial condition orresults.
Labor-Related Proceedings
We are a party to various legal actions involving labor claims of unions and former and presentemployees.
These labor disputes relate to working conditions, union practices, improper termination and discrimination. We do
88 not expect these disputes to havea material a dverse effect on our financial condition or future results ofoperations.
Other Proceedings
In October2021, CODELCO, on the one hand, and Thyssenkrupp Industrial Solutions Chile Limitada on the other, filed reciprocal arbitration claims under a Purchase Order signed by both companies in 201 5, for disputes related to dela ys, compensation for damages and payments. CODELCOS*s claims amountto approximately U.S.$42.0 million and Thyssen’s claims amountto approximately U.S.$25 million. A final rulingis pending.
In October 2020, CODELCO, on the one hand, and Santa Elvira S.A., Mining Services Group S.A. and Sociedad de Servicios para la Minería Limitada (collectively Santa Elvira) on the other, simultaneously filed reciprocal arbitration claims under an agreement with CODELCO’s El Salva dor Division, for disputes related to charges and paymentsbetween 2012 and 2018. CODELCOSs claims amountto approximately U.S.$3 15.0 million and Santa Elvira is claiming payment for works allegedly executed for approximately U.S.$75.0 million. The discovery period ended andthe process will follow to its post-evidence brief stage.
In July 2020, the State Defense Council filed a claim against CODELCO seeking environmental rehabilitation measures for a lleged environmental damage to water sources and vegetation surrounding the Salar de Pedernales dueto surface and underground water use between 1994 and 2017 by CODELCO*s El Salvador Division.
On November 16, 2020, CODELCO filed its response, and subsequently the parties to this proceeding a greed to and filed a settlement agreement, which was approved by the Environmental Court. As of the date of this offering memorandum, CODELCO is in compliance with the committed measures.
In October2019, CODELCO was served notice of a civil claim filed by relatives of 139 former employees from the Andina Division, alleging that working conditionscaused the former employees to contract silicosis cla iming compensation on behalf of the former employees. The claim requests compensation in an aggregate amount of approximately U.S.$15.1 million. A final rulingis pending.
In July 2019, Ingeniería y Maquinarias Indak Limitada et al. filed a civila claim against CODELCO claiming paymentof damages, loss of profits, loss of opportunities and moral damages, plus interest thereon, in the amount of approximately U.S.$46.0 million. The proceedings are currently in the discovery period. A final rulingis still pending,
In April 2018, Trébol Minerals S.A. filed a civil claim against CODELCO*s El Salva dor Division claiming payment of unpaid services, damages, loss of profits and moral damages, plus interest thereon, in the amount of approximately U.S.$12.0 million. The proceedings are currently in the discovery period. A final rulingis still pending,
In June 30, 2016, the Union of Independent Workers, along with a group of artisanal fishermen, divers of Caleta de Horcón and other residents of the boroughs of Quintero and Puchuncaví filed a la wsuit before the Second Environmental Court a gainst the Ministry of the Environmentand eleven companies located in the industrial area of the Quintero bay, including CODELCO, seeking mitigation, remediation and restoration of alleged environmental damage caused by pollution that has a ffected the Quintero bay overthe past decades. The proceedingis currently in its discovery period. A final rulingis still pending.
CODELCO believes that it has meritorious defenses to the claims a gainst it and, accordingly, is vigorously defendingits rights and interests in theseproceedings.
Foradditional details related to CODELCOS*s litigationand contingencies and amounts of probable loss with respect to la wsuits and legal actions, see note29 to the Consolidated Financial Statements.
89
OVERVIEW OF THE COPPER MARKET
Copper is an internationally traded commodity, the price of which is effectively established on terminal markets includingthe LME and COMEX. The followingta ble sets forth quarterly average prices forrefined copper since 2019 on the LME:
Average Copper Price (U.S.¿Pound) 2019 First Quarter . 281.9 Second Quarte: 277.3 Third Quarter. 263.2 Fourth Quarte 266.8 2020 First Quart icincnnnnnnnnniee RR RR anna 255.7 Second Quarter.. 243.0 Third Quarter. 295.7 Fourth Quarte 325.1 2021 First Quarter… 385.7 Second Quarte: 440.0 Third Quarter. 425.1 Fourth Quarte 439.9 2022 First Quarter… 453.5 Second Quarte: 431.5 Third Quarter. 351.3 Fourth Quarte 362.9
Source: London Metal Exchange, Monthly Average Settlement.
The following graph compares average market prices for copper and the level of LME, Shanghai Metal Exchange and COMEX inventories from 1998 through December3 1,2021:
Copper Prices and Inventories on Commodities Exchanges so
*000 tons ell
Source: Metal Exchanges: London, COMEX and Shanghai.
90
Historica lly, copper prices have been subject to wide fluctuations and are a ffected by numerous factors, including international economic and political conditions, levels of supply and demand, the availability and costs of substitutes, inventory levels maintained by producers and others and actions of participants in the commodities markets. To a lesser extent, copper prices are also subject to the effects of inventory carrying costs and currency exchange rates. Ina ddition, the marketprices ofcopper have occasionally been subjectto rapid short-term changes.
See Risk Factors-Risks Relatingto CODELCO”s Operations -CODELCO*s business is highly dependent upon the price of copper.
Opportunities for Copper
Since 2005, copper prices have experienced significant volatility. LME copperprices averaged 4226 cents perpound in 202 1 and 279.8 cents per pound in 2020, and compared to 272.1 cents perpoundin 2019. While higher copperprices in 2020 compared to prices in 2019 reflectedan increased in global demand, higher expectations on China and disruptions on the supply side, lower prices in 2019 reflected concerns on the trade dispute between China and the U.S. andits impacton the global growth. See Risk Factors-Risks Relatingto CODELCO”s Operations- CODELCOSs business is highly dependent upon the price of copper.
There is also increased general use of copper tubing, particularly in air conditioning systems. The quantity of copper consumed in electrical applications in cars, trains and other vehicles has also increased. In the electricity generation and transmission area, the control of energy losses and a growingconcern for higher energy efficiency are factors that have tended to increase demand for copper, becoming the main copper usage. The termination of widesprea d substitution of aluminum for copper in overhead high-voltage transmission lines also bodes well for the metal’s future.
Historically, demand and supply of copper have demonstrated continued growth during periods of oversupply as wellas periods ofoverconsumption. The following graph shows the historical development of copper supply, demand and stocks in the world from 2000 through 2021 (in thousands of metric tons):
Refined Copper Supply and Demand Worldwide Balance
25,000 1,500
IA Balance ==” Production tm Consumption 24,000 o 17250
23,000
1,000
22,000 750
21,000 500
20,000
19,000 250
18,000 +
17,000 250
16,000 500
15,000
750
14,000
13,000 -1,000
0007 Tooz zo0z 007 vooz so0z 9007 L00z 8007 6007 OTOz Troz zIoOz EToz vroz sToz 9Toz £TOZ 8Toz 6Toz ozoz TzOZ
Source: CODELCO, internal data (October 2022).
91
REGULATORY FRAMEWORK Overview of the Regulatory Regime
CODELCO is a mining, industrial and commercial state-owned enterprise of indefinite duration with its own legal personality and capital. CODELCOS*s relationship with the Government of Chile is conducted through the Ministry of Mining. CODELCO was incorporated pursuantto Decree Law No. 1,350 of 1976, as amended by LawNo. 20,392. CODELCO is governed by Decree Law No. 1,350 and by Decree No. 1460f August 12, 1991,as amended (to conform the same with Law No. 20,392) by Decree No. 3 of January 13, 2012 issued jointly by the Ministries of Finance and Mining, and published in the Official Gazette on July 4, 2012, which sets forth CODELCOSs current bylaws, and the general legal framework applicable to private companies regarding public disclosure (rules applicable to publicly held companies), and other applicable regulations. CODELCOSs principal corporate purpose is to exercise all rights acquired by Chile pursuant to the nationalization of the Chilean mining industry, namely mining, exploration and the development of mining depositsand otherrights belongingto Chil at the time of CODELCOS*s incorpontionin 1976.
CODELCO is subject tothe oversight of: (1)the Chilean securities authority, the CMF, on the same terms as publicly held corporations (CODELCO is registered under the Securities Registry No. 785 of the CMF) and (ii) the Chilean Commission of Copper (Comisión Chilena del Cobre, or COCHILCO) or the governmental agencies that, among other authorities, are responsible for examining the compliance with certain regulations applicable to CODELCO*s activities and report the relevant findings to its Chief Executive Officer. Furthermore, other government a gencies in charge of specific areas, such as taxes and customs, exercise their legal authorities with respect to CODELCO as they do in regard to any other company of the Chilean private sector. The House of Deputies (Cámara de Diputados) of the Chilean Congress also maintains an overarching authority to oversee CODELCO in the exercise of its constitutional duties.
Chilean law requires CODELCO to obtain the approval of the Ministry of Finance before it can assume any financial indebtednessa nd beforeit can acquire assets outside Chile with financial orpa yment terms exceeding one year. Although CODELCO is 100% owned by it, the Government of Chile is not legally lia ble for CODELCO’s obligations unless expressly guaranteed by the Government of Chile, nor do such obligations form any part of the direct public debt of the Government of Chile. A constitutional amendment would be required to allow private participationin CODELCOs ownership.
Each year, the Board of Directors must approve the BDP report of the Company for the following three years, subject to the approval of the Ministries of Finance and Mining. This plan must include the annual investment and financing amounts in additionto the annual profits thatthe Company is estimated to generate durmg the period. The Ministries of Finance and Miningjointly issue a decreepursuantto whicha portion ofCODELCO’s profit may beallocated by CODELCO to the creation of capitaliza tion and reserve funds.
CODELCOSs Board of Directors mustalso submit its proposed annual budget to the Ministries of Finance and Mining for approval. In addition, Decree La w No. 1,350 requires CODELCO to includeas partof its proposed annual budget a debt amortization budget that includes interest and principal payments on CODELCO*s debts, includingthe notes. CODELCO*s budgetand financial sta tements are subjectto both internal and external control.
CODELCOS*s Board of Directors is responsible for monitoringits operations, and CODELCO reta ins independent auditors to audit its consolidated financial statements and an internal comptrollerto reviewits finances, accounting and administration.
CODELCOS*s Board of Directors approved corporate governance guidelines consistent with its high transparency, probity and accountability standards which: (1) esta blish limits and controls on theuse ofresourcesof the Board of Directors; (ii) implementa transparent and traceable system forthe handling of hiring requests, promotions and redundancies of CODELCOS*s officers and employees; (iii) regulate the relationships between members and management ofthe Board of Directors with related parties; and (iv) establish guidelines for corporate speakers. CODELCO*s Board of Directors also agreed to consider directives that: (1) regulate lobbying a ctivities within CODELCO); (ii) strengthen and reform internal audit systems; and (iii) strengthen policies to avoid any conflicts of interest.
92
Mining Regulations
Legal framework. CODELCO*s exploration, mining, milling, smeltingand refininga ctivities aresubjectto Chilean lawsa nd regulations which are generally applicable to all Chilean companies in the mining sector. The legal framework which regulates CODELCO as a holder of mining concessions is contained in the Chile s Constitution, the Constitutional La w Governing Mining Concessions (Law No. 18,097 of January 21, 1982) and the Mining Code (Law No. 18,248 of October 14, 1983). Under Chilean mining law, Chile is the owner of all mineral and fossil substances located in their natural deposit, regardless of who owns the surface land in which such substances are located. Private persons and companies may obtain mining concessions for exploration and exploitation. These concessions are granted by judicial resolutions in accordance with the Mining Code.
Miningconcessions are transferable, mortgageable and irrevocable and regulated by thesame civil law that regulates real estate rights generally. As a general rule, the ownerofa miningconcession may occupy as much of the surface land as is necessary for mining activities upon the creation of a mining easement or upon other authorization given by the land owner, such as a lease agreement ora license. Mining easementscan be obtained by way of direct negotiation with the surface land owner or, if the latter opposes, by way of a summary procedure before the relevant court. Regardless of how the mining easement is obtained, the party granting the easement is entitled to be compensated forthe damages that the granting ofeasements and the mining activities and works caused.
Exploitation concessionshave an indefinite duration. Exploration concessions are granted fortwo years and may be extended for a maximum of two additional years subject to waiving at least half of the area originally a llocated.
Prior to the expira tion of the first orthe second two -year period, the owner of exploration concessions has priority in applying for exploitation concessions overthe area comprised by exploration concessions.
Owners of mining concessions must pay an annual fee equivalent to approximately U.S.$1.33 per hectare in the case of exploration concessions and approximately U.S.$6.66 per hectare in the case of exploitation concessions. However, the la tter fees, within certain limits, may be credited to income taxes origina ted through the exploitation of the concession. Payments of the annual fees must be made in March of each year. Failure to make the annual fee payments may result in the loss of title to the concession through its auction.
CODELCO owns mining concessions granted by the Constitution and the Chilean Ordinary Courts for ts exploration and exploitation operations. Some of these concessions were previously held by foreign private mining companies before being transferred to Chile in 1971 and subsequentlyto CODELCO uponits incorporation in 1976.
CODELCOSs principal concessions are those which give rights to the mineral deposits of the Chuquicamata, El Teniente, Andina, Salvador, Radomiro Tomic, Gabriela Mistral and Mina Ministro Hales Divisions.
CODELCOSs concessions relating to land thatis currently being mined essentially grant an indefinite right to conduct mining operations in that land, provided that annual concession fees are paid. In 2019, CODELCO paid total concession fees ofU.S.$8.4 million and in 2020, CODELCO paid total concession fees ofU.S.$7.3 million. In 2021, CODELCO paid total concession fees of U.S.$7.3 million andas September 30, 2022, CODELCO paid total concession fees of U.S.$8.5 million
Pursuant to the Mining Code, all mining concessions, as well as certain raw materials, assets and other property pemanently dedicated to the exploration or extraction of minerals cannot be subject, except in extremely limited circumstances, to an order of attachment. In addition, pursuant to the Constitution, mining concessions corresponding to mining deposits exploited by CODELCO upon its incorporation in 1976 cannot be subject to attachment nor to any act of disposition by CODELCO. As a result, the rights of holders to attach property of CODELCO in the event ofa default under thenotes would be limited by such provisions. See Risk Factors-Risks Relatingto the Offering-In case ofa default under the notes, the ability ofholders to a ttach property of CODELCO may be limited by Chilean law.
Environmental Regulations
CODELCOSs operations are subject to national, regional and local regulations as well as international treaties subscribed by the Government of Chile and enacted as Chilean domestic la wregardingthe protection of the environment, natural resources and the effect of the environment on human health and safety, including laws and regulations concerning water, airand noise pollution, the handling, disposal and transportation of hazardous waste and occupational health and safety.
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The General Environmental La w (Law No. 19,300), enacted in March 1994 and modified by Law No.
20,417, enacted in 2010, establishes the general environmental legal framework in Chile, including the establishment of a range of environmental management mechanisms known as the Environmental Impact Assessment System (Sistema de Evaluación de Impacto Ambiental), the Emission Standards and the Environmental Quality Standards, amongothers. Chilean environmental laws a nd regulations, and its enforcement, have become increasingly stringent since 2010 and even more in recent years due torecent changes. Such amendments include, among other significant modifications, the creation of a new institutional framework comprised by: (i) the Ministry of the Environment (Ministerio del Medio Ambiente); (ii) the Council of Ministers for Sustainability (Consejo de Ministros para la Sustentabilidad); (iii) the Environmental Assessment Service (Servicio de Evaluación Ambiental); (iv) the Bureau of the Environment (Superintendencia del Medio Ambiente); and (v)the Environmental Courts (Tribunales Ambientales), each of which are in charge of designing, evaluating and enforcing laws and regulations rela ting to projects and activities that could have an environmental impact. These institutions are fully operational. Recent legal and regula tory changes are likely to impose additional restrictions or costs on CODELCO andalso increased fines due to non-compliance with such la ws and regulations, relating to environmental litigation and protection of the environment, particularly those related to flora and fauna, wildlife protected areas, water quality standards, mine closure, air emissions, and soil pollution. Since the Bureau of the Environment became fully operational on December28,2012, infringement ofenvironmental regula tions may result in fines ofup to approximately U.S.$8.7 million, the closure of facilities and therevocation ofenvironmental a pprovals. As described in more detail below, CODELCO incurs, and may be required in the future to incur, substantial capital and operating costs related to environmental compliance. However, many of these costs are inextricably intertwined with the operation of CODELCOS*s business as a whole.
The General Environmental La w, as complemented by additional regulations, enables the Govemmentof Chile to: (i) bring administrative and judicial proceedings against companies that violate environmental la ws; (ii) close non-complying fa cilities; (iii) revoke required operating licenses; (iv) require that companies to submit their projects for environmental evaluation as required by applicable law; and (v) impose sanctions and fines when companies act negligently, recklessly or deliberately in connection with environmental matters. The General Environmental La w also grants citizens the right to bringcivilactionsa gainst companies thatarenotin compliance with environmental laws and regulations when such companies have caused environmental damage, as defined in such law, a fter such non-compliance has been established by a judicial proceeding. As of the date of this offering memorandum, one of these proceedings involves CODELCO, for an action brought by citizens against all the companies that operate in the Ventanas area and the Ministry of the Environment. CODELCO is unable to fully assess at this timethe potential cost ofcompliance.
In 2016, the Bureau of the Environment presented claims against the Ventanas Division for the infringement of environmental regulations and permits. In response, CODELCO presented a Compliance Plan (Programa de Cumplimiento), which allows the Ventanas Division to comply with the Bureau ofthe Environment’s requirements in a specified term and once successfully executed it may absolve the infringer from finesor sanctions.
This Compliance Plan was approved by the Bureau ofthe Environment in 2016 and was implemented by CODELCO.
In 2017 the Environmental Court required a complement of this plan to include the evaluation of possible environmental consequences. CODELCO presented the required information and on November, 28, 201 8 the Bureau of the Environment approved the Compliance Program as satisfactorily fulfilled. This approval decision was later appealed and ultimately upheld in August 2020 bythe Environmental Court and in February 2021 by the Supreme Court, followinganappeal (recurso de casación).
Additionally, citizens affected by environmental pollution may file a petition for relief to Chilean Courts of Appeal, requiring the suspension of the offending activity and the adoption of protective measures through the judicialprocess called recurso de protección (constitutional protection action).
If determined that CODELCO violated its environmental permits, the Bureau of the Environment could impose a fine on CODELCO and could require CODELCO to implement environmental compensation and mitiga tion measures. Therecan be no assurance thatthe Bureau ofthe Environment, asa result ofthe Supreme Court decision, will not impose additional fines orrequire that additional measures betaken. As of the date ofthis offermg memorandum, CODELCO has not assessed a potential loss as probable or such loss is not estimable.
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The General Environmental Law and its regulations contain certain rules on Environmental Impact Assessment, which have been in effect since April 1997, and that provide that CODELCO must evaluate the environmental impact of any future project or activity listed in Article 10 of Law No. 19,300 by means of an environmental impact declaration or an environmental impact study depending on the significance of the environmental impacts associated. CODELCO has conducted these environmental impact declarations and studies pursuantto the General Environmental Law.
Chile has adopted environmental regula tions requiring companies operating in Chile, including CODELCO, to undertake programs to reduce, control andor eliminate certain environmental impacts. CODELCO has undertaken a number of environmental initiatives to comply with suchregula tions. From 20 12to 2019, CODELCO invested U.S.$3.6 billion in environmental projects, and plans to continue implementing pollution abatement plans through additional ca pital investments amountingto U.S.$439.0 million in 2020 and U.S.$490.0 million in 2021. In 2021, CODELCO allocated U.S.$196.0 million to environmental projects, includingthe expansion of the Ta labre, Ovejería and Carén Tailings dams in the Chuquicamata, Andina and El Teniente Divisions and various projects in Chuquicamata, Potrerillos and Caletones smelters in orderto comply withthenew regulation regarding atmospheric emissions. Additionally, as part of its pollution abatement efforts, CODELCO continues to implement water recovery systems, the costs of which are also budgeted in CODELCOSs pollution abatement plan, to conserve resources and minimize pollution of natural water sources.
To protect and improve environmental air quality in the country, the Ministry of the Environment has the authority to declare certain areas to be latent zones (zonas latentes) or saturated zones (zonas saturadas). Latent zones are areas in which there exists a high risk ofexcessive pollution -the pollutant concentration in airwater or soil is greaterthan 80%of thecorresponding quality standard in a certain area – and in which further emissionsare highly restricted. Saturated zones are areas in which an excessive level of pollution already has been reached – the concentration of the air pollutant exceeds 100% of the corresponding quality standard for a pollutant in a certain area -andin which emissions are required to be reduced and mitigation measures are required to be implemented.
In connection with the declaration ofa latent or saturated zone, the Ministry of the Environment may initiate an investigation and public-consultation process to develop a prevention or decontamination plan, as thecase may be.
The whole process for approving these plans may take morethan two years. Upon publication of eithertypeof plan, emission reduction targets and other environmental remediation actions ma y be required of specific industries located within the latent or saturated zone. Measures included in the pollution prevention or reduction plans governing CODELCOSs operations are subject to change and may become more stringent if compliance with applicable air quality standards is not achieved.
The area surrounding the Potrerillos, Caletones and Ventanas smelting facilities have been declared saturated zones for particulate matter (PM 10 andor MP5) and sulfur dioxide (SO”). These areas are subject to decontamination plans. The Ventanas decontamination plan has beenrecently reviewed by government authorities.
In the areas surrounding the Chuquicamata smelter, there are decontamination plans for PM ¡o under review and under development, and a pollution prevention plan for SO” is currently under development. In August 2013, the Ministry of the Environment enacteda decontamination plan for Chiles Sixth Region, Central Valley, which could potentially a ffectCODELCOS*s operations in the region.
In addition, the relevant Environmental Assessment Service may impose further requirements on CODELCOSs projects. Under the various plans that cover the areas where CODELCO openates, net increases in emissions by industrial facilities in these zones, includingany increased emissions from the Potrerillos, Ca letones, Ventanas and Chuquicamata smelting plants, have been banned. As of the date of this offering memorandum, the impact of operating in latent and saturated zones has not been material for CODELCO; however, it could have a material effect in the future.
A newair quality standard for an additional pollutant, primary particulate matter PM”, was enacted by the Ministry of the Environment in 2011 and became effective in 2012, In 2015, a new saturated zone with respect to PM2s and latent zone with respect to PM10 in the boroughs of Concón, Quintero and Puchuncaví, the areas where Ventanas is located, was declared and, asa result, a new decontamination plan has been recently enacted. CODELCO estimates that the cost of complying with this new standard will be U.S.$27.0 million, which will be incurred over a period of approximately four years.
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In 2013, Supreme Decree No.28 of the Ministry of the Environment, on Emission Standard for Smelting Plants was enacted, which establishes maximum parameters of emission for PM 0, SO” arsenic (As) and mercury (Hg) generated by smelting plants. Certain aspects of the regulation became effective immediately while other provisions of the new emission standards must be complied with by a later date-within three years in the case of Ventanas smelter, and within five years in Chuquicamata, Potrerillos and Caletones smelters. The cost ofcomplying with this new standard was U.S.$2.4 billion, which was incurred over a period of approximately five years. This regula tion is currently under routine review by the Ministry ofthe Environment, which is conducted every five years.
In May 2022, the Ministry of the Environment approved the Preliminary Draft on Emission Standards Applicable to Heavy Motor Vehicles, which aims to reducethe accumulative exposure ofthe emissions from heavy vehicles. The preliminary draft recently completed the public consultation phase.
Supreme Decree No. 902001 ofthe General Secretary of the Presidency, which sets forth the standards for discharges of liquid waste into surface water bodies, went into effect in 2006. CODELCO has invested significant amounts to reduce liquid waste emissions to date and expects that it will continueto incur costs related to compliance with Supreme Decree No. 902001. In addition, the authorities are developing water quality standards for water bodies that CODELCO currently or may in the future discharge into, includingthe Loa, Aconcagua and Cachapoal rivers. Such standards could require CODELCO to incura dditional costs to manage liquid waste discharges.
Regula tions were enacted in February 2004 governing sa fety standards for mining operations. Pursuant to these regulations, all mining companies, including CODELCO, were required to provide closure plans for their mining facilities, demonstrating compliance with safety standards. These plans must be updated every five years and must consider the requirements set forth in the environmental authorization issued for the respective facility, if any. SERNAGEOMIN has approved the closure plans CODELCO prepared for all of its facilities.
A new mine closure regulation, Law No. 20,551, which includes health, safety and environmental requirements along with mandatory provisions that require financial gua rantees, was enacted in 201 1, and became effective in 2012. Accordingto this law, CODELCO and other mining companies in Chile were required to submit an assessment of the closure expenses of all its mines to the SERNAGEOMIN before2014. Once the assessment of closure expenses was approved, CODELCO ha dto provide the financial guarantee between the sixth months since the approval and two-thirds ofthe project life (less than20 years), or 15 years ofthe project life (more than 20 years).
CODELCO obtained the approval of the closure plans for all of its divisions from SERNAGEOMIN and pro vided the financial guarantees in the term established by the law. CODELCO had total provisions amounting to U.S.$2.3 billion for future decommissioning and site restoration costs primarily related to tailing dams, closures of mine operations and other mining assets, including potential new governmental regulations, as of December 31, 2020, and U.S.$2.0 billion as of December 31,2019. CODELCO is currently developing a project to estimate the additional costs of complying with this new regula tion regarding mine closure, which could be material.
On June 20, 2020, Law No. 21,169 entered into force, which introduced the following amendments, among others: (i) the recognition of policies issued by Chilean insurance companies within the A.1 credit rating category, provided that they are unable to raise exceptions that condition or defer the payment of theindemnity to Sernageomin; and (ii) the obligation to request Sernageomins authorization to make changes or alterations in the identity and validity oftheA.l financial instruments that comprise the guarantee.
On February 13, 2018, the Environmental Court (Tribunal Ambiental) in Antofagasta, Chile issued an interim decision which could potentially reducethe availability ofa minor source ofwaterto CODELCO in the city of Calama. As of the date of this offering memorandum, CODELCO: (i) is nota partyto this legal proceeding and (ii) has not been contacted by any party orserved by the Environmental Court. Ifand when CODELCO becomes a party to this proceeding, CODELCO expects to: (a) enforce all its available legal remedies against any adverse decision; and (b) implement operational mitigation measures, if necessary. In August 2018, the Environmental Court voided its previous interim decision and subsequently during the month of August 2018 the Bureau of the Environment desisted fromits original action givingrise to such interim decision.
Future legislative orregulatory developments, private causesof action or the discovery ofnew facts relating to environmental matters may impose new restrictions orresult in additional costs that may havea material a dverse effect on CODELCO*s business, financial condition, results of operations or prospects. See Risk Factors-Risks
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Relatingto CODELCO’s Operations -CODELCO’s compliance with environmental, health and safety laws may require increased costs, including capital commitments, and non-compliance may subjectit to significantpenalties.
Enforceability of Obligations
CODELCO’s commercial obliga tions are enforceable in the same manner as thoseof any privately owned company in Chile. Eventhough CODELCO is a state-owned enterprise, it is subjectto the same laws and regulations applicable to all private Chilean corporations. This principle is consistent with the constitution of 1980, wherein Article 19, No. 21 states thatif Chile and its bodies carry out commercial activities, they will be governed by common legislation applicable to private persons, unless a specific law approved by an absolute majority of representatives ofthe Chilean Congress dictates otherwise. No such la w has been passed with respect to CODELCO.
Payment of Obligations
Article 23 of Decree Law No. 1,350 provides that CODELCO has the obliga tion to return the total proceeds of its exports to Chile, but has no obligation to convert the proceeds to Chilean pesos in excess of its peso requirements. The proceeds from its exports are deposited at the Central Bank of Chile, and withdrawals a gainst such foreign exchange deposits are madeto cover CODELCO*s expenses. In addition, Article 13 of Decree Law No.
1,350 directs CODELCO to prepare a Loan Amortization Budget which must include the payment of principal of CODELCOS*s debts andrela ted interest payments, includingthe notes. This budget, as partof the general budeetof CODELCO, is approved annually by joint decree of the Ministry of Mining and the Ministry of Finance and may be amended to meet non-budgeted expenses, in accordance with the terms and conditions of Article 16 of Decree LawNo. 1,350. Theincurrence ofany indebtedness by CODELCO mustbe authorized by an official letter from the Ministry of Finance. For loans with maturity at issuance ofa duration of more than one year, this authorization is required to commence therelevant procedures.
Statutory Documents
The statutory documents of CODELCO are contained in Decree La w No. 1,350 published in the Official Gazette on February 28, 1976, as amended by Law No. 20,392, and Decree No. 146 published in the Official Gazette on October25, 1991, as amended (to conform the same with La w No. 20,392) by Decree No. 3 of January 13, 2012 issued jointly by the Ministries of Finance and Mining, published in the Official Gazette on July 4, 2012. These gazettes may be seen on-line on the Library of the Chilean Congress website (http: www.ben.cl ) or in a booklet that CODELCO will issue upon request, which contains free translations ofthe regulations into English.
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MANAGEMENT
The Board of Directors is primarily responsible for the management and administration ofCODELCO. The
Board of Directors is composed of nine members, appointed as set forth in La w No. 20,392,: (i) three directo1s are directly appointed by the President of Chile; (ii) four directors are appointed by the President of Chile from a short-list presented by the Council of Senior Public Management (Consejo de la Alta Dirección Pública), an entity within the National Civil Service Bureau that advises the President of Chile, ministers and heads of services departments on the appointmentof high -ranking public positions; (iii) one directoris appointed by the Presidentof Chile from a short-list presented by the Federación de Trabajadores del Cobre (FTC); and (iv) one director is appointed by the Presidentof Chile from a short-list presented by boththe Federación de Sindicatos de Supervisores del Cobre(FESUC)andthe Asociación Nacional de Supervisores del Cobre (ANSCO). All directors in CODELCO serve four yearterms and may be reelected for new terms. The Boardis renewed on a staggered basis and may not be revoked in its entirety.
The Board of Directors is vested with all the management and asset -disposal authority, except to the extent that Chilean la w or CODELCO*s bylaws establish such authority within the exclusive province of the President of Chile (as discussed below), and other than the authority delegated to the Chief Executive Officer. The main responsibilities ofthe Board of Directors of£CODELCO areto: (1) designate and removethe Chief Executive Officer, (ii) approveand sendto the Ministry of Finance an estimate oftherevenues and surplus earnings that it will transfer to the Governmentof Chile in the following years budget; (iii) prepare theannual budgetof CODELCO and send for the approval of the Ministry of Finance; and (iv) approve the BDP report of the Company for the following three-year period.
The President of Chile is vested with authority analogous to that of the shareholders of a corporation (sociedad anónima) under Chilean law, which may be delegated in whole or in part to the Ministers of Finance and Mining, jointly. Pursuantto such authority, the Presidentof Chile: (i) participates in the designation of the Board of Directors by designating three directors without external inputand by electing six directors on the basis of third party short-lists; (ii) appoints the Chairman of the Board of Directors; and (iii) ma y approve and amend the bylaws of the Company, by means ofan executive decreeissued jointly by the Ministries of Financeand Mining. See Risk Factors
-Risks Relatingto CODELCO*s Relationship with the Governmentof Chile.
Senior management and administration of the Company are vested in its Board of Directors and Chief Executive Officer. The Board of Directors is in charge of the ultimate conduct and oversight of the Company. The Chief Executive Officer is named by the Board of Directors and remains in office so long as heshe maintains the confidence of the Board. The Chief Executive Officer is responsible forimplementing the resolutions of the Board of Directors and supervising the activities of CODELCO. On August 26th, 2022, the Board of Directors of CODELCO appointed André Sougarret Larroquete as the new Executive President and CEO, and he commenced his term on August 26, 2022.
On March 1, 2019, CODELCO announced the appointment Sergio Herbage Lundín, former Northem District Development Manager, as the General Manager ofthe Gabriela Mistral Division. Thesame day, CODELCO announced the appointment of Jaime Rivera Machado, former General Manager ofthe Mina Ministro Hales Division, as the General Manager of Andina Division, and the appointment of Andrés Music Garrido, former Mine Manager El Teniente Division, as the General Manager ofthe Mina Ministro Hales Division. Finally, CODELCO announced the appointment of Alvaro García Gonzalez as CODELCOSs first Vice Presidentof Technology.
On July 26,2019,CODELCO announced the appointment of Mauricio Barraza Gallardo, former General Manager of the Chuquicamata Division, as Vice President of Central Southern Operations. The same day, CODELCO announced the appointment of Nicolás Rivera Rodriguez, former General Manager of the El Teniente Division, as the General Manager ofthe Chuquicamata Division, and the appointment of Andrés Music Garrido, the former General Manager of Mina Ministro Hales, as the General Manager of the El Teniente Division. On August 29,2019, CODELCO amnounced the appointment of Rodrigo Barrera, former Chuquicamata Underground Project Manager, as the General Manager of the Mina Ministro Hales Division. All new positions were effective as of September 1,2019.
On January 3 1, 2020, CODELCO announced theappointmentof Lorena Ferreiro Vidal as General Counsel and created the position Vice Presidency of Smelters and Refiners, appointing José Sanhueza Reyesin the role. Both
98 appointments are effective as of March 1,2020. On February 28, 2020, CODELCO announced the appointmentof Cristián Cortés Egañaas acting General Manager for the Ventanas Division, effective on March 1,2020. On March 2,2020, CODELCO announced the appointment of Patricio Vergara Lara as Vice President of Mining Resources
Managementand Development, effective on April20, 2020.
On September 29, 2020, CODELCO announced the appointment of Ricardo Weishaupt Hidalgo as General Managerof the Ventanas Division, effectiveon November 1,2020.
On October2, 2020 CODELCO amnounced the appointment of Mauricio Barraza Gallardo as acting Vice President – Northern Operationsand Alejandro Rivera Stambuck as acting Vice President – Productivity and Costs, both positions effective as ofOctober 16,2020. Mr. Mauricio Barraza Gallardo and Mr. Alejandro Rivera Stambuck will also maintain their current positions as Vice President – Central Southern Operations and Chief Financial Officer, respectively.
On October 30, 2020 CODELCO announced the appointment of Carlos Alvarado Hernández as Vice President of Sales and Rodrigo Miranda Schleyeras acting General Auditor, both positions effective on November
1,2020. Thesame day, CODELCO announced the appointmentof Rodrigo Barrera Paéz, former General Manager of the Mina Ministro Hales Division, as General Manager of Andina Division, and Francisco Balsebre Olaran as acting General Manager ofthe Mina Ministro Hales Division, both positions effective on December 1,2020.
On November 19, 2020 CODELCO announced the appointment of Andre Sougarret as Vice President – Northern Operation s, effectiveon January 2,2021.
On January 26, 2021, CODELCO amnounced the resignation of Rodrigo Cerda Norambuena from his position as Directorof CODELCO.
On January 29, 2021, CODELCO announced the appointment of Raúl Alejandro Puerto Mendoza as General Auditor effective on March 11,2021.
On February 18,202 1, CODELCO announced organizational a djustments, consisting ofthe elimination of the Vice Presidency of Productivity and Costs, distributing its functions across other areas of the corporation. In consideration of the above, CODELCO announced the appointment of Mauricio Acuña Sapunaras Vice President of Supply, a new departmentreportingto the Executive President, effective on April 5,2021.
On March 31, 2021, CODELCO announced the appointment of Felipe Larraín Bascuñán as Director of CODELCO.
On May 10, 2021, CODELCO announced the appointment of Patricia Núñez Figueroa and Pedro Pa blo Errázuriz Domínguez as Directors of CODELCO.
On May 14,2021, CODELCO announced the appointmentof Marco Bastías Villablanca as Vice President of Projects, effective on October 1,2021.
On March 10, 2022, CODELCO announced the resignation of Juan Benavides from his position as President of the Board of Directors and Director of CODELCO, effective on March 11,2022
On March 3 1,2022, CODELCO announced the appointmentof Maximo Pacheco Matte as President of the Board of Directors, effective on March3 1,2022.
On March3 1,2022, CODELCO announced the appointment of Josefina Montenegro Araneda as Directors, effective on May 1 1,2022.
On May 20,2022, CODELCO announced the resignation of Renato Fernández Baeza as Vice Presidentof
Corporate Affairs £ Sustainability and Marcelo Álvarez Jara as Vice President of Human Resources, effective on September30,2022
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On May 23, 2022, CODELCO announced the appointment of Alejandra Wood Huidobro and Nelson Cáceres Hernández as Directors.
On July 12,2022, CODELCO announced the resignation of Rodrigo Barrera Páez as General Manager of the Andina Division effective on July 12, 2022. In consideration of the above, CODELCO announced the appointment of Roberto Pastén Jeraldo as a cting General Manager ofthe Andina Division.
On August 26, 2022, CODELCO announced the appointment of Mary Carmen Llano Aranzasti as Vice President of Human Resources, effective on October0 1,2022
On August 26, 2022, CODELCO announced the resignation of Octavio Araneda as Chief Executive Officer and President. In consideration ofthe above, CODELCO announced the appointment of André Sougarret Larroquete as Chief Executive Officer and Executive President, effective on August29, 2022
On September 28, 2022, CODELCO announced the resignation of Lorena Ferreiro Vidal as General Counsel, effective on September 28, 2022. In consideration of the above, CODELCO announced the appointment of María Susana Rioseco Zorn as General Counsel.
On September 30, 2022, CODELCO announced the appointment of Nicolás Rivera Rodríguez as Vice President Northern Operations, Christian Caviedes Núñez as General Manager of the Chuquicamata Division, Lindor Quiroga Bugueño as General Manager of the Andina Division and Julio Díaz Rivera as General Manager of the Radomiro Tomic Division, effectiveon October0 1,2022
On November 16, 2022, CODELCO announced the resignation of Marcos Bastías Villablanca as Vice President of Projects effective on November 30, 2022. In consideration of the above, CODELCO announced the appointmentof Francisco Carrasco Jerez as acting Vice Presidentof Projects from December0 1,2022 to December 11,2022 andtheappointment of Julio Cuevas Ross as Vice Presidentof Projects effective on December 12,2022.
On December05, 2022, CODELCO announced the appointmentof Nicole Porcile Yanineas Vice President of Corporate Affairs 8 Sustainability effective on December 12, 2022.
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Directors and Executive Officers
(1)
2)
6)
(4)
The following table sets forth the current directors and executive officers of CODELCO and their positions:
Name
Directors
Máximo Pacheco Matte Juan Enrique Morales Jaramillo Patricia Núñez Figueroa Isidoro Palma Penco….
Josefina Montenegro Araneda ….
Pedro Pablo Errázuriz Domínguez .
Nelson Cáceres Hernández Alejandra Wood Huidobro
Executive Officers André Sougarret Larroquete Alejandro Rivera Stambuck
Mary Carmen Llano Aranzasti.
Carlos Alvarado Hernández..
Julio Cuevas Ross ….
Patricio Vergara Lara
Nicole Porcile Yanine Alvaro García González .
José Sanhueza Reyes …
Alejandro Sanhueza Díaz…
María Susana Rioseco Zorn Raúl Puerto Mendoza Mauricio Barraza Gallardo Nicolás Rivera Rodríguez..
Christian Caviedes Núñez..
Julio Díaz Rivera Francisco Balsebre Olaran .
Gonzalo Lara Skiba Christian Toutin ….
Ricardo Weishaupt Hidalgo Andrés Music Garrido…
Lindor Quiroga Bugueño
Directly appointed by the President of Chile.
Term expires May 2026.
Position
Chairman VO Director 4 Director 6) Director 4 Director VO) DirectorY6) Director NO Director(1)
Chief Executive Officer and Executive President Chief Financial Officer and acting Vice President – Productivity and Costs
Vice President – Human Resources
Vice President of Sales
Vice President- Projects
Vice President- Mining Resources Management and Development
Vice President- Corporate Affairs £ Sustainability Vice President- Technology
Vice President of Smelters and Refineries
Head of Finance
Acting General Counsel
General Auditor
Vice President- Central Southern Operations Vice President- Northern Operations
General Manager – Chuquicamata Division General Manager – Radomiro Tomic Division General Manager – Mina Ministro Hales Division General Manager – Gabriela Mistral Division General Manager – Salvador Division
General Manager – Ventanas Division
General Manager – El Teniente Division
General Manager – Andina Division
Appointed by the President of Chile from a short list presented by the Council of Senior Public Management (Consejo de la Alta Dirección
Pública).
Term expires May 2023.
(5) Term expires May 2025.
(6) Appointed by the President of Chile from a short list presented by Unions
There is no family relationship between any director or executive officer and any other director or executive officer. The business address forthe executives and directors is Huérfanos 1270, 6th floor, Santiago, Chile, postal code 8340424. No executive holds a positionas an employee outside ofCODELCO.
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Committees of the Board of Directors Audit, Benefits and Ethics Committee (Comitéde Auditoría, Compensaciones y Ética)
CODELCOSs audit, benefits and ethics committee consists of Isidoro Palma Penco (Chair), Juan Enrique Morales Jaramillo (Vice Chair), Patricia Núñez Figueroa and Pedro Pablo Errázuriz Domínguez, who may invite others to assist in its work. The audit, benefitsand ethics committees primary responsibility isto supportthe Board of Directors by providing and improving internal controls by reviewing transactions with related parties and the work of CODELCOSs internal audit department. The committee also analyzes and reviews the work and reports of the external auditors. The committee is also responsible for analyzing observations made by Chilean regulatory entities and for recommending measures to be taken by the management in response. CODELCO*s audit, benefits and ethics committee is not subject tothe independenceand other requirementsto which U.S. public companies are subject.
Projects and Investment Committee (Comitéde Proyectos y Financiamiento de Inversiones)
The projects and investment committee consists of Pedro Pablo Errázuriz Domínguez (Chair), Patricia Núñez Figueroa (Vice Chair), Isidoro Palma Penco, Josefina Montenegro Araneda and Nelson Cáceres Hemández This committee analyzes and recommends major mining development projects and financing of th ese projects.
ManagementCommittee (Comité de Gestión)
The management committee consists of Pedro Pablo Errázuriz Domínguez (Chair), Patricia Núñez Figueroa (Vice Chair), Isidoro Palma Penco, Alejandra Wood Huidobro and Nelson Cáceres Hernández The committee is primarily responsible forthe management ofthe Companys divisions and key projects. Ita lso reviews and evaluates the perfomanceof subsidiaries and a ffiliated companies.
Sustainability Committee (Comité de Sustentabilidad)
The sustainability committee consists of Alejandra Wood Huidobro (Chair), Nelson Cáceres Hemández (Vice Chair), Patricia Núñez Figueroa, Josefina Montenegro Araneda and Pedro Pablo Errázuriz Domínguez, The committee advisesthe Board of Directors with respect to matters of sustainability, providingassistance to the Board of Directors in the Companys sustainability policies and goals as well as analyzingthe efficacy of the Company’s policies and managementsystems in the areas of health, safety and the environment.
Science, Technology and Innovation Committee (Comité de Ciencias, Tecnología e Innovación)
The science, technology and innovation committee consists of Josefina Montenegro Araneda (Chair), Alejandra Wood Huidobro (Vice Chair), Pedro Pablo Errázuriz Domínguez, Juan Enrique Morales Jaramillo, and Nelson Cáceres Hernández. This committee wa s formed in 2016 and discusses the challenges facing the corporation with respect to science and technology.
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RELATED PARTY TRANSACTIONS
In the ordinary course of its business, CODELCO engages in a variety of transactions on am s-length terms with certain related parties. For information regarding these transactions, see note 3 to the Consolidated Financial Statements.
In its dea lings with Cyprus El Abra Corporation (a subsidiary of Freeport-McMoRan Inc.), the partner in SCM El Abra, CODELCO acts through a subsidiary, as agent. CODELCO does not sell copper to Nordeutsche Affinerie Group, its partnerin Deutsche Giessra dht GmbH.
Pursuant to Article 147 ofthe Law No. 18,046 on Corpontions (the Corporations Act), CODELCO may only enterinto operations with related parties if its intent is to benefit the corporate interest, ifits price, terms and conditions are consistent with those prevailing in the market when approved, andif it follows certain requirements and procedures established by the law.
According to Article 146 of the Corporations Act, as amended, operations with related parties of CODELCO include any and all negotiations, acts, contracts or operations in which the Company must take part, as well as: (i) one or more related persons to the Company, pursuant to the definition contained in Article 100 ofLawNo. 18,045 (the Securities Market Law, as amended); (ii) a board member, manager, a main executive or a liquidator of CODELCO, acting directly or on behalf of any persons other than the Company, or their respective spouses or relatives up to the second degree (consanguinity ora ffinity); (iii) a corporation or partnership in which one of the persons mentioned in (ii) above are direct or indirect owners of 10%.or moreofits capital, board members, managers or main executives; (iv) those persons specifically established under CODELCO*s bylaws orreasonably identified by the Directors Committee, as applicable, even if the transaction with such persons (a) is not of a relevant amount, (b) is conducted on a regular basis (as per the regularity policy determined by the Board of Directors of CODELCO) or (c) is entered into with a subsidiary of CODELCO in which the Company holds a director indirect ownership interestof at least 95%; and (v) any company in which a board member, manager or main executive of CODELCO has served as a board member, manager, main executive or liquidator, during thelast 18 months.
Article 100 of the Securities Market Law provides that the following persons constitute a related party: (i) the other entities of the business conglomerate to which a company belongs; (ii) parents, subsidiaries and equity-method investors and investees of a company; (iii) all directors, managers, officers and liquidators of a company, and their spouses or blood relatives to the second degree, orany entity controlled, directly or indirectly, by any of the abovementioned individuals; (iv) any person that, by theirown actions or with other persons under a joint actiona greement, may appointatlea stone member of the management ofa company or controls 10% or more of the capital or voting capitalof a stock company; and (v) other entities orpersons deemed a related party by the CMF.
The rules, requirements and procedures to approve operations with related parties apply both to the operations of CODELCO as well as to those of its subsidiaries, regardless of their legal nature, except for some exemptions set forth in Article 147 of the Corporations Act in which related -party transaction may be executed without the requirements referred to above, with the prior approval of the Board of Directors.
The breach of any of the restrictions on related party transactions will not affect the validity of the transaction. However, CODELCO or the President of Chile may demand from the breaching party, the reimbursement for an amount equivalent to the benefits ga ined by the breaching party resulting from the transaction.
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Additionally, CODELCO orthe Presidentof Chile may claim damages. Finally, the breac hin g party bears the burden of proof that the transaction was carried outaccordingto the law.
CODELCOSs policy for transactions with related parties is defined and governed by a specific intemal regulation created pursuant to general policies established by the Board of Directors and in connection with the guidanceprovided by Decree Law No. 1,350and the Corporations Act. CODELCOS*s internal regula tion prescribes the manner in which transactions between CODELCO and related entities must be carried out and provides for sanctions if the requirements of the regulation are notmet.
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FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN CHILE
As a general matter, the Central Bank of Chile is, among other things, responsible for monetary policies and for exchange controls in Chile. Most Chilean companies must inform the Central Bank of any international issue of bonds andif theproceeds ofthe issuance arenotlefta broad, should be brought into Chile through a bank or other participant in the Formal Exchange Market. Article 23 of Decree Law No. 1,350 provides that CODELCO has an obligation to return the total proceeds of its exports to Chile, but has no obligation to convert such proceeds to Chilean pesos beyond its peso requirements. These proceeds from its exports are deposited at the Central Bank of Chile, and withdrawals a gainst such foreign exchange deposits are made to cover CODELCOs expenses. As a result, CODELCO does not require foreign exchange approval in connection with the issuance or placement of, or payments upon the notes. See Regulatory Framework–Payment of Obligations.
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DESCRIPTION OF NOTES
The notes will be issued pursuant to an indenture, dated as of February 5, 2019 (the base indenture), among CODELCO, The Bank of New York Mellon, as trustee, paying agent, transfer agent and registrar (the trustee), and The Bank of New York Mellon SANV, Luxembourg Branch, as Luxembourg paying agent, as amended and supplemented by the eleventh supplemental indenture, dated as of February 2, 2023 (together with the base indenture, the indenture), between CODELCO andthe trustee.
The following description ofcertainprovisionsofthenotes and ofthe indentureis subjectto and is qualified in its entirety by reference to the provisions of the notes and the indenture, copies of which will be available for inspection at the office of the trustee at 240 Greenwich Street, New York, New York 10286. CODELCO urges you to read the indenture because it, and not this description, defines your rights as holders of the notes issued under the indenture.
General
The notes will be issued by CODELCO, and CODELCO will be lia ble thereforand obligated to perfom all covenants and agreements to be performed by CODELCO pursuant to the notes and the indenture, including the obligations to pay principal, interest and Additional Amounts (as defined below under Payment of Additional Amounts), if any. The trustee under the indenture is The Bank of New York Mellon (the trustee, which term shall include any successor trustee under the indenture).
The indenture provides forthe issuance by CODELCO from timeto timeof notes in one or more series up to an aggregate principal amount of notes as from time to time may be authorized by CODELCO, subject to all required governmentauthorizations. Notes havingthesame date of maturity and Interest Payment Dates (as defined below), pa yable in the same currency, bearing interest atthe same rate and the terms of which are otherwise identical, are referred to asa series.
The notes will bear interest at the applicable rate per annum set forth on the cover page of this offering memorandum from the date of issuance or from the most recent Interest Payment Date to which interest has been paid orprovided for. Interest on the notes will be pa yable semi-annually in arrears on February 2 and August2 of each year, commencing on August 2,2023, or, if any such dateis not a Business Day (as defined below), on the next succeeding Business Day (each an Interest Payment Date) to the person or persons (each, a Holder) in whose namesuch notes are registered in the Security Register (as defined below) atthe close ofbusiness on January 18 and July 18, respectively, precedingsuch Interest Payment Dates (each a Record Date). Interest on the notes will be calculated on the basis ofa 360-day year oftwelve 30-day months. Forthepurposeshereof, the term Business Day means a day on which banks in The City of New York are not authorized orrequired by law or executive order to be closed.
Moneys paid by CODELCO tothe trustee or any paying agent for the paymentof principal of (and premium, if any) or interest onany ofthe notes and remainingunclaimed at the end of two years a fterthe date on which such principal (and premium, if any) or interest shall have become due and payable (whether at maturity, upon call for redemption or otherwise) shall, together with interestmadea vailable for paymentthereof, be repaid to CODELCO, whereupon all lia bility of the trustee orsuch paying a gent with respectto such moneys shall cease.
The notes will mature on February 2,2033. The notes will not be redeemable priorto maturity exceptas described below and in the event of certain developments a ffecting taxation, in that case at a price equal to the outstanding principal amountthereof, together with any Additional Amounts and accrued interestto the redemption date. On the maturity date of the notes, CODELCO will be required to pay 100% of the then outstanding principal amount ofthe notes plus accrued and unpaid interestthereon and Additional Amounts, ifany.
Ranking
The notes will constitute direct, general, unsecured, unconditional and unsubordinated obliga tions of CODELCO. The notes rank and will rank without any preferencea mong them and equally with all otherunsecured and unsubordinated obligations ofCODELCO, other than certain obliga tions granted preferential treatment pursuant to Chilean law. It is understood that this provision will not be construed so as to require CODELCO to make
106 pa y ments under the notes ratably with payments being made under any other obliga tions. The indenture containsno restriction on the amount of additional indebtedness which ma y be incurred by CODELCO or its subsidiaries; however, as set forth under -Limitation on Liens below, the indenture contains certain restrictions on the ability of CODELCO and its subsidiaries to incur secured indebtedness.
Registration, Formand Delivery
The trustee will initia lly act as paying a gent, transfer a gent and registrar for the notes. The notes will be issued upon the closing of this offering in definitive, fully registered form, without coupons, in denominations of
U.S.$200,000 principal amount at maturity and multiples of U.S.$1,000 in excess thereof. The notes will be exchangeable, and transfers thereof will be registra ble, at the office of the registrar forthe notes. No charge will be madeto holders ofthe notes in connection with any exchange orregistration of transfer, but CODELCO may require paymentof a sum sufficient to coverany tax or other go vernmental charge payable in thatconnection.
The trustee will ma intain atits office in the City of New York, currently located at240 Greenwich Street, New York, New York 10286, a security register (the Security Register) with respect to the notes. The nameand addressof the registered Holder ofeach noteand the amountof eachnote will be recorded in the applicable Security Register, and the trustee and CODELCO may treat the person in whose name the note is registered as the owner of such note forall purposes. Forso longas the notes arerepresented by oneor more Global Notes (as defined below), the registered owner of a Global Note, in accordance with the terms ofthe indenture, may be treated atall times and for all purposes by CODELCO and the trustee as the sole owner with respect to such notes, with respect to all payments on the notes and forallotherpurposes undertheterms of thenotes and the indenture.
The notes are being offered and sold in connection with the initial offering thereof solely to qualified institutional buyers, as that term is defined in Rule 144A under the Securities Act, pursuant to Rule 144A, and in offshore transactions to persons other than U.S. persons, as defined in Regulation S under the Securities Act, in reliance on Regulation S. Followingthe initial offering ofthenotes, thenotes may be resold to qualified institutional buyers pursuant to Rule 144A, non-U.S. persons in reliance on Regulation S and pursuant to Rule 144under the Securities Act, as described under Transfer Restrictions.
The Global Notes Rule 144A Global Note
The notes offered and sold to qualified institutional buyers pursuant to Rule 144A will initia lly be issued in the form of one or more registered notes in global form, without interest coupons. The Rule 144A Global Notes will be deposited on the date of the closing of the sale of the notes with, or on behalf of, The Depository Trust Company (DTC), andregistered in the nameof Cede 8: Co., as nominee ofDTC, or will remain in the custody of the trustee as custodian for DTC. Interests in the Rule 144A Global Note will be available for purchase only by qualified institutional buyers.
Regulation S Global Note
The notes offered and sold in offshore transactions to non-U.S. persons in reliance on Regulation S under the Securities Act will initia lly be issued in the form ofone or moreregistered notes in global form, without interest coupons. The Regulation S Global Notes will be deposited upon issuance with, oron behalf of, a custodian for DTC.
Exceptas set forth below, the Rule 144A Global Note andthe Regulation S Global Note (collectively, the Global Notes) may be transferred, in whole and not in part, solely to anothernominee of DTC orto a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for notes in physical, certificated form (referred toas certificated notes) except in the limited circumstances described below.
The notes will be subject to certain restrictions on transfer and will bear a restrictive legend as set forth under Transfer Restrictions.
All interests in the Global Notes are subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstreamare subjectto the procedures and requirements of such systems.
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Euroclear and Clearstream will hold interests in the Global Notes on behalf of their participants through customers securities accounts in their respective names on the books of their respective depositaries. Such depositaries, in turn, will hold such interests in the Global Notes in customers securities accounts in the depositaries names on the books of DTC.
Exchanges Among the Global Notes
Prior to the 40th day after the later of the commencement of the offering of the notes and the date of the closingofthe sale of the notes (theperiod through and including the 40th day, the restricted period), transfers by an ownerofa beneficial interest in the Regulation S Global Note to a transferee who takes delivery of this interest through the corresponding Rule 144A Global Note will be ma de only in accordance with applicable procedures and upon receipt by the trustee of a written certification from the transferor ofthe beneficial interest in the form provided in the indenture to the effect thatsuch transferis beingma de to a person whom the transferorrea sona bly believes is a qualified institutional buyer within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A. Such written certification will no longer be required aftertheexpira tion of the restricted period.
Transfers by an owner of a beneficial interest in the Rule 144A Global Note to a transferee who takes delivery of such interestthrough the corresponding Regulation S Global Note, whether before or afterthe expiration of the restricted period, will be made only upon receipt by the trustee ofa certification from the transferor to the effect thatsuch transferis beingmadein accordance with Regulation S underthe Securities Act.
Any beneficial interest in one of the Global Notes thatis transferred to a person who takes delivery in the form ofan interest in another Global Note will, upon transfer, cease to bean interest in such Global Note andbecome an interestin the other Global Note and, accordingly, will therea fter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for aslongas it remains such an interest.
Certain Book-Entry Procedures for the Global Notes
The descriptions of the operations and procedures of DTC, Euroclear and Clearstream set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to change by them from time to time. Neither CODELCO nor the initial purchasers take any responsibility forthese operations orprocedures, and investors are urged to contact the relevantsystem orits participants directly to discuss these matters.
DTC has advised CODELCO thatit is (1) a limited purposetrust company organized under the la ws of the State of New York, (ii) a banking organization within the meaning of the New York Banking Law, (iii) a member of the Federal Reserve System, (iv) a clearing corporation within the meaning of the Uniform Commercial Code, as amended, and (v)a clearing agencyregistered pursuantto Section 17A ofthe Securities Exchange Act 0£ 1934, as amended (the Exchange Act). DTC was created to hold securities forits participants and facilita tes the clarance and settlementof securities transactions between participants through electronic book -entry changes to the accounts of its participants, thereby eliminatingtheneed for physical transfer and delivery of certificates. DTCs participants include securities brokers and dealers (including the initial purchasers), banks and trust companies, clearing corporationsand certain other organizations. Indirect accessto DTCs system is also available to other entities such as banks, brokers, dealers and trust companies, or indirect participants that clear through or maintain a custodial relationship with a participant, either directly orindirectly. Investors who arenotparticipants may beneficially own securities held by oron behalf of DTC only through participants or indirect participants.
CODELCO expects that pursuant to procedures established by DTC (1) upon deposit ofeach Global Note, DTC will credit the accounts of participants designated by the initial purchasers with an interest in the Global Note and (ii) ownership ofthe notes will be shown on, and thetransfer ofownership thereof will be effected only through, records maintained by DTC (with respect to the interests of participants) and the records of participants and the indirect participants (with respect to the interests ofpersons other than participants).
The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Accordingly, the ability to transfer interests in the notes represented by a Global Note to such persons may be limited. In addition, because DTC can act only on behalf of its participants, who in turn act on behalf of persons who hold interests through participants, the ability of a person having an interest in
108 notes represented by a Global Noteto pledge or transfer such interest to persons or entities that do notparticipate in DTCs system, or to otherwise take actions in respect of such interest, may be affected by the lack of a physical definitive security in respect of such interest.
So longas DTC orits nominee is the registered ownerof a Global Note, DTC orsuchnominee, as the case may be, will be considered the sole owner or holder of the notes represented by the Global Note for all purposes underthe indenture. Except as provided below, owners of beneficial interests in a Global Note will not be entitled to have notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of certificated notes, and will not be considered the owners or holders thereof under the indenture forany purpose, including with respectto the givingofany direction, instruction or approval to the trustee thereunder.
Accordingly, each holderowninga beneficial interestin a Global Note must rely on the procedures of DTC and, if such holder is not a participant or an indirect participant, on the procedures of the participant through which such holder owns its interest, to exercise any rights of a holder of notes under the indenture or such Global Note.
CODELCO understands that under existing industry practice, in the event that CODELCO requests any action of holders of notes, ora holderthat is an ownerof a beneficial interestin a Global Note desires to take any action that DTC, asthe holder of such Global Note, is entitled to take, DTC would authorize the participants to take such action and the participants would authorize holders ownin g through such participants to take such action or would otherwise actupontheinstruction of such holders. Neither CODELCO northe trustee will ha ve any responsibility or lia bility for any aspect of the records relating to, or payments made on account of, notes by DTC, or for maintainig, supervisingorreviewingany records of DTC relatingto suchnotes.
Payments with respect to the principal of, premium, if any, and interest on any notes represented by a Global Note registered in the name of DTC or its nominee on the applicable Record Date will be payable by the trustee to or at the direction of DTC orits nominee in its capacity as the registered holder of the Global Note representingsuch notes under the indenture. Underthe termsof theindenture, CODELCO and the trustee may treat the persons in whose names the notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving payment thereon and for any and all other purposes whatsoever. Accordingly, neither CODELCO northetrustee has or will ha veany responsibility or lia bility forthe payment of such amounts to owners of beneficial interests in a Global Note (including principal, premium, if any, and interest). Payments by the participants and the indirectparticipants to the owners of beneficial interests in a Global Note will be governed by standing instructionsa nd customary industry practice and will be the responsibility of the participants or the indirect participants and DTC.
Transfers between participants in DTC will be effected in accordance with DTCs procedures, and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream will be effected in the ordinary way in accordance with theirrespectiverules and operating procedures.
Subject to compliance with the transfer restrictionsapplica ble to the notes, cross-market transfers between the participants in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTCs rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary. However, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines ofsuch system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicabk to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note from a participant in DTC will be credited, and any such crediting will be reported to therelevant Euroclear or Clearstreamparticipant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. Cash received in Euroclear or Clearstream as a result of sales of interest in a global security by orthrough a Euroclearor Clearstream participant to a participant in DTC will be received with value on the settlement date of DTC but will
109 be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTCs settlement date.
Although DTC, Euroclearand Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform orto continue to perform such procedures, and such procedures may be discontinued at any time. Neither CODELCO nor the trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governingtheiroperations.
Certificated Notes
With respect to the notes, if (1) CODELCO notifies the trustee in writingthat DTC is no longer willing or able to act as a depositary or DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days of such notice or cessation; (ii) CODELCO, at its option, notifies the trustee in writing that it elects to cause the issuance of notes in definitive form underthe indenture; or (iii) upon the occurrence of certain other events as provided in the indenture, then, upon surrender by DTC of the Global Notes, certificated notes will be issued to each person that DTC identifies as the beneficial owner of the notes represented by the Global Notes. Upon any such issuance, the trustee is required to register such certifica ted notes in the nameof suchperson or persons (orthe nominee ofany thereof) and cause thesameto be delivered thereto.
Neither CODELCO nor the trustee shall be liable for any delay by DTC or any participant or indirect participantin identifyingthe beneficial owners of the related notes and CODELCO andthe trustee may conclusively rely on, and shall be protected in relying on, instructions from DTC forall purposes (including with respect to the registra tion and delivery, and the respective principal amounts, ofthe notes to be issued).
Covenants
CODELCO has agreed to restrictions onits activities forthe benefit of holders ofthe notes. The following restrictions will apply to thenotes:
Consolidation, Merger, Corveyance, Sale or Lease
Nothing contained in the indenture prevents CODELCO from consolidating with or merginginto another corporation or conveying, transferring or leasing its properties and assets substantially as an entiretyto any person, provided that: (i) the corporation formed by such consolidation orinto which CODELCO is merged orthe person which acquires by conveyanceortransfer, or which lea ses, theproperties and assets of CODELCO substantially as an entirety is a corporation organized and existing under the la ws of Chile and expressly assumes, by supplemental indenture, the due and punctual payment of the principal of and interest and Additional Amounts, if any, on all outstandingnotesand the performance ofevery covenant in the indenture onthepartof CODELCO to beperfonmed or observed; (ii) immediately after giving effect to such transaction no Event of Default (as defined below) and no event which, a fternotice orlapse of time orboth, would become an Event of Default, shall ha ve happened and be continuing; and (iii) CODELCO has deliveredto the trusteean officers certificate and an opinion ofcounsel, each stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture complies with the foregoing provisions relatingto such transaction.
Limitation on Liens
Nothing contained in the indenturerestricts orprevents CODELCO or any Restricted Subsidiary (as defined below) from incurring any additional indebtedness; provided thatneither CODELCO norany Restricted Subsidiary will (1) issue, assume or guarantee any indebtedness for money borrowed (Debt) if such Debt is secured bya lien upon, or (ii) directly or indirectly secure any outstanding Debt by a lien upon, any Principal Property (as defined below) or upon any shares of stock of, or indebtedness of, any Restricted Subsidiary, now owned or hereafter acquired, without effectively providing that the notes shall be secured equally and ratably with such Debt, except that the foregoing restrictions shall not apply to (i) liens on any Principal Property acquired, constructed or improved after the date of issuance of the notes to secure or provide for the payment of the purchase price or cost of construction or impro vements (including costs such as increased costsdueto esca lation, interest during construction
110 and similar costs) thereofincurred afterthedateof theissuance ofthe notes, or existing liens on property acquired, provided suchliens shallnot apply to any property theretofore owned by CODELCO orany Restricted Subsidiary other than theretofore unimproved real property, (ii) liens on any Principal Property or shares of stock or indebtedness acquired from a corporation merged with orinto CODELCO ora Restricted Subsidiary, (iii) liens to secure Debt of a Restricted Subsidiary to CODELCO or another Subsidiary, (iv) the sale or other transfer of any interest in property of the character commonlyreferred to as a production payment, (v) liens over any property at the time of acquisition of such property by CODELCO orany ofits Restricted Subsidiaries which lien was not (or is not) created in connection with such acquisition, (vi) liens in existence on the date of the offering of the notes, (vii) liens on deposits to secure, or any lien otherwise securing, the performance of bids, statutory obliga tions, surety bonds, appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, (viii) liens created on any property to secure Debt incurred in connection with the financing of such property, therepaymentof which Debtis to bemade from therevenues arising out of, or other proceeds ofrealization from, such property, with recourse to those revenues and proceeds and other property used in connection with, or forming the subject matter of, such property, but without recourse to any other property of CODELCO or any Restricted Subsidiary and (ix) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any lien referred to in the foregoing clauses (i) to (iii) or (v), (vi) and (vii), inclusive of any Debt secured thereby, provided that the principal amount of Debt so secured thereby shall not exceed the principal amount of Debt so securedat the timeof such extension, renewal orrepla cement and that such extension, renewal or replacement lien shall be limited to allorpartof the property which secured the lien extended, renewed or replaced (plus improvements on or additions to such property). Notwithstanding the foregoing, CODELCO and one or more Restricted Subsidiaries may issue, assume or guarantee Debt secured by liens which would otherwise be subject to the foregoingrestrictions in an a ggregate principal amount which, together with the aggregate outstanding principal a mount of all other Debt of CODELCO and its Restricted Subsidiaries that would otherwise be subjectto the foregoing restrictions (not including Debt permitted to be secured under clauses (i) through (ix) above) and the aggregate value of the sale-and-lease-back transactions described under -Limitation on Sale-and-Lease-Back Transactions below (other than sale-and-lease-back transactions the proceeds of which have been applied as provided in clause (b) under -Limitation on Sale-and-Lease-Back Transactions below) does not at thetimeof issuance, assumption or guarantee thereof exceed20%of Consolidated Net Tangible Assets.
Consolidated Net Tangible Assets means the total of all assets (includingreevaluations thereofas a result of commercial appraisals, price level restatement or otherwise) appearing on the consolidated balance sheet of CODELCO and its Subsidiaries as of the then most recent date filed by CODELCO with the CMF, but excluding goodwill, trade names, trademarks, patents, unamortized debt discount and all other like intangible assets (which term shallnotbe construed to include such reevaluations), less the a geregate of the currentlia bilities of CODELCO and its Subsidiaries appearing on such balance sheet.
Principal Property means any mineral property, concentrator, smelter, refinery orrod mill located within Chile, of CODELCO orany Subsidiary except any such property, plantor facility which the Board of Directors by resolution declares is not of material importance to the total business conducted by CODELCO andits Subsidiaries asan entity.
Subsidiary means any corporation more than 50% of the outstanding voting stock of which is owned, directly orindirectly, by CODELCO and of which CODELCO has thepowerto direct the management.
Restricted Subsidiary means(i) any Subsidiary which owns, directly orindirectly, any Principal Property and (ii) any Subsidiary which owns, directly orindirectly, any stock or debt ofa Restricted Subsidiary.
Limitation on Sale-and-Lease-Back Transactions
The indenture provides that neither CODELCO nor any Restricted Subsidiary will enter into any arrangement with any person (otherthan CODELCO ora Restricted Subsidiary ), orto which any such personis a party, providing for the leasing to CODELCO or a Restricted Subsidiary for a period of more than three years of any property orassets which has been oris to be sold or transferred by CODELCO or such Restricted Subsidiary to such person orto any person (otherthan CODELCO ora Restricted Subsidiary) to which funds have been orare to be advanced by such person on the security of the leased property or assets unless either (i) CODELCO or such Restricted Subsidiary would be entitled, pursuant to the provisions described under -Limitation on Liens above,
111 to incur Debt in a principal amount equal to orexceedingthe value ofsuch sa le -and-lease-back transaction, secured by a lien on the property orassets to be leased, without equally and ratably securingthe notes, or (ii) CODELCO, during or immediately afterthe expiration ofsix months a fterthe effective date of such transaction (whether made by CODELCO or a Restricted Subsidiary), applies to the voluntary retirement of indebtedness of CODELCO (includingthe notes) maturin g by its terms more than one yeara fterthe original creation thereof (Funded Debt) an amount equal to the value of such transaction, less an amount equal to the sum of (a) the principal amount of notes delivered, within six months after the effective date of such a rrangement, to the trustee for retirement and cancellation and (b)the principal amount of other Funded Debt voluntarily retired by CODELCO within such six-month period, in each case excludingretirements of notes and other Funded Debt as a result of conversions or pursuantto mandatory sinking fund or mandatory prepayment provisions or by paymentat maturity.
Periodic Reports
CODELCO will furnish, to the noteholders and to prospective purchasers of notes, upon request to the trustee, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the notes are not freely transferable under the Securities Act.
Events of Default
An Event of Default with respectto the notes is defined in the indentureas being any ofthe following (each an Event of Default): (1) default for 30 days in payment of any interest on the notes; (ii) default in payment of principal of the notes; (iii) default in the performance, or breach, of any covenant or warranty or obliga tion of CODELCO in the indenture and continuance of such default orbreach fora periodof60 days after written notice is given to CODELCO by the trustee orto CODELCO and the trustee by the holders of at least 33 13%in a ggregate principal amount of the notes; (iv) default under any bond, debenture, note or other evidence of indebtedness for money borrowed, or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by CODELCO orany Subsidiary, whether such indebtedness now exists or shall hereafter be created, in an aggregate principal amount exceeding U.S.$50.0 million (orits equivalent in any other currency or currencies) which default (x) shall constitutethe failure to pay any portion of the principal of such indebtedness when due and payable, whether at maturity, upon redemption or acceleration or otherwise, or (y) shall have resulted in such indebtedness becoming or being declared due and payable priorto the date on which it would otherwise become due and payable, in either case, if such default shall continue formore than 30 Business Days and within such 30 Business Da ys the time for payment of such amount has not been expressly extended (provided that if such default under such indenture or instrumentshall be remedied or cured by CODELCO or waived by the holders of such indebtedness, then theevent of default with respect to the notes shall be deemed likewise to have been remedied, cured or waived); and (v) certain events of bankruptey or insolvency of CODELCO or any Significant Subsidiary. Significant Subsidiary is defined in the indenture asa Subsidiary, the total assets of which exceed 10% of the total assets of CODELCO and its subsidiaries on a consolidated basis asofthe end ofthe most recently completed year. The trustee shall not be charged with knowledge of any Event of Default with respect to the notes unless a written notice of such default or Event of Default shall have been given to an officer of thetrustee who has direct responsibility fortheadministration oftheindenture and the notes by CODELCO orany holderof notes.
The indenture provides that (1) if an Event of Default (other than an Event of Default described in clause (v) above) shall ha ve occurred and be continuing with respect to the notes, eitherthe trustee orthe holders of not less than 33’3% of the total principal amount of the notes of such series then outstanding may declare the principalof allsuch outstanding notes and the interest accrued thereon, if any, to be due and payable immediately and (ii) ifan Eventof Default described in clause (v) above shall ha ve occurred, the principal ofall such outstanding notes and the interest accrued thereon, if any, shall become and be immediately due and payable without any declaration or otheract onthe part ofthe trustee orany holder of suchnotes. The indenture provides that the notes owned by CODELCO orany ofits affiliates shall be deemed not to be outstanding for certain purposes, including declaring the acceleration of the maturity of the notes. Upon the satisfaction by CODELCO of certain conditions, including (i) the pa yment of all fees and expenses of the trustee, (1i) CODELCO” deposit with the trustee ofa sum sufficientto pay all outstanding amounts then due on the applicable notes (otherthan principal due by virtue of the acceleration) together with interest on such amounts through the date of the deposit and (iii) all Events of Default (otherthan non-paymentof principal that became due by virtue ofthe acceleration upon the event of default) have been cured orwaived, the declaration described in clause (1) of this paragraph may be annulled by the holders of a
112 majority ofthetotal principal amount ofthe applicable notesthen outstanding. Past defaults, otherthan nonpayment of principal, interest and compliance with certain covenants, may be waived by the holders ofa majority of the total principal amountof the applicable notes outstanding.
The trustee must give to the holders of the notes notice of all uncured defaults knownto it with respect to the notes within 30 days a ftera Responsible Officer of thetrustee has received written notification of such a default (unless such default shall ha ve been cured); provided, however, that, except in the case of default in the paymentof principal, interestor Additional Amounts, the trustee shall be protected in withholding such noticeif it in good faith determines that the withholding of such notice is in the interest of the holders ofthe notes. Responsible Officer is defined in the indentureas any officer ofthetrustee with direct responsibility forthe administration of the indenture and, with respectto a particular corporate trustmatter, any other officerto whom such matter is referred because of his knowledge ofa nd familiarity with the particular subject.
No holder of notes may institute any proceeding, judicial or otherwise, under the indenture unless (1) such holdershall have given the trustee written notice of a continuing Event of Default with respect to the notes of that series, (ii) the holders ofnotless than 33’4% of the total principal amountofthe notes ofthat series then outstanding shall have made written request to the trustee to institute proceedings in respect of the Event of Default, (ii) such holder or holders shall ha ve offered the trusteesuch reasonable indemnity as the trustee may require, (iv) the trustee shall ha ve failed to institute an action for 60 days thereafterand (v) no inconsistent direction shall ha ve been given to the trustee during such 60-day period by the holders of a majority of the total principal amount of the notes of such series. Such limitations, however, do not apply to any suit instituted by a holderof a note for enforcement of paymentof the principal or interest on the notes on ora ftertherespective stated maturity expressed in such notes.
The indenture provides that, subject to the duty ofthetrustee during default to act with the required standard of care, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request or direction of any holders of the notes, unless such holders shall have offered to the trustee reasonable indemnity.
CODELCO is required to furnish to the trustee annually a statement as to the performance by CODELCO of certain ofits obligations underthe indenture andas to any default in such performance.
Paymentof Additional Amounts
All paymentsof principal and stated interest under the notes by CODELCO willbe made without deduction or withholding for or on account of any present or future taxes, assessments, duties or governmental charges of whatever nature imposed or levied by or on behalf of Chile or any political subdivision or territory or possession thereofortherein (the Taxing Jurisdiction) unless the withholding or deduction of such taxes, assessments, duties or governmental charges is required by law or regulation or by the official interpretation thereof. In that event, CODELCO will pa y to each Holder ofa note such additional amounts (Additional Amounts) asmay benecessary in order that each net payment on such note after such deduction or withholding will not be less than the amount provided for in such note to be then due and payable; provided, however, that the foregoing obligation to pay Additional Amounts will not apply to:
(0) any tax, assessment, duty or other governmental charge that would not have been so deducted or withheld but for (i) the existence of any present or former connection between the Holder or the beneficial owner of thenote (orbetweena fiduciary, settlor, beneficiary, member or sha reholder of, or possessorofa power over, such Holder or beneficial owner, if such Holder or beneficial owneris an estate, trust, partnership or corporation) and the Ta xing Jurisdiction imposing such tax, assessment, duty or other governmental charge (including, without limita tion, such Holder or beneficial owner (or such fiduciary, settler, beneficiary, member, shareholder or possessor) being or ha vingbeena citizen or residentthereof or beingorha ving been engaged in a trade or business or present therein or having, or having had, a permanent establishment therein) other than the mere receipt of payments in respect of a note or the holding or ownership of a note or beneficial interest therein; or (ii) the presentation of a note (where presentation is required) for payment ona datemore than 30 days afterthe date on which such payment became dueand payable orthe date on which paymentthereofis duly provided for, whichever occurs later;
113 (ii) any estate, inheritance, gift, sales, transfer, personal property, capital gains, excise or similar tax, assessment, duty or other governmental charge; (iii) any tax, assessment, duty or other governmental charge that is payable other than by withholding from payments of (orin respect of) principal of, orany intereston, thenotes; (iv) any tax, assessment, duty or other governmental charge that would nothave been imposed but for the failure to comply with certification, information or other reporting requirements concerning the nationality, residence oridentity ofthe Holder or beneficial owner ofthenote, if compliance is required by statute orby regulation ofthe Taxing Jurisdictionas a precondition to relief or exemption from allorpart of such tax, assessment, duty or other governmental charge, orto a reduction in the applicable tax rate, and propernoticehas been sentto the Holder or beneficial owner; or (v) any combination ofitems (1), (ii), (iii), and (iv) above.
Nor shall Additional Amounts be paid with respect to any payment of the principal of or any interest on any note to any Holder orbeneficial ownerthat isa fiduciary or partnership or otherthanthe sole beneficial owner of such note to the extent such payment would be required by the la ws of the Taxing Jurisdiction to be included in the income fortax purposes ofa beneficiary or settlor with respectto such fiduciary ora member ofsuch partnership or a beneficial owner who would not have been entitled to such Additional Amounts had it been a Holderof such note.
IFCODELCO pays Additional Amounts in respectof the Chilean withholding tax on payments of interest or premium, if any, made by CODELCO in respect of the notes to a Foreign Holder (as defined in Taxation) assessed ata rate of 4%, and a refund is provided with respect to such withholdingtax, CODELCO shall ha ve the right to receive and be entitledto such funds from the relevant Taxing Jurisdiction.
Redemption
CODELCO will not be permitted to redeem thenotes before their stated maturity, exceptas set forth below.
The notes will not be entitled to the benefit of any sinking fund -meanin g that CODELCO will not deposit money on a regular basis into any separate account to repay your notes. In addition, you will not be entitled to require CODELCO to repurchase your notes from you before the stated maturity.
Optional Redemption CODELCO may redeem on one or more occasions some orallof the notes before they mature.
Prior to November 2, 2032 (three months prior to their maturity date) (the Par Call Date), CODELCO may redeem the notes at its option, in whole or in part, at any time and from time to time, ata redemption price (expressed as a percentage of principal amount and rounded to three decimal places) equal to the greater of:
(1) (a) the sum ofthepresent values of theremainingscheduled payments of principal and interestthereon discounted to the redemption date (assuming the notes matured on the Par Call Date) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 25 basis points less (b) interest accruedto the date of redemption, and
(2) 100% of the principal a mount of the notes tobe redeemed, plus, in either case, accrued and unpaid interestthereon to theredemption date.
On or afterthe Par Call Date, CODELCO mayredeem thenotes, in whole orin part, at any timeand from time to time, ata redemption price equal to 100%ofthe principal amount ofthenotes beingredeemed plus accued and unpaid interestthereon to the redemption date.
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Treasury Rate means, with respect to any redemption date, the yield determined by CODELCO in accordance with the followingtwo paragraphs.
The Treasury Rate shall be determined by CODELCO after4:15 p.m., New York City time (ora ftersuch time as yields on U.S. government securities are posted daily by the Board of Governors of the Federal Reserve System), onthe third Business Da y preceding theredemption date based upon the yield or yields forthemostrecent da y thatappear a fter such time on such day in the most recent statistical release published by the Board of Govemors of the Federal Reserve System designated as Selected Interest Rates (Daily) – H.15 (orany successor designation orpublication) (H.15) under the caption U.S. government securities-Treasury constant maturities-Nominal (or any successor caption or heading). In determining the Treasury Rate, CODELCO shall select, as applicable: (1) the yield forthe Treasury constant maturity on H.1 5 exactly equalto the period from the redemption dateto the Par Call Date (the Remaining Life); or (2) if there is no such Treasury constant maturity on H.15 exactly equal to the Remaining Life, the two yields -one yield corresponding to the Treasury constant maturity on H.15 immediately shorter than and one yield corresponding to the Treasury constant maturity on H.15 immediately longer than the Remaining Life -and shall interpolateto the Par Call Date ona straight-line basis (usingthe actual number of days) usingsuch yields and rounding theresult to three decimal places; or (3) ifthereis no such Treasury constant maturity on H.15 shorterthan or longer than the Remainin g Life, the yield forthe single Treasury constant maturity on H.15 closest to the Remainin g Life. For purposes of this paragraph, the applica ble Treasury constant maturity or maturities on H.15 shall be deemed to have a maturity date equal to the relevant number of months or years, as applicable, of such Treasury constant maturity from the redemption date.
If on the third Business Day preceding the redemption date H.15 or any successor designation or publication is no longer published, CODELCO shall ca Iculate the Treasury Rate based ontherate pera nnum equalto thesemi- annual equivalent yield to maturity at 11:00 a.m., New York City time, on thesecond Business Day preceding such redemption date ofthe United States Treasury security maturing on, or with a maturity that is closest to, the Par Call Date, asapplicable. If there is no United States Treasury security maturing on the Par Call Date but there are two or more United States Treasury securities with a maturity date equally distant from the Par Call Date, one with a maturity date preceding the Par Call Date and one with a maturity date following the Par Call Date, CODELCO shall select the United States Treasury security with a maturity date precedingthe Par Call Date. If there are two or more United States Treasury securities maturing on the Par Call Date or two or more United States Treasury securities meeting the criteria of the preceding sentence, CODELCO shall select from among these two or more United States Treasury securities the United States Treasury security that is trading closest to par based upon the average of the bid andasked prices forsuch United States Treasury securities at 11:00 a.m., New York City time.
In determiningthe Treasury Rate in accordance with the terms ofthis paragraph, the semi-annual yield to ma turity of the applicable United States Treasury security shall be based upon the average of the bid and asked prices (expressed as a percentage of principal amount) at 11:00 a.m., New York City time, ofsuch United States Treasury security, and rounded to three decimal places.
CODELCOSs actions and determinations in determining the redemption price shall be conclusive and binding forallpurposes, a bsent manifest error. CODELCO will notify the trustee ofthe redemption price promptly after the calculation thereof and the trustee shall have no duty to determine, or verify the calculation of, the redemptionprice.
Notice of any redemption will be mailed or electronically delivered (or otherwise transmitted in accordance with the depositarys procedures) at least 10 days but not more than 60 days before the redemption date to each holderof notes tobe redeemed. Forso longas thenotes are listed on the Luxembourg Stock Exchange and the rules of the Euro MTF market so require, CODELCO will cause notices of redemption to be announced through the
Luxembourg Stock Exchange.
In the case of a partial redemption, selection of definitive notes for redemption will be made by lot. No notes of a principal amount of US$1,000 or less will be redeemed in part. If any note in definitive form is to be redeemed in part only, the notice ofredemption thatrelates to such note will state the portion ofthe principal amount of the note to be redeemed. A new definitive note in a principal amount equal to the unredeemed portion of such note will be issued in the name of the holder of such note upon surrender for cancellation of the original definitive note. Forso longas the notes are held by DTC (oranother depositary), theredemption ofthe notes shall be done in
115 accordance with the policies and procedures of the depositary, which may be made on a pro rata pass-through distribution of principal basis.
Unless CODELCO defaults in payment ofthe redemption price, on andafterthe redemption date interest will cease to accrueon thenotes orportionsthereof called forredemption.
Tax Redemption
The notes may be redeemed at the election of CODELCO, in whole, butnot in part, by the giving of notice as provided in -Notices below (which notice shall be irrevocable), at a price equalto the outstanding principal amount thereof, together with any Additional Amounts and accrued and unpaid interest to the redemption date, if, as a result of any change in, or amendment to, the laws (or any regula tions or rulings promulgated thereunder, including a holding by a court of competent jurisdiction) of the Taxing Jurisdiction, or any change in the official application, administration or interpretation of such laws, regulations or rulings in such Taxing Jurisdiction, CODELCO has or will become obligated to pay Additional Amounts on the applicable notes in excess of the Additional Amounts that would be payable were payments of interest on the notes subject to the 4% of Chilean Interest Withholding Tax, as defined below (Excess Additional Amounts), and if such change or amendment is announced or becomes effective on or after the date of the agreement to purchase the notes and such obligation cannotbe avoided by CODELCO taking measures it considers reasonable and thatare available toit (for this purpose, reasonable measures shall not include any change in CODELCOSs orany successor’s jurisdiction of incorporation or organization or location of its principal executive orregistered office); provided, however, thatno such notice of redemption shall be given earlierthan 60 days prior to the earliest date on which CODELCO would be obligated to pay such Excess Additional Amounts, were a payment in respectof the notes then due. Priorto the givingof notice of redemption of such notes, CODELCO will deliverto the trustee an officers certificate and a written opinion of recognized Chilean counsel independent of CODELCO to the effect that all governmental appro vals necessary for CODELCO to effect such redemption, if any, have been or at the time of redemption will be obtained and in full force and effect and that CODELCO is entitled to effectsuch a redemption, and setting forth in reasonable detail the circumstances givingrise to such right of redemption. See Taxation-Chilean Taxation.
Notices
For so long as the notes are outstanding in global form, notices to be given to holders will be given to the depositary, in accordance with its applicable procedures as in effect from time to time. If notes are issued in individual definitive form, notice to holders of the notes will be given by mail to the addresses of such holders as they appear in the security register. In addition, so longas the notes are listed on the Luxembourg Stock Exchange and the rules of such exchange so require, notices will also be published in a leading newspaper ha ving general circulation in Luxembourg (which is expectedto be Luxemburger Wort) or on the website ofthe Luxembourg Stock Exchange (www.bourse.lu). Any such notice will be deemed to have been delivered on the date of first publication.
Replacement of Notes
In case of mutilated, destroyed, lost or stolen notes, application for replacement thereof may be made to the trustee or CODELCO. Any such note shall be replaced by the trustee in compliance with such procedures, and on such terms as to evidence and indemnification, as the trustee or CODELCO may require and subject to any applicable law orregulation. All such costs as may be incurred in connection with the replacement ofany notes shall be borne by the applicant. Mutilated notes mustbe surrendered beforenew ones will be issued.
Modification ofthe Indenture
CODELCO and the trustee may, without the consent of the holders of notes, amend, waive or supplement the indenture or the notes for certain specified purposes, including among other things: (i) to evidence CODELCO’s succession by another corporation, and the assumption by such party of CODELCO*s obligations; (ii) to add to CODELCOS’s covenants or surrender any of its rights or powers forthe benefit of all or any series of notes; (iii) to cure any ambiguity, defect or inconsistency in the indenture; (iv) to provide for the issuance of any new series of securities, andor add to the rights of any holders of any series of notes; (v) to provide for the appointment ofa successor trustee; (vi) to add any additional Events of Default forthe benefit of any orall series; (vii) to provide for
116 the issuance of securities in bearer form; and (viii)to makeany other change to the indenture as shall not adversely affect the interests ofany holder of thenotes.
In addition, with certain exceptions, the indenture and the notes may be modified by CODELCO and the trustee with the consent ofthe holders of a majority in a ggregate principal amount ofthenotes ofthe series a fíected thereby then outstanding, but no such modification may be made without the consent of the holder of each outstandingnote affected by the modification which would:
(1) changethe maturity ofany principal of, orany premium on, or any installmentofinterest on, any note, orreduce the principal a mount thereof orthe rate of interest orany premium (or Additional Amounts, ifany) payable thereon, orchange the method of computing the amount of principal thereof or interest or premium (or Additional Amounts, ifany) payable thereon on any date, orchange any place of paymentwhere, orthe coin or currency in which, the principal or interest (including Additional Amounts) on any note are payable, or impair the right of holders to institute suit for the enforcement of any such paymenton orafterthe date when due; (ii) reduce the percentage in a geregate principal a mountof outstanding notes of such series, where the consent of holders is required for any such modification or for any waiver of compliance with certain provisions ofthe indenture or certain defaults thereunder and their consequences provided for in the indenture; or (iii) modify provisions rela tingto waiverof certain defaults, waiver of certain covenants and the provisions summarized in this paragraph, including provisions governing the am endment of the indenture, exceptto increaseany such percentage orto provide that certain other provisionsoftheindenture cannot be modified or waived without the consent of the holder of each outstanding note affected by the modification.
The indenture provides that the notes owned by CODELCO or any ofits a ffilia tes shall be deemed not to be outstanding for, among other purposes, consentto any such modification.
Defeasance and Covenant Defeasance
CODELCO, at its option, at any time upon the satisfaction of certain conditions described below, may elect to be discharged from its obliga tions with respect to the notes. In general, upon a defeasance, CODELCO shall be deemedto have paid and discharged the entire indebtedness represented by the notes and to have satisfied all of its obligations under the notes, except for: (i) the rights of holders of notes to receive, solely from the trust fund established for such purposes, payments in respect oftheprincipal of, and interest, and Additional Amounts, ifany, on the notes when such payments are due; (ii) certain provisions rela tingto ownership, registration and transfer of the notes; (iii) the covenant relating to the maintenance of an office or agency in New York City; and (iv) certain provisions rela tingto the rights, powers, trusts, duties and immunities ofthe trustee.
In addition, CODELCO, at its option, at any time, upon the satisfaction of certain conditions described below, ma y discharge its obliga tionto comply with the covenants specified above under -Consolidation, Merger, Conveyance, Sale or Lease, -Limitation on Liens and -Limitation on Sale-and-Lease-Back Transactions. In order to cause a defeasance or covenant defeasance with respect to the notes, CODELCO will be required to (1) deposit funds or obliga tions issued by the United States in an amount sufficient to provide forthe timely payment of principal, interest and all other amounts due under the notes with the trustee, and (ii) satisfy certain other conditions, including delivery to the trustee ofan opinion of independent tax counsel of recognized standingto the effect that beneficial owners of notes will not recognize income, gain orloss for U.S. federalincome tax purposes asa result of such deposit and defeasance and will be subject to U.S. federal incometax on the same amount and in the same manner and atthesame times as would have beenthe case if such deposit and defeasance had notoccuned.
Such opinion ofcounsel in the case of defeasance must referto and be based upona rulingof the Internal Revenue Service ora change in applicable U.S. federal income tax la w occurring a fterthe date ofthe indenture.
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Governing La w; Submission to Jurisdiction; Sovereign Immunity
The indenture provides that it and the notes will be governed by, and will be construed and interpreted in accordance with, the law of the State of New York. The indenture provides that CODELCO will maintain atall times duringthelife of thenotes anoffice oragentin the Borough of Manhattan, The City of New York, upon wiwom process may be served in any action arising out of or based on the notes which may be instituted in the Supreme Court of the State of New York orthe United States District Courtforthe Southern District of New York, in either case in the Borough of Manhattan, The City of New York, by any holderof a note, and CODELCO will expressly accept thejurisdiction ofany such court.
To the extentthat CODELCO may be entitled, in any jurisdiction in which judicial proceedings may atany time be commenced with respect to the notes, to claim for itself or its revenues or assets any immunity from sutt, jurisdiction, attachment in aid or execution of a judgment or prior to a judgment, execution ofa judgment or any otherlegalprocess with respectto its obligations under the notes, and to the extent thatin any suchjurisdiction there may beattributedto CODELCO such animmunity (whether ornotclaimed), CODELCO will irrevoca bly agree not to claim and will irrevocably waive such immunity to the maximum extent permitted by law.
Article 226 of the Mining Code of Chile prohibits the attachment and judicial sale of a debtors mining concessions and instala tions and other goods pemanently dedicated to exploration or extraction of minerals relating to those mining concessions, except with respect to mortgages. However, a debtor may consent to such attachment and sale, provided that the consent is given in the same judicial proceeding in which the attachment and sale is sought. The general waiver of immunity by CODELCO in the notes will not be effective with respect to immunity under Article 226. In addition, pursuant to the Constitution, mining concessions correspondingto mining deposíts exploited by CODELCO uponits creation in 1976 may notbe subject to attachmentorto any actof disposition by CODELCO.
Further Issues of Notes
Without the consent of the holders, CODELCO may create and issue additional notes with terms and conditions that are the same (orthe same except as to scheduled interest p ayments priorto the time of issue of the additional notes) as the terms and conditions of the notes. CODELCO may consolidate the additional notes to form a single series with the notes; provided, however, that unless such additional notes are issued under a separate CUSIP number, such additional notes must be part of the same issue as the outstanding series of notes for U.S. federal income tax purposes, issued pursuant to a qualified reopening of the outstanding series of notes for U.S. federal income tax purposes, orissued with less than a de minimis amount of original issue discount.
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TAXATION General
The following is a summary of certain Chilean tax and U.S. federal incometax considerations (and certain EU-related tax consequences) rela tingto the purchase, ownership and disposition of notes. The summary doesnot purport tobe a comprehensive description ofall the tax considerations thatmay berelevantto a decisionto purchase the notes, and, except to the extent certain EU-related tax consequences are described below, it does not describe any tax consequences arising under the laws of any national, state, orlocal ta xingjurisdiction other thanthe United States and Chile.
This summary is based on the tax laws of Chile and the United States as in effect on the date of this offering memorandum, as well as regulations, rulings and decisions of Chile and the United States available on or before such dateand now in effect. Allof the foregoingis subjectto change, which may apply retroactively and could affect the continued validity of this summary.
Prospective purchasers of the notes should consult theirown tax advisors as to the Chilean, United States orothertax consequencesofthepurchase, ownership and disposition ofthenotes, takinginto accountthe application of the tax considerations discussed below to their particular situation, as well as the application ofstate, local, foreign or othertax laws.
On February 4,2010, Chile and the United States entered into a tax treaty (the Treaty), which has been ratified bythe Chilean Congress. The Treaty was approved with certain reservations on March 29, 2022 by the US.
Senate Foreign Relations Committee. Then, it must be considered by the full U.S. Senate, where a two -thirds majority will be required forits finalapproval. If the Treaty is approved by the U.S. Senate, it ma y apply to income generated in Chile or the United States by a resident of either country . Investors should consult their own a dvisors regarding the application of the Treaty to their particular circumstances and the date on which a particular Treaty provision will enterinto effect.
Chilean Taxation
The following is a general summary of the material consequences under Chilean tax law, as currently in effect, of an investmentin the notes made by a Foreign Holder. Forpurposes of this summary, the term Foreign Holder means (i) an individual not residentor domiciled in Chile or (ii) a legal entity thatis not incorporated under the laws of Chile, unless the notes are acquired by or assigned to a branch, agent, representative or a permanent establishment of such entity in Chile. For purposes of Chilean taxation, (a) an individual is a resident of Chile if such individual has remained in Chile, uninterruptedly ornot, fora period or periods that in total exceed 183 days within a twelve-month period, and (b) an individual is domiciled in Chile if such individual resides in Chile with the actual or presumptive intention of remaining in Chile notwithstanding the time resided in Chile (the intention will be determined accordingto the circumstances).
Under Chiles Income Tax Law, payments ofinterestor premium, if any, in respect of thenotes to a Foreign Holder will generally be subject to a Chilean withholding tax assessed at a rate of 35%. However, interest and premium (analogous to interest) from bonds or debentures issued in foreign or local currency by companies incorporated in Chile (i.e. CODELCO) are subject to a reduced tax rate of 4% (the Chilean Interest Withholding Tax).
The Income Tax Law provides that a Foreign Holder is subject to income tax on Chilean source income.
Chilean source income is defined by the Income Tax Law as income arising from goods located in Chile or activities performed in Chile, regardless ofthe domicile orresidence ofthe taxpayer. For these purposes, the Income Tax Law esta blishes that the source of interest shall be deemed to be located in the debtor?s domicile (¡.e. CODELCO, as issuer).
As described above, CODELCO has a greed, subject to specific exceptions and limitations, to pay to the holders of notes Additional Amounts in respect ofthe Chilean Interest Withholding Tax in orderthat any interest or premium the Foreign Holderreceives, netof the Chilean Interest Withholding Tax, equals the amount which woukd
119 have been received by such Foreign Holder in the absence of such withholding. See Description of Notes-Payment of Additional Amounts.
A Foreign Holder will not be subject to any Chilean taxes in respect of payments of principal made by CODELCO with respect to thenotes.
Article 11 of the Chilean Income Tax Law also states that bonds and other private or public securities issued in Chile by taxpayers domiciled, resident or established in Chile, such as CODELCO, will be deemedto be located in Chile. Consequently, as the notes are issued outside of Chile, capital gains arising from the disposition of the notes wouldnotbe deemedasChilean source income (accordingto ChileanIRS ruling 604 0£2015). Therefore, any capital gains realized by a Foreign Holder onthesale or other disposition ofthenotes issued outside of Chile should not be subject toany Chilean taxes.
A Foreign Holder will not be lia ble for estate, gift, inheritance or similartaxes with respect to its holdings unless the notes held by a Foreign Holder are either located in Chile at the timeof such Foreign Holders death, or, if the notes are not located in Chile at the time ofa Foreign Holders death, if such notes were purchased or acquired with funds obtained from Chilean sources.
As a general rule, the issuance of the notes is subject to stamp tax at a rate o£0.066% per month or fraction thereof elapsed between the issuance and the maturity of thenotes, calculated on the principal amountof thenotes, with a maximum 0.8% stamp tax on the principal amount of the notes, which will be paid by CODELCO. If the sta mp tax is not paid when due, Chiles stamp tax la wimposes penalties (fines, interests, and inflation adjustments), which will also be payable by CODELCO. In addition, until such tax (and any penalty) is paid, Chilean courts would not enforce any action brought with respectto the notes. We ha veagreed to pay promptly such tax when due.
U.S. Federal Income Taxation
This summary of U.S. federal income tax considerations deals with U.S. Holders (as defined below) that will hold CODELCO notes as capital assets and whose functional currency is the U.S. dollar. It does notpurport to be a comprehensive description ofall of the tax considerations thatmay be relevantto a particular investors decision to purchase notes and generally does nota ddress the tax treatment of U.S. Holders that may besubject to special tax rules, such as certain banks, tax-exempt entities, partnerships (or entities classified as partnerships for U.S. federal income tax purposes) or partners therein, insurance companies, regulated investment companies, dealers in securities or currencies, traders in securities electing to mark to market, U.S. expatriates, U.S. Holders holding the notes in connection with a trade or business conducted outsidethe United States, nonresident alien individuals presentin the United States for 183 days or more during a taxable year, or persons that will hold notes as part ofan integrated investment (including a straddle) consisting of the notes and one or more other positions, nor does it address the tax treatment of U.S. Holders that do not acquire notes as part of the initial distribution at the notes issue price, which will equal the first price to the public (not includin g bond houses, brokers or similar persons or organizations acting in the capacity ofunderwriters, placement agents or wholesalers) at which a substantial amount of thenotes is sold formoney.
Asused in this section -U.S. Federal Income Taxation, the term U.S. Holdermeans a beneficial owner of a note that is a citizen or resident of the United States or a U.S. domestic corporation or that otherwise will be subject to U.S. federal incometaxation ona net income basis in respect ofthe notes.
This summary is based on the U.S. Internal Revenue Code of 1986 (the Code), as amended to the date hereof, administrative pronouncements, judicial decisions, and final, temporary and proposed Treasury Regulations, changes to any of which subsequent to the date of this offering memorandum may affect the tax consequences described herein. Moreover, as described above, final approval of the Treaty by the U.S. Senate may also affect the tax consequences described herein. Investors should consult their own tax advisors in determining the tax consequences to them of purchasing, owning, and disposing of the notes, including the application in their particular circumstances of the U.S. federal income tax considerations discussed below, as well as the application of state, local, non-U.S. orothertax laws, the alternative minimum tax orthe Medicare tax on net investment income or the special timingrules prescribed under Section45 1(b) ofthe Codeand possible changes in tax laws.
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Payments of Interestand Additional Amounts. The gross amountof stated interestand Additional Amounts (i.e., without reduction for Chilean taxes withheld) will be taxable to a U.S. Holder as ordinary interest income at the time it accrues or is actually or constructively received, in accordance with the holders method of accounting for U.S. federal income tax purposes. Itis expected, and this discussion assumes, that the notes will be issued without original issue discount (OID) for U.S. federal income tax purposes. In general, however, if the notes are issued with OID atorabovea de minimis threshold, a U.S. Holder willbe required to include OID in gross income, as ordinary income, under a constant-yield method before the receipt of cash attributable to such income, regardless of the U.S. Holders regular method of accounting for U.S. federal incometax purposes.
Subjectto generally applicable limitations and conditions, Chilean interest withholding tax paid at the appropriate rate applicable to the U.S. Holder may be eligible for credit a gainst such U.S. Holder’s U.S. federal income tax liability. These generally applicable limitations and conditions include new requirements recently adopted by the U.S. Internal Revenue Service (IRS) and any Chilean tax will need to satisfy these requirements in orderto be eligible to be a creditable tax fora U.S. Holder. The application of theserequirements to the Chilean tax on interest is uncertain and we ha ve not determined whether these requirements ha ve been met. Ifthe Chilean tax isnot a creditable tax or the U.S. Holder does not electto claim a foreign tax credit for any foreign income taxes, the U.S. Holder may be able to deduct the Chilean tax in computing the U.S. Holders taxable income for U.S.
federal income tax purposes, subject to applicable limitations and requirements. Interest and Additional Amounts will constitute income from sources without the United States and, for U.S. Holders that validly claim foreign tax credits generally will constitute passive category income for foreign tax credit purposes.
The availability and calculation of foreign tax credits and deductions for foreign taxes may depend on a
U.S. Holder’s particular circumstances and involve the application of complex rules to those circumstances. U.S.
Holders should consult theirown tax advisors regarding the application of these rules to their particular situations.
Taxation of Dispositions. A U.S. Holder will generally recognize taxable gain or loss upon the sale, exchange, redemption or other taxable disposition of the notes in an amount equal to the difference between the amountrealized upon such sale, exchange, redemption or other disposition (less any accrued interestand, in the case of a redemption, any Additional Amounts with respect to accrued interest, which will be taxable in the manner described above under -Taxation of Interestand Additional Amounts) and such U.S. Holders adjusted tax basis in those notes. AU.S. Holder’s adjusted tax basis in a note will genera lly equal the costof thenote to such Holder.
Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the notes are held for more than one year. Certain non-corporate U.S. Holders (including individuals) may be eligible fora preferential rate in respect of long-term capital gain. The deduction of capital losses is subject to limita tions.
Specified Foreign Financial Asset Reporting. Certain U.S. Holders that own specified foreign financial assets with an aggregate value in excess of U.S.$50,000 on the last day of the taxable year orU.S.$75,000atany time during the taxable year are generally required to file an information statement along with their tax retums, currently on IRS Form 8938, with respect to such assets. Specified foreign financial assets include any financial accounts held ata non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include the notes) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirementto certain entities thatare treated as formed ora vailed of to hold director indirect interests in specified foreign financial assets based on certain objective criteria. U.S. Holders who fail to report the required information could be subject to substantial penalties. In addition, the statute of limita tions for assessment of tax would be suspended, in whole or part. Prospectiveinvestors should consult their own tax advisors concerningthe application of these rules to their investment in the notes in their particular circumstances.
Information Reporting and Backup Withholding. Payments ofinterestand Additional Amounts on the notes and sales or redemption proceeds that are made within the United States or through certain U.S. -related financial intermediaries generally are subject to information reporting and to backup withholding unless the holder is an exempt recipient that, if required, establishes its exemption or (ii) in the case of backup withholding, the holder provides a correct taxpayer identification number and certifies thatit is not subjectto backup withholding.
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Any amounts withheld under the backup withholding rules from a payment to a holder will genera lly be refunded (or credited against such holder’s U.S. federal income tax liability, if any), provided the required information is properly furnished to the IRS on a timely basis.
The Proposed Financial Transaction Tax
On February 14, 2013, the European Commission published a proposal (the Commission’s Proposal) for a Directive fora common financial transaction tax (FTT) in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the Participating Member States) and which, if enacted, could apply under certain circumstances to transactions involving the Notes. The issuance and subscription shouk, however, be exempt. Estonia has since officially announced its withdrawal from the negotiations.
The mechanism by which the tax would be applied and collected is not yet known, but if the proposed directive orany similar tax is adopted, transactions in the Notes would be subject to higher costs, and the liquidity of the market forthe Notes may be diminished.
Following the lack of consensus in the negotiations on the Commissions Proposal, the Participating Member States (excluding Estonia) and the scopeof suchtax are uncertain. Based onrecent public statements, the Participating Member States (excluding Estonia) havea greed to continue negotiationson the basis ofa proposal that would reduce the scope of the FTT and would only concern listed shares of European companies with a market capitalization exceeding EUR 1 billion on December 1 of the year preceding the taxation year. According to this revised proposal, the applicable tax rate would not beless than0.2%. Such proposal remains subjectto change until a finalapprovaland it may therefore be altered priorto any implementation, the timingof which remains unckar.
Additional EU Member States may decide to participate andor certain of the Participating Member States may withdraw.
Prospective holders of Notes are advised to seek their own professional advice in relation to the consequences of the FTT that could be associated with subscribing for, purchasing, holding and disposing of the Notes.
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PLANOF DISTRIBUTION
Subjectto theterms and conditions of the purchasea greement among CODELCO, BNP Paribas Securities Corp, BofA Securities, Inc., Santander Investment Securities Inc. and Scotia Capital (USA) Inc., the initial purchasers haveseverally, and not jointly, agreedto purchase from the Company the followingrespective principal amounts of notes listed opposite their name below at the initial offering prices set forth on the cover page of this offering memorandum, less commissions:
Initial Purchasers Principal Amount of Notes BNP Paribas Securities Corp. U.S.$225,000,000 BofA Securities, Inc. U.S.$225,000,000 Santander Investment Securities Inc. U.S.$225,000,000 Scotia Capital (USA) Inc. U.S.$225,000,000 Wo cciccccacniccoconnooncoorooooonononnnnnnnroiocccnos U.S.$900,000,000
The purchase agreement provides thatthe obligations ofthe several initial purchasers to purchase the notes offered hereby are subject to certain conditionsprecedent and that the initial purchasers will purchase all of the notes offered by this offering memorandum if any ofthesenotes are purchased. The initial purchasers may use any of their affiliates to offerand sell any ofthe notes. The initial purchasers are offeringthe notes, subjectto prior sale, when, asandif issued to and accepted by them, subjectto approval of legal matters by their counsel, including the validity of the notes, and other conditions contained in the purchase agreement, such as thereceipt by the initial purchasers of officers certificates and legal opinions. The initial purchasers reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole orin part.
Afterthe initial offering, the initial purchasers may change the offering price and other sellingterms.
CODELCO has a greed to indemnify the initial purchasers a gainst certain lia bilities, includin g lia bilities underthe Securities Act, andto contribute to payments the initial purchasers may be required to make in respectof any of these lia bilities.
The notes ha ve not been registered under the Securities Act. Each initial purchaser has a greed that it will offerorsell the notes only (i) in the United States to qualified institutional buyers in reliance on Rule 144A under the Securities Act or (ii) in offshore transactions in reliance on Regulation S under the Securities Act. The notes beingoffered and sold pursuantto Regulation S may not be offered, sold or delivered in the United States orto, or forthe account or benefitof, any U.S. person, unless the notes areregistered underthe Securities Act oran exemption from, the registration requirements thereof is available. Resales of the notes are restricted as described under Transfer Restrictions.
Until forty (40) days a fterthe later of the commencementof the offeringand the closing date, any offer or sale of notes within the United States by a broker-dealer (whether ornot participating in this offering) may violate the registration requirements of the Securities Act, unless such offer or sale is made pursuant to Rule 144A under the Securities Act or another available exemption from the registration requirements thereof. Terms usedabove have the meanings given to them by Regulation S and Rule 144A under the Securities Act.
CODELCO has agreed, thatfora period 0£ 30 days from the date of thepurchase a greement, CODELCO will not, without prior consent ofthe initial purchasers, offer, sell or contract to sell, or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by CODELCO or any affiliate of CODELCO or any person in privity with CODELCO or any of its affiliates), directly or indirectly, or announce any public or broadly marketed offering of, any U.S. dollar-denominated debt securities issued or guaranteed by CODELCO in the international capital markets (otherthan thenotes).
The notes are a new issue of securities without an established trading market. We intend to apply to list the notes on the Official List of the Luxembourg Stock Exchange; however, thenotes have not yet been listed. The notes
123 are expected to trade on the Euro MTF market ofthe Luxembourg Stock Exchange. See General Information- Listing. The initial purchasers may make a market in the notes after completion of the offering, but will not be obligated to do so and may discontinue any market-making a ctivities atany time without notice. No assurance can be given asto the liquidity of the trading market forthe notes orthat an active market forthe notes will develop. If an active public trading market for the notes does not develop, the market price and liquidity of the notes may be adversely a ffected. If the notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, our operating performance and financial condition, general economic conditions and other factors.
In connection with the offering of thenotes, the initial purchasers may engage in overallotment, stabilizing transactions and syndicatecovering transactions. Overallotment involves sales in excess of the offering size, which creates a short position for the initial purchasers. Stabilizing transactions involve bids to purchase the notes in the open market forthe purpose of pegging, fixing or maintaining the price ofthe notes. Syndicate covering transactions involve purchases of the notes in the open market a fterthe distribution has been completed in orderto cover short positions. Stabilizing transactions and syndicate covering transactions may causethe price ofthe notes to be higher than it would otherwise be in the absence of those transactions. If the initial purchasers engage in sta bilizing or syndicate covering transactions, they may discontinuethem atany time withoutnotice.
The initial purchasers and their a ffiliates have performed and may in the future perform certain commercial banking, investment banking or a dvisory services for us from time to time for which they have received customary fees and expenses. The initial purchasers may, from time to time, continueto engage in transactions with and perfom services forus in the ordinary course of their business.
In addition, in the ordinary course of their business activities, the initial purchasers and their a ffiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities andor instruments of ours or our affiliates. Certain ofthe initial purchasers ortheira ffiliates that havea lendingrelationship with us routinely hedee, and certain other of those initial purchasers or their a ffiliates that have a lending relationship with us may hedge, their credit exposure to us consistent with their customary risk management policies. Typically, such initial purchasers and theira ffiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such short positions could adversely a ffect future trading prices of the notes offered hereby.
The initial purchasers and their a ffiliates may also make investment recommendations andor publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to customer that they acquire, longandor short positions in such securities and instruments.
Delivery of the notes is expected on or about February 2, 2023 which will be the third business day followingthe date of pricing of the notes (this settlement cycle beingreferredto as T+3). Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes prior to the delivery of the notes may be required, by virtue of the fact that the notes initia lly will settle in T+ 3, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers of the notes who wish to trade notes prior to their date of delivery hereunder should consult their own advisor.
Notice to Prospective Investors in the European Economic Area
The notes arenot intended to be offered, sold or otherwise made available to and will not be offered, sold or otherwise made available to any retail investor in the EEA. Forthese purposes, a retail investor means a person who is one (ormore) of: (i) a retail client as defined in point(1 1) of Article 4(1) of MiFIDII; (ii) a customer within the meaningof the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID Il; or (i1i) nota qualified investor as defined in the Prospectus Regulation.
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Consequently, no key information documentrequired by the PRIIPs Regulation for offering or selling the notes or otherwise making them available to retail investors in the EEA, has been prepared and therefore offering or selling the notes or otherwise making them availa ble to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
Notice to Prospective Investors in the United Kingdom
The notes arenot intended to be offered, sold or otherwise made available to and will not be offered, sold or otherwise madea vailable to any retail investorin the UK. Forthese purposes, a retail investor means a person who is one (ormore) of: (i)_ a retail clientas defined in point(8) of Article 2 of Regulation (EU) No 2017565 as it forms part of domestic la wby virtueof the EUWA; (ii) a customer within the meaning of theprovisions oftheFSMA and any rules or regula tions made underthe FSMA to implement Directive (EU) 201697, where that customer would not qualify asa professional client, as defined in point(8) of Article 2(1) of Regulation (EU) No 6002014 asit forms partof domestic la w by virtueof the EUWA; or (i1i) nota qualified investor as defined in the Prospectus Regulation.
Consequently, no key information documentrequired by the UK PRITPs Regulation for offering or selling the notes or otherwise making them availa ble to retail investors in the UK has been prepared and therefore offering or selling the notes or otherwise making them availa ble to any retail investor in the UK ma y be unlawful under the UK PRITPs Regulation.
Notice to Prospective Investors in Canada
The notes may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale ofthe notesmustbe made in accordance with an exemption from, orin a transaction notsubjectto, theprospectus requirements of applicable securities la ws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this offering memorandum (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation ofthe purchasers province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to Section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the initial purchasers arenotrequired to comply with the disclosurerequirements of NI 33 -105 regarding underwriter conflicts of interest in connection with this offering.
Notice to Prospective Investorsin Brazil
The notes havenotbeen and will not be issued nor publicly placed, distributed, offered or negotiated in the Brazilian capital markets. The issuance of the notes has notbeen nor will be registered with the CVM. Any public offering or distribution, as defined under Brazilian la ws and regulations, of the notes in Brazilis not legal without prior registra tion under Law No. 6,38576 and CVM Instruction No. 400. Documents relatingto the offering of the notes, as well as information contained therein, may not be supplied to the public in Brazil (as the offering of the notes is not a public offering of securities in Brazil), nor be used in connection with any offer for subscription or sale of the notes to the public in Brazil.
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Notice to Prospective Investorsin Hong Kong
The notes may not be offered or sold in Hong Kong by means of any document other than (a) to professional investors as defined in the Securities and Futures Ordinance (Cap.571) of HongKong(the SFO) and any rules made under the SFO Ordinance; or (b) in other circumstances which do not result in the document beinga prospectusas defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that ordinance; and no advertisement, invitation or document rela tingto the notesmay be issued or may be in the possession of any person forthe purposeof issue (in each case whetherin Hong Kongorelsewhere), which is directed at, orthe contents of which are likely to be accessed orread by, thepublic in Hong Kong (exceptif permitted to do so under the securities laws of Hong Kong) other than with respect to the notes which are orare intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO and any rules made under that ordinance.
Notice to Prospective Investorsin Italy
The offer of the notes has not been registered with the Commissione Nazionale per le Societá e la Borsa (Italian Securities and Exchange Commission, or the CONSOB) pursuant to Italian securities legislation and, accordingly, thenotes may notbe offered, sold or distributed to thepublic in the Republic of Italy (Italy) nor may copies of this offering memorandum orof any other documentrela tingto the notes be distributed in Italy, except: (i) to investitori qualificati (qualified investors), as defined in Article 2, paragraph (e) of the Prospectus Regulation as implemented by Article 34 -ter of CONSOB Regulation No. 11971 of May 14, 1999, as amended from time to time, (the Issuers Regulation); or (ii) in any other circumstances where an express exemption from compliance with the restrictions on offers to the public applies, as provided under Article 100 of the Italian Legislative Decree No. 58 of February 24, 1998, as amended from time to time, (the Financial Services Act) and Article
34-terof the Issuers Regulation.
Moreover, and subject to the foregoing, any offer, sale or delivery of the notes or distribution of copies of this offering memorandum or any other document rela tingto thenotes in Italy under (1) or (ii) abo vemust be: (i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in Italy in accordance with the Financial Services Act, CONSOB Regulation No. 16190 of 29 October 2007, as amended from time to time, and Legislative Decree No. 385 of September 1, 1993, as amended from time to time (the Banking Act); (ii) in compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy, as amended from time to time, pursuant to which the Bank of Italy may request information on the issue orthe offer of securities in Italy; and (iii) in compliance with any other applicable laws and regulations or requirement imposed by the Bank of Italy, CONSOB orother Italian authority.
Any investor purchasing the notes in this offering is solely responsible for ensuring that any offer or resalke of the notes it purchased in the offering occurs in compliance with applicable Italian la ws and regulations.
Notice to Prospective Investorsin Japan
The notes have not been and will not be registered underthe Financial Instruments and Exchange Act, and the notes ha ve not been offered orsold and will not be offered or sold, directly orindirectly, in Japan orto, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, includingany corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan orto, or for the benefit of, a resident of Japan, except a s pursuant to an exemption from the registra tion requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable la ws, regula tions and ministerial guidelines of Japan.
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Notice to Prospective Investorsin Singapore
This offering memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this offering memorandum or any other document or material in connection withthe offer orsale, orinvitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, orbe made the subject ofan invitation for subscription or purchase, of such notes, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), (11) to a relevant person pursuant to Section 275(1), orany person pursuant to Section275(1A), andin accordance withthe conditions specifiedin Section 275, ofthe SFA, or (iii) otherwise pursuant to, and in accordance withthe conditions of, any other applicable provision ofthe SFA.
Where the notes are subscribed or purchased under Section 275 ofthe SFA by a relevantperson which is: (i) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by oneor more individuals, each of whom is an accredited investor; or (ii) a trust (where the trustee is not an accredited investor) whose sole purposeis to hold investments and each beneficiary ofthetrust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries rights and interest (howsoever described) in that trustshall not be transferred within six months a fterthat corporation orthat trust has acquired the notes pursuantto an offermade under Section 275 ofthe SFA, except: (i) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2)ofthe SFA), orto any personarising from an offer referred to in Section275(1A), or Section 276(4)(1(B) of the SFA; (ii) where no consideration is or will be given forthe transfer; (iii) where the transferis by operation of law; (iv) as specified in Section276(7) of the SFA; or (v) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
Notification under Section 30X(B)1)C) of the SFA. The Company has determined that the Securities are (A) prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and (B) Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N1 6: Noticeon Recommendations on Investment Products).
Notice to Prospective Investors in Switzerland
This offering memorandum is not intended to constitute an offer or solicitationto purchase or invest in the notes described herein. The notes may not be publicly offered, sold or advertised, directly orindirectly, in, into or from Switzerland and will not be listed on the SIX Swiss Exchange oron any otherexchange orregulated trading facility in Switzerland. Neitherthis offering memorandum nor any other offering or marketing material relating to the notes constitutes a prospectus as such term is understood pursuant to Article 652a or Article 1156 of the Swiss Code of Obliga tions, and neither this offering memorandum nor any other offering or marketing material rela ting to the notes may bepublicly distributed or otherwise made publicly a vaila ble in Switzerland.
Notice to Prospective Investorsin Chile
The notes may not be offered or sold in Chile, directly or indirectly, by means of a Public Offer (as defined under the Chilean Securities Market Law and regulations from the CMF). Chilean institutional investors (such as banks, pension funds and insurance companies) are required to comply with specific restrictions rela ting to the purchase of the notes. Pursuant to Chilean law, a public offering of securities is an offering that is a ddressed to
127 the general public or to certain specific categories andor groups thereof. Considering that the definition of public offeringis quite broad, even an offering a ddressed to a small group of investors may be considered to be addressed to a certain specific category or group of the public and therefore be considered public under applicable law. On June 27, 2012, the CMF issued Norma de Carácter General No. 336 (General Rule No. 336, hereinafter NCG
336), which is intended to govern the private offering of securities in Chile. NCG 336 provides that the offering of securities that meet the conditions described therein shall not be considered public offerings in Chile and shall be exempted from complying with the general rules applicable to public offerings.
The following information is provided to prospective investors pursuantto NCG 336:
1. Date of commencement ofthe offer: January 30,2023. Theofferof the notes is subjectto CMF rule (norma de carácter general) No. 336, dated June 27, 2012, as amended, issued by the CMF.
2. Thesubject matter of this offer are securities not registered with the securities registry (registro de valores) or the foreign securities registry (registro de valores extranjeros) kept by the CMF. Asa consequence, the notes are not subject tothe oversightof the CMF.
3. Sincethe notesare not registered in Chile, the issueris not obliged to provide public information a bout the notes in Chile.
4. Thenotes shall not besubjectto public offering in Chile unless registered with therelevant securities registry kept by the CMF.
Notice to Prospective Investorsin China
The notes are not being offered or sold and may not be offered or sold, directly or indirectly, in the People’s Republic ofChina (the PRC) (for such purposes, notincludingthe Hong Kongand Macau Special Administrative Regions or Taiwan), exceptas pemitted by the securities laws of the PRC.
Notice to Prospective Investorsin the Dubai International Financial Centre
This offering memorandumrelates to an Exempt Offerin accordance with the Markets Rules 2012 of the Dubai Financial Services Authority (DFSA). This offering memorandum is intended for distribution only to persons of a type specified in the Markets Rules 20 12 ofthe DFSA. Itmustnot be delivered to, orrelied onby, any other person.
The DFSA has no responsibility forreviewing or verifying any documents in connection with Exempt Offers, The DFSA has notapproved this offering memorandum nor taken steps to verify the information set forth herein and has no responsibility for this offering memorandum. The notes to which this offering memorandum relates may be illiquid andor subject to restrictions on theirresale. Prosp ective purchasers ofthe notes offered should conducttheir own due diligence on the notes. If you do not understand the contents of this offering memorandum, you should consult anauthorized financial a dvisor.
Notice to Prospective Investorsin Taiwan
The notes have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuantto relevant securities la ws and regulations and the notes may notbe sold, issued or offered within Taiwan through a public offeringorin a circumstance which constitutes an offer within the meaningof the Securities and Exchange Act of Taiwan requiringregistration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offeringand sale of the notes in Taiwan.
Notice to Prospective Investorsin the Republic of Korea
The notes have not been and will not be offered, delivered or sold directly or indirectly in Korea or to any resident of Korea except as otherwise permitted under applicable Korean laws and regulations.
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TRANSFER RESTRICTIONS
The noteshave notbeen and will not be registered under the Securities Act or with any securities regulatory authority in any jurisdiction and may not be offered orsold in the United States orto, or forthe account or benefít of, U.S. persons except that notes may be offered orsold to (i) Qualified Institutional Buyers (QIBs) in reliance upon the exemption from theregistra tion requirement ofthe Securities Act provided by Rule 144A and (ii) persons otherthan U.S. persons as such tem is defined in Regulation Sunderthe Securities Act (Foreign Purchasers) in offshore transactions in reliance upon Regulation S.
Each purchaser ofthe notes thatis not a Foreign Purchaser will be deemedto: (ii) represent that it is purchasingthe notes forits own account oran account with respectto which it exercises sole investment discretion and that it and any such account is a QIB and is a ware that the sale to itis beingmade in reliance on Rule 144A; (iii) acknowledge that the notes have not been and will not be registered under the Securities Act or with any securities regula tory authority in any jurisdiction and may not be offered or sold within the United States orto, or forthe account or benefit of, U.S. persons exceptas set forth below; (iv) agree that if it should resell or otherwise transfer the securities, it will do so only pursuant to an applicable exemption from, orin a transactionnot subjectto, the registra tion requirements of the Securities Act, in each case in accordance with all applicable securities laws of the states of the United States orany other applicable jurisdiction; (v) agree that it will deliver to each person to whom it transfers notes notice of any restrictions on transfer of such notes; (vi) agree thatitis notan affiliate (within the meaning of Rule 144 underthe Securities Act) of the Bank; and (vii) acknowledge that CODELCO, thetrustee, the initial purchasers and others will rely upon the truth and accuracy ofthe foregoingacknowledgments, representationsa nd agreements. If it is acquiring any notes forthe account of one or more QIBs, it represents thatit has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgments, representations and agreements on behalf of each such account. If any of the acknowledgements, representations or agreements it is deemed to have been made by the purchase of notesis no longer accurate, it will promptly notify CODELCO and the initial purchasers.
Each 144A Global Note will bear the following legend:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED(THE SECURITIES ACT) OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)IT AND ANY ACCOUNT FOR WHICHIT IS ACTINGIS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT (RULE 144A)) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNTOR (B) ITISA NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)Q2)) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTES EVIDENCED HEREBY UNDER RULE 144(d) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER SUCH NOTES EXCEPT IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
129
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND ONLY (A) TO THE ISSUER OR A SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 1444 PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,(D) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACTOR (E) PURSUANT TO AN EXEMPTION FROM REGISTRATION (IF APPLICABLE). PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (E) ABOVE, THE COMPANY RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINETHAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THIS NOTE IS SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH INTHE INDENTURE REFERREDTO ON THE REVERSE HEREOF. THIS LEGEND WILL BE REMOVED ONLY AT THE OPTION OF THEISS UER.
Each purchaser ofnotes that isa Foreign Purchaser will be deemed to: (i) represent that it is purchasing the notes for its own account or an account for which it exercises sole investment discretion and that it and any such account is a Foreign Purchaserthat is outside the United States and acknowledge that the notes have not beenand will not be registered under the Securities Act or with any securities regulatory authority in any jurisdiction and may not be offered orsold within the United States orto, or forthe accountor benefit of, U.S. persons except asset forth below; and (ii) agree that if it should resell or otherwise transfer the notes prior to the expiration of a restricted period (definedas 40 daysa fter the later of the commencement ofthe offeringand the closing date with respect to the notes), it will do so only (a)(1) outside the United States in compliance with Rule 904 under the Securities Act or (2)to a QIB in compliance with Rule 144A, and (b) in accordance with all applicable securities laws of the states of the United States or any other applicable jurisdiction.
Each Regulation S Global Note will bearthe following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US.
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR WITH ANY SECURITIES REGULATORY AGENCY IN ANY JURISDICTION, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THESECURITIES ACT OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS SECURITY IS SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. PRIOR TO THE EXPIRATION OF A 40-DAY RESTRICTED PERIOD OR SUCH LATER DATE AS THE COMPANY MAY NOTIFY TO THE TRUSTEE, THIS SECURITY, OR ANY BENEFICIAL INTEREST HEREIN, MAY NOT BE RESOLD OR OTHERWISE TR ANSFERRED EXCEPT (A)J(1) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (2) TO A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN COMPLIANCE WITH RULE 144A, AND(B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES OR ANY OTHER APPLICABLEJURISDICTION.
The transfer orexchange of a beneficial interestin a Regulation S Global Notefora beneficial interest in a corresponding 144A Global Note prior to the expiration of the restricted period will be made only in accordance
130 with applicable proceduresuponreceipt by thetrustee ofa duly completed certificate from the transferorto the effect that such transferis beingmade in accordance with Rule 144A underthe Securities Act. Such written certification will no longer be required after the expira tion of the restricted period. The transfer or exchange of a beneficial interests in a Rule 144A Global Note fora corresponding beneficial interest in a Regulation S Global Note, whether before or after the expiration of the restricted period, will be made only upon receipt by the trustee of a written certification from the transferorto theeffectthatsuch transfer is being made in accordance with Regulation S under the Securities Act.
For so long as the notes are listed on the Luxembourg Stock Exchange, if the notes are ever issued in certificated form: . Certificated Notes will be delivered by the trustee as described in this offering memorandum and atthe offices ofthe payinga gent; and . holders of notes in certificated form will be able to transfer or exchange theirnotes at the offices ofthe transfera gent.
Any resale orother transfer, or attempted resa le of othertransfer, made otherthan in compliance with the above stated restrictions shall not be recognized by us.
For further discussion of the requirements (including the presentation of transfer certificates) under the indenture to effect exchanges or transfers of interests in Global Notes, see Description of Notes-Registration, Form and Delivery -Certain Book-Entry Procedures forthe Global Notes.
We have prepared this offering memorandum solely for use in connection with the offer and sake of the notes outside the United States, forthe private placement ofthe notes in the United States and for thelistingon the Luxembourg Stock Exchange. We and the initial purchasers reserve theright to rejectany offerto purchase, in whole orin part, forany reason, orto sell less than the amount ofnotes offered pursuantto Rule 144A under the Securities Act. This offering memorandum does not constitute an offerto any person in the United States otherthan any QIB underthe Securities Act to whom an offer has been made directly by the initial purchasers or an affiliate ofthe initial purchasers.
Each purchaser of notes must comply with all applicable laws and regulations in force in any jurisdiction in which it purchases, offers or sells notesor possessesor distributes this offering memorandum orany part ofit and must obtain any consent, appro val or permission required by it for the purchase, offer or sale by it of notesunder the laws and regulations in forcein any jurisdictionto which it is subjectorin which it makes such purchases, offers or resales, and neither the Company northe initial purchasers shall ha ve any responsibility therefor.
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VALIDITY OF THE NOTES
The validity of the notes will be passed upon for CODELCO by Cleary Gottlieb Steen 8 Hamilton LLP, New York, New York, United States counsel for CODELCO, and by Carey y Cía. Ltda., Chilean counsel to CODELCO, and forthe initial purchasers by Linklaters LLP, special New York, New York, United States counsel for the initial purchasers, and by Garrigues Chile SpA, special Chilean counsel for the initial purchasers. Clary Gottlieb Steen £ Hamilton LLP may rely without independent investigation as to all matters of Chilean law on
Carey y Cía. Ltda., and Linklaters LLP may rely without independent investigation as to all matters of Chilean law on Garrigues Chile SpA.
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INDEPENDENT AUDITORS
The financial statements of CODELCO and its subsidiaries as of and for the years ended December 31, 2020 and 2019, included in this offering memorandum, have been audited by Deloitte Auditores y Consultores Ltda., independentauditors, as stated in theirreportappearingherein.
The financial statements of CODELCO and its subsidiaries as ofand for the year ended December 31, 2021 included in this offering memorandum, have been audited by PricewaterhouseCoopers Consultores, Auditores y Compañía Limitada, independent auditors, as stated in theirreport appearingherein.
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GLOSSARY OF CERTAIN MINING TERMS
Andesite: A fine-grained volcanic rock, usually dark grey in color, with an average composition of 50-60% sulphur dioxide.
Anode Copper: Blister copperthat has undergone further refinement to remo ve impurities. Inananode fumace, the blister copperis blown with airand a hydrocarbon redundant to upgrade its purity to approximately 99.5% copper.
It is then castinto keystone-shaped slabs thatare shipped to an electrolytic refinery.
Anodic Slime: A product with a high content of precious metals that settles on the bottom ofan electrolytic cell in the copperrefinery duringthe production of copper ca thodes. The product is called anode, oranodic, slime due to its muddy appearance. Anode slimes ha ve a high commercial va lue based on their precious metals content (silver, gold, platinum and palla dium).
Blister Copper: Copper that has been cast after passing through a converter. Blister copperis approximately 99.0% copperand takes its name from the blistersthat form on the surface during cooling.
Breccia: Arock conglomerate made up of highly angular coarse fragments.
Calcopyrite: A combination ofcopper and iron sulfide with a metallic yellow-gold color, containing 34.7% copper, 30% iron and 26% sulfur.
Cathode: Copper produced by an electrochemical refining process that has been melted and cast into cakes, billets, wire bars orrods usually weighing approximately 90kg.
Concentration: The process by which crushed and ground ore is separated into metal concentrates and reject material through processes suchas flotation. Concentrates are shipped to a smelter for further processing.
Concentrator: A plant where concentration takes place.
Converter: A plant that conducts a principal phase of the smeltingprocess, blowing oxygen-enriched airthrough, molten metal, causing oxidation and the removal of sulfur and other impurities. Inthe case ofcopper, the product of this process is blister copper.
Copper Concentrate: A product of the concentrator usually containing 25% to 30% copper. It is the raw feed material for smelting.
Copper Grade: The concentration ofcopperin a given volumeof rock, usually expressedas a percentage.
Dacite: A fine-grained volcanic rock similar in composition to andesite but containing a greater abundance of quartz crystals thatare frequently visible to the naked eye.
Development: Activities related tothe buildingof infrastructure and the strippingand opening of mineral deposís, commencing when economically recoverable reserves canreasonably be estimated to exist and generally continuing until commercial production begins.
Diorite: A dark, coarsely crystalline igneous rock, similar in composition to granite that is composed principally of silica, alumina, calcium andiron.
Electrolytic Refining: Electrochemical refining of copper anodes. Copper anodes are placed between layers of refined copper sheets in a tank through which an acid copper sulfate solution is circulated. A low volta ge currentis introduced, causing the transfer of copper from the anodes to the pure copper sheets, and producing 99.98% copper cathodes. Impurities, often containing precious metals, settle to the bottom ofthe tank.
Electrowinning: The process of directly recovering copper from solution by the action of electric currents.
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Exploration: Activities associated with ascertainingthe existence, location, extent or quality of a mineral deposit.
Fine Copper: 99.99% pure copper obtained through metallurgical processes.
Flotation: A process of copper concentrate production in which mineral particles a ttachthemselves to the bubbles in an oily froth and rise to the surface, where they are skimmed off. This process is used primarily for the concentration of sulfide ores.
Flux: A high grade silica, which reacts with iron oxides formed during smelting and converting stages to create a molten sla g.
Geological Resources (measured, indicated and inferred): Concentrations or occurrences of materials in such form, quantity (tonnage and ore grade) and quality, based on specific geological evidence and knowledge, which allows for the ca Iculation ofthe amount, ore gradeand quality of the material with somelevel of confidence.
Grade A Copper: Electrolytic copper, in the form of cathodes, that (1) is at least 99.99% pure, (ii) meets the LME’s highest standards for copper quality, and (iii) is named in the LME -approved list of brands of Grade A copper.
Indicated Resources (geological or mineral resources): Resources about which CODELCOs knowledge is substantial but less extensive than its knowledge of measured resources.
Inferred Resources (geological or mineral resources): Resources about which CODELCOs knowledge is only indirect.
Intrusion: A geologic processes in which magmatic material flows to the earths surface through pre-existing rocks.
Leached Capping: An a bundant mass of iron oxide concentrated in the upper zones of a porphyry copper deposit.
Leaching: The process of extracting a soluble metallic compound from an ore by selectively dissolving it n a suitable solvent.
Matte: A high density liquid that is produced duringthe concentrate fusion stage of thepyro-metallurgical process.
Matte Sulfide: A high density liquid containing copper and iron sulfides thatis produced ofthe concentrate fusion stage of the pyro-metallurgical process.
Measured Resources (geological or mineral resources): Resources about which CODELCOs knowledge is both extensiveand direct.
Milling: A treatment process in which ore is ground into a fine powder.
Mine: Mines are the source of mineral-bearin g material found nearthe surface or deep in the ground.
Mineral Deposit: A mineralized underground body that has been probed by a sufficient number of closely spaced drill holes andor underground sampling m easurements to support an estimate of sufficienttonnage and ore gradeto warrant further exploration or development. Mineral deposits or mineralized materials do not qualify as commercially minable ore reserves (i.e., provedreserves or probable reserves), as prescribed under standards of the
U.S. Bureau ofMines Circular 831 of 1980, until a final and comprehensive economic, technical, and legal feasibility study based upon thetest results has been concluded.
Mineral Resources (measured, indicated and inferred): Geological resources about which CODELCO has achieved increased knowledge and which enable CODELCO to generate a long-term mining plan for the exploitation of such resources.
Mineralization: A deposit of rock containing one or more minerals for which the economics of recovery havenot yet been established.
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Molybdenum: A metallic element, gra yish in color, that resembles chromium and tungsten in man y properties, and is used especially in strengtheningand hardening steel.
Ore: A mineralora ggregate of minerals from which metal can be economically mined or extracted.
Ore Grade: The average amount of metal expressed as a percentage orin ounces per metric ton.
Ore Deposit: Category includinga!ll geological resources, mineral resources and ore reserves.
Ore Reserves: Theeconomically mineable part of a mineral resource.
Ounces: Unit of weight. A troy ounce equals 3 1,103 grams or 1.097 avoirdupois ounces.
Outokumpu Flash Furnace: Pyro-metallurgical technology used to smelt copper concentrate.
Overburden: The alluvium and rock that must beremoved in orderto exposeanore deposit.
Oxide Ore: Metalliferous minerals a ltered by weathering, surface waters, and their conversion, partly or wholly, into Oxides, carbonates, or sulfates.
Pierce Smith Converter: Horizontal furnace to remove impurities from white metal by oxidation.
Porphyry: Rock with siliceous minerals and fine-medium grained size.
Porphyry-type Ore Body: Deposit ofporphyric rocks with economic mineralization.
Probable Ore Reserves: Ore reserves about which CODELCOs knowledge is substantial but less extensive than its knowledge ofproved ore reserves.
Proved Ore Reserves: Ore reserves about which CODELCOs knowledge is both extensive and direct. Quantities of proved ore reserves are computed from dimensions revealed in outcrops, trenches, workings or drill holes, and grade and quality are computed from the results of detailed sampling. Sites for inspection, sampling and measurement of proved ore reserves are spaced so closely together, and the geologic character of the ore is so well defined, that its size, shape, depth and mineral contentare well esta blished.
Reclamation: The process of restoring mined land to a condition established by applicable law. Reclamation standards vary widely, but usually address issues of ground and surface water, topsoil, final slope gra dients, overburden and revegetation.
Refining: The purification of crude metallic substances.
Reverberatory Furnace: A fumace with a shallow hearth and a ceiling that reflects flames toward the hearth or ra diates heat toward the surface of thecharge.
Rod Mill: A large rotating cy linderin which metalrods are used for grinding ore.
Slag: Aresidue of the smeltingprocess containing iron and otherimpurities, which the Company disposes of with its other industrial solid waste.
Smelting: A pyro-metallurgical process in which metalis separated by fusion from those impurities with which it may be chemically combined or physically mixed.
Solvent Extraction: A method of separatingone or more substances from a chemical solution by treatment with a suitable organic solvent.
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Subvertical: Amount of waste material removed during mining per metric ton of ore extracted in a near-vertical spatial orientation.
Sulfide Ore: Ore characterized by the inclusion of metal in the crystal structure ofa sulfide mineral.
Tabular: Havinga near-rectangular geometric configuration closeto a rectangular shape.
Tailings: Finely groundrock from which valuable minerals have been extracted by concentration.
Teniente Converter: A horizontal rotary furnace into which matte, concentrates and flux are placed, and through which oxygen-rich airis blown to provide sufficient heat to smelt the concentrates. Off-gases are captured and transported to the acid plant.
Teniente Modified Converter: An advanced pyro-metallurgical technology used to smelt copper concentrate.
Ton: Aunit of weight. One metric ton equals 2,204.6 pounds. One short ton equals 2,000 pounds. Unless otherwise specified in this document, tons refers to metric tons.
Tourmaline: A dark-green hy drosilica te that exists in a lteredrock zones in some ore deposits.
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GENERAL INFORMATION Authorization
The Ministry of Financeof Chile authorized CODELCO to commence negotiations to issue bonds abroad through Resolution No. 1978 dated November 09,2022. The Ministry of Finance of Chile authorized the issuance of the notes by Resolution No. 221 dated January 27, 2023.
CODELCOSs Board of Directors authorized the issuance of the notes in its ordinary session of May 26, 2022 bymeans of Reserved Agreement No. 22-2022. CODELCO has obtained all other consentsand authorizations necessary under Chilean law forthe issuance of the notes.
Litigation
CODELCO is not involved in any litigation or arbitration proceeding which is material in the context of the issuanceof the notes. CODELCO is not aware ofany material litigation or arbitration proceeding that is pending or threatened.
Clearing
CODELCO has applied to have the notes accepted into DTCs book-entry settlement system. The notes have been accepted for clearance through the clearing systems of Euroclear System and Clearstream Banking, S.A.
The securities codes for the notes are:
CUSIP Number ISIN Number Rule 144A Global Note 21987B BF4 US21987BBF40 Regulation S Global Note P3143N BP8 USP3143NBP89
Listing
CODELCO*s LEI Codeis 549300UVMBCBCIPSU170. We intendto apply to list the notes on the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF market of the Luxembourg Stock Exchange in accordance with its rules and regulations. The notes are not yet listed. If any European or national legisla tion is adopted and is implemented or takes effect in Luxembourg in a manner that would impose requirements on us that CODELCO, in its discretion determinesare impracticable or unduly burdensome, CODELCO may de-list the notes. In thesecircumstances, there canbe no assurancethat CODELCO would obtain an alternative admission to listing, trading andor quotation for the notes by another listing authority, exchange andor system within or outside the EU. For information regarding the notice requirements associated with any delisting decision, see Description of Notes-Notices.
CODELCO has initia lly appointed The Bank of New York Mellon SANV, Luxembourg Branchto serve asits Luxembourglistinga gent. You can contact the Luxembourg listing a gent at the addresses listed on the inside back cover ofthis offering memorandum. CODELCO will maintain a paying agent so longas thenotesare listed on the Luxembourg Stock Exchange. Any change in the paying a gent will be communicated tothe Luxembourg Stock Exchange and through publication in a daily newspaper in Luxembourg.
As longas the notes are listed on the Luxembourg Stock Exchange, you may receive free of charge copies of the following documents at the offices ofthe listinga gentorthe payinga genton any business day: . this offering memorandum; . the indenture attachingthe forms of thenotes;
138 . CODELCOSs sta tutory documents; . English translations of the official letter authorizing the incurrence of indebtedness as issued by the Ministry of Finance; and . the mostrecentannual report, including the Consolidated Financial Statements, of CODELCO.
Copies of the indenture may be physically inspected during usual business hours on any weekday (excluding Saturday, Sundays and public holidays) at the offices ofthe trustee at 240 Greenwich Street, Floor 7 East, New York, New York 10286.
Financial Position
There has been no material a dverse change in CODELCOS*s financial position and prospects since the date of the last financial information included in the offering memorandum.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Interim Consolidated Financial Statements as of and for the nine month periods ended September 30, 2022 and 2021
Page Independent Auditor’s Review Report from PricewaterhouseCoopers Consultores +2 IN Interim consolidated statements of financial pOSitiO…c.ononnnnnnnnninninnncoonnncncncncnn F-7 Interim consolidated statements Of COM .occccnnnnnnnnnnncnnnncrcnnnnrocnrnneinarnnnn F-9 Interim consolidated statements of comprehensive inCOM€ coccion F-10 Interim consolidated statements of changes in equity coccccncccnnnninannos F-11 Interim consolidated statements Of Cash flOWS cooocccnicnnnnnnonnnconrecnrrernrrnnnns F-13 Notes to the interim consolidated financial StatementS …ooocnccicninninnooniccnnicnnns F-14
Consolidated Financial Statements as of and for the years ended December 31, 2021 and 2020 and independent auditors report
Independent Auditors Report from PricewaterhouseCoopers Consultores F-115 IN
Consolidated statements of financial pOSItION ..cocoinninnnnnnnnnnnnonnnnaninnn rro cocncncncnnnno F-120 Consolidated statements of profit or loss….. F-122 Consolidated statements of comprehensive inCoMS cooccccnnnnncnnonininnnnnonannn coco conncnninno F-123 Consolidated statements of changes in eQuÍtY cococicincnnnnnninnnnnncnnonininnncncnnn rn roca cnnncnninno F-124 Consolidated statements of cash flows ……. F-126 Notes to the consolidated financial Statements …ooooccicininonininnncncnnncncnnonoconononononanonon F-127
Consolidated financial statements as of and for the years ended December 31, 2020 and 2019 and independent auditors report
Independent Auditor’s Report from Deloitte Auditores y Consultores Limitada …. F-233 Consolidated statements of financial pOSItION ..cooninninnnnnnnnnnnnonnnnninnrncn cn cncncncnnnno F-238 Consolidated statements of comprehensive income (loss) – by function …………….. F-240 Consolidated statements of other comprehensive income (10SS) ….oooincicicinnnicincncnn. F-241 Consolidated statements of cash flows – direct Metho0d .ooocccnnnnininininicinnncncnincncnn F-242 Consolidated statements of changes in eQuItY cococicicinnnnnnnononncnnoninnnnncncnnn rn roca cocaina F-243 Notes to the consolidated financial Statements …oooooccininininininnnnncnoncncncnnononanonononononos F-244
F-1
THE ISSUER
Corporación Nacional del Cobre de Chile Huérfanos 1270 Santiago Republic of Chile Postal Code 8340424
TRUSTEE, PAYING AGENT, TRANSFER AGENT AND REGISTRAR
The Bank of New York Mellon 240 Greenwich Street New York, New York 10286 United States
LUXEMBOURGLISTING AGENT
Vertigo Building Polaris 2-4 rue Eugene Ruppert L-2453 Luxembourg Luxembourg
LEGAL ADVISORS TO THE ISSUER
As to New York law As to Chilean law Cleary Gottlieb Steen € Hamilton LLP Carey y Cía. Ltda.
One Liberty Plaza Isidora Goyenechea, 2800, Piso 43 New York, New York 10006 Las Condes, Santiago United States Republic of Chile
Postal Code 7550647 LEGAL ADVISORS TO THE INITIAL PURCHASERS
As to New York law As to Chilean law Linklaters LLP Garrigues Chile Spa 1290 Avenue of the Americas Isidora Goyenechea 3477, Piso 12 Las New York, NY 10104 Condes, Santiago United States Republic of Chile Postal Code7550106 INDEPENDENT AUDITORS Deloitte
Auditores y Consultores Ltda.
Rosario Norte 407, Las Condes Santiago Chile Postal Code7561210
PricewaterhouseCoopers Consultores, Auditores y Compañía Limitada Av. Andrés Bello 2711, Floor 5, Las Condes Santiago Chile PostalCode7550611
O
CODELCO
Corporación Nacional del Cobre de Chile
U.S.$900,000,000 5.125% Notes due 2033
Offering Memorandum
Joint Book-Running Managers
BNP PARIBAS BofA Securities Santander Scotiabank
January 30,2023
CORPORACION NACIONAL DEL COBRE DE CHILE
Interim Consolidated Financial Statements as of September 30, 2022 a pwe
INDEPENDENT AUDITORS REVIEW REPORT (A free translation from the original in Spanish)
Santiago, October 27, 2022
To the President and Directors of Corporación Nacional del Cobre de Chile
We have reviewed the accompanying interim consolidated financial statements of Corporación Nacional del Cobre de Chile and its subsidiaries, which comprise the interim consolidated statement of financial position as of September 30, 2022, and the related interim consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2022 and 2021, and the interim consolidated statements of changes in equity and cash flows for the nine-month periods then ended.
Management’s Responsibility for the Interim Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the interim consolidated financial statements in accordance with IAS 34 Interim Financial Reporting incorporated in the International Financial Reporting Standards. This responsibility includes the design, implementation and maintenance of internal control sufficient to provide a reasonable basis for the preparation and fair presentation of the interim consolidated financial statements in accordance with the applicable framework for the preparation and presentation of financial information.
Auditor’s Responsibility
Our responsibility is to conduct our reviews in accordance with auditing standards generally accepted in Chile applicable to reviews of interim financial statements. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in Chile, the objective of which is the expression of an opinion on the financial statements. Accordingly, we do not express such an opinion.
Conclusion
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim consolidated financial statements for them to be in accordance with IAS 34 Interim Financial Reporting incorporated in the International Financial Reporting Standards.
r ..- Í : PwC Chile, Av. Andrés Bello 2711 – piso 5, Las Condes – Santiago, Chile RUT: 81.513.400-1 | Teléfono: (56 2) 2940 0000 | www.pwe.cl a pwe
Santiago, October 27, 2022 Corporación Nacional del Cobre de Chile 2
Emphasis of Matter – Preparation for the Ventanas Smelter Shutdown
As indicated in Note 29 to the interim consolidated financial statements, on June 17, 2022 the Board of Directors of Corporación Nacional del Cobre de Chile announced its decision to move forward in preparing the closure of the Ventanas smelter. As described in that same Note, the closure of the smelter requires the amendment of Law No. 19,993, which obliges the Corporation to smelt the ores of Empresa Nacional de Minería (ENAMID) exclusively at the Ventanas smelter. In the event that the referred law was amended and the Corporation proceeded with the closure of the smelter, the recoverable value of its net assets could be lower than its carrying amount. Our conclusion is not modified in respect of this matter.
Other matters – Consolidated Statement of Financial Position as of December 31, 2021 On February 24, 2022, we expressed an unmodified opinion on the consolidated financial statements of Corporación Nacional del Cobre de Chile and its subsidiaries as of December 31, 2021 which include the consolidated statement of financial position as of December 31, 2021 and explanatory notes also presented in the attached interim consolidated financial statements.
DocuSigned by: po Ressitlziros A Progr? 5C2853C6DC264A1…
Juan Carlos Pitta De C.
RUT: 14.709.125-7
O
CODELCO
CODELCO – CHILE
Interim consolidated financial statements as of September 30, 2022 (A free translation from the original in Spanish)
CONTENTS
INTERIM CONSOLIDATED FINANCIAL STATEMENTS (A free translation from the original in Spanish)
INDEPENDENT AUDITOR’S REPORT INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION..
INTERIM CONSOLIDATED STATEMENTS OF INCOME……………………- INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME …
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
lL.. GENERAL INFORMATION.
1. Corporate information……
2. Basis of presentation of the consolidated financial statements…
ll… SIGNIFICANT ACCOUNTING POLICIES ……
1. Significant judgments and key estimates . Significant accounting policies…
2
3 New standards and interpretations adopted by the Corporation .
4, New accounting pronouncemenkts….
lll. EXPLANATORY NOTES
1. Cash and cash equivalents
2. Trade and other receivables .
3, Balances and transactions with related parties…
4, Inventories
5. Income taxes and deferred taxes .
6. Current and non-current tax assets and liabi
7.
8.
9 Investments accounted for using the equity method
10. SubsidiarieS …….oocnnmmmosmmmmmsmám*á9*.
11. Current and non-current financial assets..
12. Other financial liabilities
13. Fair Value of financial assets and liabilities .
14. Market value hierarchy for items at market value
15. Trade and other accounts payable
16. Other provisions
17. Employee benefits
18. Equity …….
19. Revenue
20. Expenses by nature ..
21. Asset impairment ……
22. Other income and expenses by function ..
23. Finance costs……..
24. Operating segments .
25. Exchange difference .
26. Statement of cash flows …
27.
28.
29.
30.
31.
32.
33.
34.
Risk management Derivatives contracts.
Contingencies and restrictions GuaranteesS cooocnicnonnnnonas.
Balance in foreign currency…
Sanctions The environment .
Subsequent Events…
CORPORACIÓN NACIONAL DEL COBRE DE CHILE INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of September 30, 2022 (unaudited) and December 31, 2021 (In thousands of US dollars – TRUS$) (A free translation from the original in Spanish)
Note 9-30-2022 12-31-2021 No Assets Current assets Cash and cash equivalents 1 1,611,381 1,283,618 Other current financial assets 11 51,846 320,340 Other current non-financial assets 28,435 23,997 Trade and other current receivables 2 2,076,467 4,194,350 Accounts receivable from related entities, current 3 13,441 156,711 Current inventories 4 2,566,252 1,811,455 Current tax assets 6 161,380 11,438 Total current assets 6,509,202 7,801,909 Non-current assets
Other non-current financial assets 11 39,250 38,283 Other non-current non-financial assets 1,702 1,621 Non-current accounts receivable 2 80,220 104,177 Accounts receivable from related parties, non-current 3 224 224 Non-current inventories 4 604,502 610,558 Investments accounted for using equity method 9 3,534,431 3,546,011 Intangible assets other than goodwill 42,808 43,311 Property, plant and equipment 7 31,101,244 30,449,893 Investment property 981 981 Right-of-use assets 8 403,315 361,539 Non-current tax assets 6 4,699 4,333 Deferred tax assets 5 90,526 94,595 Total non-current assets 35,903,902 35,255,526 Total assets 42,413,104 43,057,435
The accompanying notes are an integral part of these interim consolidated financial statements.
CORPORACIÓN NACIONAL DEL COBRE DE CHILE INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of September 30, 2022 (unaudited) and December 31, 2021 (In thousands of US dollars – TRUS$) (A free translation from the original in Spanish)
Note 9-30-2022 12-31-2021
No Equity and liabilities Liabilities Current liabilities Other financial liabilities, current 12 380,136 605,203 Lease liabilities, current 8 116,390 112,104 Trade and other payables 15 1,181,416 1,497,429 Accounts payable to related entities, current 3 84,581 221,344 Other shortterm provisions 16 514,710 742,027 Current tax liabilities, current 6 14,499 308,376 Current provisions for employee benefits 17 346,321 419,323 Other non-financial liabilities, current 36,022 33,071 Total current liabilities 2,674,075 3,938,877 Non-current liabilities Other financial liabilities, non-current 12 16,620,648 16,903,640 Lease liabilities, non-current 8 259,341 240,023 Non-current payables 1,028 1,065 Other long-term provisions 16 2,159,378 2,457,585 Deferred tax liabilities 5 7,978,169 7,004,523 Non-current provisions for employee benefits 17 943,453 934,542 Other non-financial liabilities, non-current 2,238 2,279 Total non-current liabilities 27,964,255 27,543,657 Total liabilities 30,638,330 31,482,534 Equity Share capital 5,619,423 5,619,423 Other reserves 18.a 5,302,576 5,286,406 Accumulated losses (66,447) (277,340) Equity attributable to owners of parent 10,855,552 10,628,489 Non-controlling interests 18.b 919,222 946,412 Total equity 11,774,774 11,574,901 Total liabilities and equity 42,413,104 43,057,435
The accompanying notes are an integral part of these interim consolidated financial statements.
CORPORACIÓN NACIONAL DEL COBRE DE CHILE INTERIM CONSOLIDATED STATEMENTS OF INCOME For the nine- and three-month periods ended september 30, 2022 and 2021 (unaudited) (In thousands of US dollars – TRUS$) (A free translation from the original in Spanish)
Note 1-1-2022 1-1-2021 7-1-2022 7-1-2021 No 9-30-2022 9-30-2021 9-30-2022 9-30-2021
Revenue 19 11,879,784 14,868,179 3,188,844 4,853,260 Cost of sales (8,340,192) (8,822,621) (2,552,636) (2,919,254) Gross margin 3,539,592 6,045,558 636,208 1,934,006 Other income 22a 39,476 83,337 8,533 24,605 Distribution costs (10,353) (7.429) (3,647) (2,400) Administrative expenses (374,634) (322,012) (127,975) (101,350) Other expenses by function 22.b (1,305,710) – (1,748,250) (379,764) (808,362) Other gains 22,415 24,032 6,647 8,707 [Gains (losses) from operating activities 1,910,786 4,075,236 140,002 1,055,206 Finance income 29,600 10,086 15,895 3,056 Finance costs 23 (424,459) (448,789) (139,000) (144,282) Impairment of gains and reversal of impairment losses determined in accordance with IFRS 9 (1,182) (9) 136 249 Equity in income of associates and joint ventures accounted for using the equity method 9 53,391 305,607 (23,430) 87,487 Exchange gains (losses) in foreign currencies 25 129,728 254,932 4,737 219,546 [Income for the period before tax 1,697,864 4,197,063 (1,660) 1,221,262 Income tax expense 5 (1,206,688) – (2,690,160) (26,930) (809,998) [Net income for the period 491,176 1,506,903 (28,590) 411,264 Profit attributable to
Profit atributable to owners of the parent 471,660 1,425,934 (26,132) 387,687
Profit attibutable to non-controlling interests 18.b 19,516 80,969 (2,458) 23,577 [Net income for the period 491,176 1,506,903 (28,590) 411,264
The accompanying notes are an integral part of these interim consolidated financial statements.
CORPORACIÓN NACIONAL DEL COBRE DE CHILE INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the nine- and three-month periods ended September 30, 2022 and 2021 (unaudited) (In thousands of US dollars – TRUS$) (A free translation from the original in Spanish)
Note 1-1-2022 1-1-2021 7-1-2022 7-1-2021 Ne 9-30-2022 9-30-2021 9-30-2022 9-30-2021 [Proñt 491,176 1,506,903 (28,590) 411,264 Comprehensive income Components of comprehensive income that will not be reclassified to profit or loss for the period, before taxes Comprehensive (loss) income, before income taxes, gains from remeasurement of
17 46,194 77,853 15,832 15,460 defined benefit plans (46,194) : (15,832) : Share of comprehensive income of associates and joint ventures accounted for using 161 (835) 103 (138) the equity method that will not be reclassified to profit or loss for the period, before taxes Total other comprehensive income that will not be reclassified to profit or loss (46,033) 77,518 (15,729) 15,322 ¡for the period, before taxes
Components of comprehensive income that will be reclassified to profit or loss for the period, before taxes Exchange differences on translation (Loss) gain on foreign exchange translation differences, before income taxes (4,477) (2,917) (1,405) (2,284)
Comprehensive income (loss) before income taxes, foreign exchange translation (4,477) (2,917) (1,405) (2,284) differences Cash flows hedges Gains (losses) on cash flows hedges, before taxes 101,120 (73,917) (6,029) (10,495) [ Comprehensive income, before tax, cash flow hedges 101,120 (73,917) (6,029) (10,495)] Total comprehensive income that will be reclassified to profit or loss for the 96,643 (76,834) (7,434) (12,779) period, before taxes Other components of comprehensive income, before taxes 50,610 684 (23,163) 2,543 Income tax related to components comprehensive income Income taxes related to remeasurements of defined benefit comprehensive income plan: 5 32,187 (54,358) 11,063 (10,640) Income taxes related to components of comprehensive income that will not be 32,187 (54,358) 11,063 (10,640) reclassified to profit or loss for the period
Income taxes related to components of comprehensive income that will be reclassified to profit or loss for the period
Income taxes related to comprehensive income cash flow hedges 5 (65,728) 48,046 3,919 6,822 Income taxes related to components of comprehensive income that will be reclassified to profit or loss for the period (65,728) 46,046 3919 6822 Comprehensive income 17,069 (5,628) 8,181 (1,275) Total comprehensive income 511,186 1,501,275 (36,771) 409,989 Comprehensive income, attributable to Comprehensive income attributable to owners of parent 488,729 1,420,306 (34,313) 386,412 Comprehensive income attributable to non-controlling interests 18.b 19,516 80,969 (2,458) 23,577 [Total comprehensive income 508,245 1,501,275 (36,771) 409,989
The accompanying notes are an integral part of these interim consolidated financial statements.
10
CORPORACIÓN NACIONAL DEL COBRE DE CHILE INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the periods from January 1, to September 30, 2022 and 2021 (unaudited) (In thousands of US dollars – TRUS$) (A free translation from the original in Spanish)
Reserve on Reserve of : Equity atributable
9-30-2022 Share capital exchange Reserves of cash | remeasurement Otherreserves Total Retained to owners of Non-controlling Total equity differences on flow hedges – |ofdefined benefit other reserves | eamings (losses) interests translation plans parent Note 18 Note 18 Opening balance at 01.01.2022 5,619,423 (6,221) (31,254) (259,573) 5,583,454 5,286,406 (277,340)| 10,628,489 946,412| 11,574,901 Changes in equity Gain 471,660 471,660 19,516] 491,176 Comprehensive income (4,477) 35,392 (14,007) 161 17,069 – 17,069 17,069 Profit (loss) – (4,477) 35,392 (14,007) 161 17,069 – 488,729 19,516| 508,245 Dividends (259,900) (259,900) (259,900) (Decrease) Increase through transfers and other changes, equity – – – – (899) (899) (867) (1,766) (46,706) (48,472) Increase (decrease) in equity – (4,477) 35,392 (14,007) (738) 16,170 210,893 227,063 (27,190) 199,873 Closing balance at 09.30.2022 5,619,423 (10,698) 4,138 (273,580) 5,582,716 5,302,576 (66,447)| 10,855,552 919,222| 11,774,774,
The accompanying notes are an integral part of these interim consolidated financial statements.
11
CORPORACIÓN NACIONAL DEL COBRE DE CHILE INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the periods from January 1, to September 30, 2022 and 2021 (unaudited) (In thousands of US dollars – TRUS$) (A free translation from the original in Spanish)
Reserve on Reserve of o o Equity attributable
9-30-2021 Share capial exchange Reserves of cash | remeasurement Other reserves Total Retained to owners of Non-controllng Total equity differences on flow hedges [of defined benefit other reserves | earings (losses) interests translation plans parent Note 18 Note 18 Opening balance at 01.01.2021 5,619,423 (2,939) 2,988 (305,556) 5,582,329 5,276,822 (194,696)| 10,701,549 924,942| 11,626,491 Changes in equity Gain 1,425,934 1,425,934 80,969 1,506,903 Comprehensive income (2,917) (25,871) 23,495 (335) (5,628) (5,628) (5,628) Profit (loss) (2,917) (25,871) 23,495 (335) (5,628) 1,420,306 80,969 1,501,275 Dividends (1,266,711)| – (1,266,711) (1,266,711) (Decrease) Increase through transfers and other changes, equity – – – 125 125 5,125 5,250 (89,741) (84,491) Increase (decrease) in equity > (2,917) (25,871) 23,495| (210) (5,503) 164,348 158,845 (8,772) 150,073 Closing balance at 09.30.2021 5,619,423 (5,856) (22,883) (282,061) 5,582,119 5,271,319 (30,348) 10,860,394 916,170] 11,776,564
The accompanying notes are an integral part of these interim consolidated financial statements.
12
Corporación Nacional del Cobre de Chile
CORPORACIÓN NACIONAL DEL COBRE DE CHILE INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine-month periods ended September 30, 2022 and 2021 (unaudited) (In thousands of US dollars – TRUS$) (A free translation from the original in Spanish)
Note 1-1-2022 1-1-2021 NO 9-30-2022 9-30-2021
Cash flows from (used in) operating activities Classes of cash receipts from operating activities Receipts from sales of goods and rendering of services 13,971,769 14,882,039 Other cash receipts from operating activities 26 1,724,131 1,538,133 Payments to suppliers for goods and services (8,001,386) (7,254,810) Payments to and on behalf of employees (1,102,015) (1,290,120) Other cash payments from operating activities 26 (2,257,471) (2,323,035) Dividends received 163,619 270,872 Income tax (paid) (695,990) (1,173,534) Net cash fiow from operating activities 3,802,657 4,649,545] Cash flows from (used in) investing activities Other cash payments to acquire equity or debt instruments of other entities (257) (193) Purchases of property, plant and equipment (2,415,287) (2,011,492) Interest received 24,736 5,687 Other cash outflows 285,611 (101,919) Net cash fiows used in investing activities (2,105,197) (2,107,917)] Cash flows from (used in) financing activities Payment of loans and bonds (344,623) (551,509) Lease liability payments (102,286) (107,547) Dividends paid (259,900) (1,160,306) Interest paid (610,933) (621,974) Other cash outfows (63,747) (100,562) Net cash fiows used in financing activities (1,381,489) (2,541,898) Net increase (decrease) in cash and cash equivalents before the effect of exchange 315,971 (270) rate changes Effect ofexchange rate changes on cash and cash equivalents 11,792 (46,688) Net increase (decrease) in cash and cash equivalents 327,763 (46,958) Cash and cash equivalents at beginning of period 1 1,283,618 2,107,493 Cash and cash equivalents at end of period 1 1,611,381 2,060,535
The accompanying notes are an integral part of these interim consolidated financial statements.
13
Corporación Nacional del Cobre de Chile
CORPORACIÓN NACIONAL DEL COBRE DE CHILE NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2022 (UNAUDITED) AND DECEMBER 31, 2021 (Monetary values in thousands of United States dollars, unless another currency or unit is indicated)
GENERAL INFORMATION
Corporate information
Corporación Nacional del Cobre de Chile (hereinafter referred to as Codelco or the Corporation), is, in Management’s opinion, the largest copper producer in the world.
Codelco’s most important product is refined copper, primarily in the form of cathodes. The Corporation also produces copper concentrates, blister and anode copper and by-products such as molybdenum, anode slime and sulfuric acid.
The Corporation trades its products based on a policy aimed to sell refined copper to manufacturers or producers of semi-manufactured products.
These products contribute to diverse fields of community development, particularly those intended to improve areas such as public health, energy efficiency, and sustainable development, among others.
The Corporation is registered under Securities Registry No. 785 of the Chilean Commission for the Financial Market (the CMF) and is subject to its supervision. According to Article No.
10 of Law No. 20392 (related to the new Corporate Governance of Codelco), such supervision shall be on the same terms as publicly traded companies, notwithstanding the provisions in Decree Law (D.L.) No.1349 of 1976, which created the Comisión Chilena del Cobre (Chilean Copper Commission).
Codelco’s head office is in Santiago, Chile, at 1270 Huérfanos Street, telephone number (56-
2) 26903000.
Codelco was incorporated through D.L. No. 1350 of 1976, which is the statutory decree applicable to the Corporation. In accordance with the statutory decree, Codelco is a government-owned mining, industrial and commercial company, which is a separate legal entity with its own equity. Codelco Chile currently carries out its mining business through ¡ts Chuquicamata, Radomiro Tomic, Ministro Hales, Gabriela Mistral, Salvador, Andina, El Teniente and Ventanas divisions.
The Corporation also carries out similar activities in other mining deposits in association with third parties.
In accordance with letter e) of Article 10 of Law No. 20392, Codelco is governed by its organic standards set forth in Decree Law No. 1350 (D.L. No. 1350) and that of its by-laws, and in matters not covered by them and, insofar as they are compatible and do not contradict the
14 (Y)
CODELCO
0 : . Y) Corporación Nacional del Cobre de Chile E provisions of such standards, by the rules that govern publicly traded companies and the common laws as applicable to them.
In accordance with D.L. No. 1350 Section IV related to the Company’s Exchange and Budget Regulations. Codelco’s financial activities are conducted following an annual budgeting program that is composed of an Operations Budget, an Investment Budget, and a Debt Amortization Budget.
The tax system applicable to Codelco’s taxable income is in accordance with Article 26 of D.
L. No.1350 which refers to Decree Law No. 824 on Income Tax of 1974 and Decree Law No.
2398 (Article 2) of 1978, as applicable. The Corporation’s taxable income ¡is also subject to a Specific Mining Tax in accordance with Law No. 20026 of 2005.
According to Law No. 13196, the return on foreign currency of the Corporation’s foreign sales (real income), of its copper production, including its by-products, is taxed at 10% and method of payment and the duration of this obligation for Codelco, which are detailed in Note 111.22 letter c) of this report.
The subsidiaries whose financial statements are included in these consolidated financial statements correspond to companies located in Chile and abroad, which are detailed in Note
11.2.d.
The associates located in Chile and abroad, are detailed in the Explanatory Notes Section l1l of Note 9.
2. Basis of presentation of the consolidated financial statements
The interim consolidated statements of financial position as of September 30, 2022 and the consolidated statements of financial position as of December 31, 2021, the interim consolidated statements of profit, statements of comprehensive income for the nine-month and three-month periods ended September 30, 2022 and 2021 and the interim consolidated statements of changes in equity and cash flows for the nine-month periods ended September 30, 2022 and 2021 have been prepared in accordance with International Accounting Standard No. 34 (IAS 34) “Interim Financial Reporting”, incorporated in the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (hereinafter “lASB).
These interim consolidated financial statements (unaudited) include all information and disclosures required in annual financial statements.
These interim consolidated financial statements (unaudited) have been prepared from accounting records maintained by the Corporation.
The interim consolidated financial statements (unaudited) of the Corporation are presented in thousands of United States dollar (*U.S. dollar).
15
0 : . Y) Corporación Nacional del Cobre de Chile E
Responsibility for information and estimates made
The Board of Directors of the Corporation has been informed of the information included in these interim consolidated financial statements (unaudited) and expressly declared its responsibility for the consistent and reliable nature ofthe information included as of September 30, 2022 which financial statements fully comply with IFRS. These interim consolidated financial statements (unaudited) as of September 30, 2022 were approved by the Board of Directors at a meeting held on October 27, 2022.
Accounting policies
These interim consolidated financial statements (unaudited) reflect the financial position of Codelco and its subsidiaries as of September 30, 2022 and December 31, 2021 and the results of their operations for the nine and three-month periods ended September 30, 2022 and 2021, and changes in equity and cash flows for the nine-month periods ended September 30, 2022 and 2021, and their related notes, all prepared in accordance with lAS 34 “Interim Financial Reporting, considering the respective presentation regulations of the Commission for the Financial Market (CMP).
ll. SIGNIFICANT ACCOUNTING POLICIES
1. Significant judgments and key estimates
In preparing these interim consolidated financial statements, the use of certain critical accounting estimates and assumptions that affect the amounts of assets and liabilities recognized as of the date of the financial statements and the amounts of revenue and expenses recognized during the reporting period is required. Such preparation also requires the Corporation’s Management to exercise its judgment in the process of applying the Corporation’s accounting policies. The areas involving a greater degree of judgment or complexity or areas in which the assumptions and estimates are significant for the consolidated financial statements are described as follows:
a) Useful economic lives and residual values of property, plant and equipment: the useful lives and residual values of property, plant and equipment that are used for calculating depreciation are determined based on technical studies prepared by internal specialists. The technical studies consider specific factors related to the use of assets.
Where there are indications that the useful lives of these assets or their residual values may have changed from previous estimates, this should be done using technical estimates to determine the impact of any changes
b) Ore reserves: the measurements of ore reserves are based on estimates of the ore resources that are legally and economically exploitable and reflect the technical and environmental considerations of the Corporation regarding the amount of resources that
16
Corporación Nacional del Cobre de Chile could be exploited and sold at prices exceeding the total cost associated with the extraction and processing.
The Corporation applies judgment in determining the ore reserves, and as such, possible changes in these estimates might significantly impact the estimates of net revenues over time. In addition, these changes might lead to modifications in usage estimates, which might have an effect on depreciation and amortization expense, calculation of stripping cost adjustments, determination of impairment losses, expected future disbursements related to decommissioning and restoration obligations, long term defined benefits plans’ accounting and the accounting for financial derivative instruments.
The Corporation estimates ¡ts reserves and mineral resources based on the information certified by the Competent Persons internal and external of the Corporation, who are defined and regulated according to Law No. 20235. These estimates correspond to the application of the Certification Code of Ore Reserves, Resources and Exploration, issued by the Mining Committee which was instituted through the law.
Notwithstanding the foregoing, the Corporation periodically reviews its estimation models, supported by experts who, in some divisions, also certify the reserves determined from these models.
Impairment of non-financial assets: the Corporation reviews the carrying amount of its non-financial assets to determine whether there is any indication that the carrying amount may not be recoverable. If any such indicator exists, the recoverable amount of the assets is estimated to determine the extent of the impairment loss. In testing impairment, the assets are grouped into cash generating units (“CGUs) to which the assets belong, if applicable. The recoverable amount of these CGUs is calculated as the present value of the expected future cash flows from such assets, considering a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of the assets is lower than their carrying amount, an impairment loss is recognized.
The Corporation defines the CGUs and also estimates the timing and cash flows that such CGUs will generate. Subsequent changes in the grouping of the CGU, or changes in the assumptions supporting the estimates of cash flows or the discount rate, may impact the carrying amounts of the corresponding assets.
Estimates of assumptions influencing the calculation of cash flows, such as the price of copper or treatment charges and refining charges, among others, are determined based on studies conducted by the Corporation using uniform criteria over different periods. Any change in these criteria may have an impact on the recoverable amount of the assets being tested for impairment.
The Corporation has assessed and defined that the CGUs are determined at the level of each of its current operating divisions.
Impairment testing also is performed at subsidiaries and associates.
17
Corporación Nacional del Cobre de Chile
d)
Provisions for decommissioning and site restoration costs: when a disruption is caused by the ongoing development or production of a mining property, an obligation to incur decommissioning and restoration costs arises. Costs are estimated based on a formal closure plan and are reassessed as of each reporting period or as of the date such obligations become known. The initial estimate of decommissioning and site restoration costs is recognized as property, plant, and equipment in accordance with lAS 16, and simultaneously a liability in accordance with lAS 37, is recorded.
For these purposes, a defined list of mine sites, facilities and other equipment are studied under this process, considering the engineering level profile, the cubic meters of assets that will be subject to removal and restoration, weighted by a structure of market prices of goods and services, reflecting the best current knowledge related to carrying out such activities, as well as techniques and more efficient construction procedures to date. In the process of valuation of these activities, the assumptions of the exchange rate for tradable goods and services are made, as well as a discount rate, which considers the time value of money and the risks associated with the liabilities, which is determined based, where applicable, on the currency in which disbursements are expected to be made.
The liability amounts recognized at the end of each reporting date represent management s best estimate of the present value of the future decommissioning and site restoration costs. Changes in the estimate of the liability because of changes in the estimated future costs or in the discount rate are added to or deducted from the respective asset cost. The amount deducted from the cost of the asset shall not exceed it carrying amount. lf a decrease in the liability exceeds the carrying amount of the asset, the excess is recognized immediately in profit or loss.
If the adjustment results in an addition to the cost of the asset, Codelco considers whether this is an indicator that the new carrying amount of the asset may not be fully recoverable.
If such an indicator exists, Codelco tests the asset for impairment by estimating ¡ts recoverable amount, and accounts for any impairment loss in accordance with lAS 36.
Costs arising from the installation of a plant or other site preparation work, discounted to their net present value, are provided for and capitalized at the beginning of each project as soon as the obligation to incur such costs arises. These decommissioning costs are charged to net income over the life of the mine, through depreciation of the corresponding asset. Depreciation expense is included in cost of sales, while the discount in the provision is included in finance costs.
Provisions for employee benefits: Provisions for employee benefits related to severance payments and health benefits for services rendered by the employees are determined based on actuarial calculations using the projected unit credit method and are recognized in other comprehensive income or s (depending on the accounting standards applicable) on an accrual basis
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Corporación Nacional del Cobre de Chile
9)
h)
j)
The Corporation uses assumptions to determine the best estimate of future obligations related to these benefits. Such estimates, as well as assumptions, are determined by management using the assistance of external actuaries. These assumptions include demographic assumptions, discount rate and expected salary increases and rotation levels, among other factors.
Accruals for open invoices: the Corporation uses information on future copper prices, through which it recognizes adjustments to its revenues and trade receivables, due to the conditions in provisional pricing arrangements. These adjustments are updated monthly, See Notes 2 r) Revenue from contracts with customers of Note 2 Significant accounting policies below.
Fair value of derivatives and other financial instruments: management may use ¡ts judgment to choose an adequate and proper valuation method for financial instruments that are not quoted in an active market. In the case of derivative financial instruments, assumptions are based on observable market inputs, adjusted depending on factors specific to the instruments among others.
Lawsuits and contingencies: The Corporation assesses the probability of lawsuits and contingency losses on an ongoing basis according to estimates performed by its legal advisors. For cases in which management and the Corporation’s legal advisors believe that a loss is not probable of occurring or where probable, may not be estimated reliably, no provisions are recognized. When it is considered more likely than not that a loss ¡is probable and it may be reliably estimated, a provision is recognized.
Application of IFRS 16: includes the following:
– Estimation of the lease term
– Determine ¡if it is reasonably certain that an extension or termination option will be exercised.
– Determination of the appropriate rate to discount lease payments
Revenue recognition: the Corporation determines appropriate revenue recognition for its contracts with customers by analyzing the type, terms and conditions of each contract or agreement with a customer.
As part of the analysis, the management must make judgments about whether an agreement or contract is legally enforceable, and whether the agreement includes separate performance obligations. In addition, estimates are required to allocate the total price of the transaction to each performance obligation based on the stand-alone selling price of the promised goods or services underlying each performance obligation. (The Corporation applies the constraint on variable consideration as defined in IFRS 15, if applicable).
Although the abovementioned estimates have been made based on the best information available as of the date of issuance of these consolidated financial statements, it is possible that new developments could lead the Corporation to modify these estimates in
19
Corporación Nacional del Cobre de Chile
2.
the future. Such modifications, if applicable, would be adjusted prospectively, as required by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
Significant accounting policies
a. Period covered: The accompanying interim consolidated financial statements of
Corporación Nacional del Cobre de Chile include the following statements:
Interim Consolidated Statements of Financial Position as of September 30, 2022 (unaudited) and December 31, 2021.
Interim Consolidated Statements of Comprehensive Income (unaudited) for the nine- month and three-month periods ended September 30, 2022 and 2021.
Interim Consolidated Statements of Changes in Equity (unaudited) for the nine-month periods ended September 30, 2022 and 2021.
Interim Consolidated Statements of Cash Flows (unaudited) for the nine-month periods ended September 30, 2022 and 2021.
. Basis of preparation – These interim consolidated financial statements (unaudited) of the
Corporation as of September 30, 2022 have been prepared in accordance with the instructions of the Commission for the Financial Market which fully comply with International Financial Reporting Standards (IFRS) issued by the lASB.
The consolidated statements of financial position as of December 31, 2021 (audited), and the statements of income for the nine-month and three-month periods ended September 30, 2021 (unaudited) and the statements of shareholders’ equity and cash flows for the nine-month period ended September 30, 2021 (unaudited), which are included for comparative purposes, have been prepared in accordance with IFRS as issued by the lASB, on a basis consistent with the basis used for the same period ended September 30, 2021, except for the adoption of new IFRS standards and interpretations adopted by the Corporation as of September 30, 2022, which are disclosed in number 3 “New standards and interpretations adopted by the Corporation” in section 1! of this report
These interim consolidated financial statements have been prepared from accounting records held by the Corporation.
. Functional currency – The functional currency of Codelco is the U.S. dollar, which is the currency of the primary economic environment in which the Corporation operates and the currency in which it receives ¡ts revenues.
The functional currency of subsidiaries, associates, and joint ventures is the currency of the primary economic environment in which those entities operate and the currency in which they receive their revenues. For those subsidiaries and associates that are an extension of the operations of Codelco (entities that are not self-sustaining and whose main transactions are with Codelco); the functional currency is also the U.S. dollar.
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CODELCO
Corporación Nacional del Cobre de Chile
The presentation currency of Codelco’s interim consolidated financial statements is the
U.S. dollar.
d. Basis of consolidation – The intermediate consolidated financial statements incorporate the financial statements of the Corporation and its subsidiaries.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Corporation obtains control, and continue to be consolidated until the date such control ceases. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement from the date the Corporation gains control until the date when the Corporation ceases to control the subsidiary.
The financial statements of the subsidiaries are prepared for the same reporting period as the Corporation, using consistent accounting policies
All assets, liabilities, equity, income, expenses, and cash flows related to transactions between consolidated companies are fully eliminated on consolidation. The value of the non-controlling interest of shareholders in equity and in the results of affiliates is presented, respectively, as ” Non-controlling interests” in the consolidated statement of financial position and “Income (loss) attributable to non-controlling interests” and “Comprehensive income (loss) attributable to non-controlling interests” in the consolidated statements of income.
The following companies have been consolidated:
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Corporación Nacional del Cobre de Chile
9-30-2022 12-31-2021 Taxpayer ID No. COMPANY Country Functional currency % Ownership % Ownership Direct | Indirect | Total Total
Foreign Chile Copper Limited England GBP. 100.00 – | 100.00 100.00 Foreign ¡Codelco do Brasil Mineracao Brazil BRL – 100.00 | 100.00 100.00 Foreign ¡Codelco Group Inc. USA US$ 100.00 – | 100.00 100.00 Foreign [Codelco Kupferhandel GmbH Germany EURO 100.00 – | 100.00 100.00 Foreign ¡Codelco Metals Inc. USA US$ – 100.00 | 100.00 100.00 Foreign ¡Codelco Services Limited England GBP. – 100.00 | 100.00 100.00 Foreign ¡Codelco Shanghai Company Limited China RMB 100.00 – | 100.00 100.00 Foreign ¡Codelco Singapore P.L Singapore US$ 100.00 – | 100.00 100.00 Foreign ¡Codelco USA Inc. USA US$ – 100.00 | 100.00 100.00 Foreign ¡Codelco Canada Canada US$ 100.00 0.00 | 100.00 100.00 Foreign Ecometales Limited Channel Islands US$ – 100.00 | 100.00 100.00 Foreign Exploraciones Mineras Andinas Ecuador EMSAEC S.A. Ecuador US$ – 100.00 | 100.00 100.00 Foreign ICobrex Prospeccao Mineral Brazil BRL – 51.00 | 51.00 51.00
78.860.780-6 [Compañía Contractual Minera Los Andes Chile US$ 99.97 0.03 | 100.00 100.00
81.767.200-0 [Asociación Garantizadora de Pensiones Chile CLP 96.69 – | 96.69 96.69
88.497.100-4 [Clínica San Lorenzo Limitada Chile CLP 100.00 0.00 | 100.00 100.00
96.817.780-K [Inmobiliaria de Salud de Codelco SpA (Ex – SEHC Calama) Chile US$ 100.00 0.00 | 100.00 100.00
76.354.490-7 – [Inmobiliaria Hospital del Cobre-Calama S.A. Chile CLP – 100.00 | 100.00 100.00
96.819.040-7 [Compañía Portuaria Mejilones S.A. Chile US$ 99.99 0.01 | 100.00 100.00
96.991.180-9 [Codelco Tec SpA Chile US$ 99.91 0.09 | 100.00 100.00
99.569.520-0 [Exploraciones Mineras Andinas S.A. Chile US$ 99.90 0.10 | 100.00 100.00
99.573.600-4 [Clínica Río Blanco S.A. Chile CLP 99.73 0.27 | 100.00 100.00
76.064.682-2 [Centro de Especialidades Médicas Río Blanco Ltda. Chile CLP – 100.00 | 100.00 100.00
77.773.260-9 – [Inversiones Copperfield SpA Chile US$ 100.00 100.00 100.00
76.043.396-9 – [Innovaciones en Cobre S.A. Chile US$ 0.05 99.95 | 100.00 100.00
76.148.338-2 [Sociedad de Procesamiento de Molibdeno Ltda. Chile US$ 99.95 0.05 | 100.00 100.00
76.173.357-5 – [Inversiones Gacrux SpA Chile US$ 100.00 – | 100.00 100.00
76.231.838-5 – [Inversiones Mineras Nueva Acrux SpA Chile US$ – 67.80 | 67.80 67.80
76.237.866-3 – [Inversiones Mineras Los Leones SpA Chile US$ – – – 100.00
76.173.783-K [Inversiones Mineras Becrux SpA Chile US$ – 67.80 | 67.80 67.80
76.124.156-7 [Centro de Especialidades Médicas San Lorenzo Ltda. Chile US$ – 100.00 | 100.00 100.00
76.255.061-K [Central Eléctrica Luz Minera SpA Chile US$ 100.00 – | 100.00 100.00
70.905.700-6 – [Fusat Chile CLP – – – –
76.334.370-7 |lsalud Isapre de Codelco Ltda. Chile CLP 99.90 0.10 | 100.00 100.00
78.394.040-K [Centro de Servicios Médicos Porvenir Ltda. Chile CLP – 99.00 | 99.00 99.00
77.928.390-9 [Inmobiliaria e Inversiones Rio Cipreces Ltda. Chile CLP – 99.90 | 99.90 99.90
77.270.020-2 [Prestaciones de Servicios de la Salud Intersalud Ltda. Chile CLP – 99.00 | 99.00 99.00
76.754.301-8 – [Salar de Maricunga SpA Chile CLP 100.00 – | 100.00 100.00
For the purposes of these interim consolidated financial statements, subsidiaries, associates, acquisitions and disposals are defined as follows:
– – Subsidiaries: A subsidiary is an entity over which the Corporation has control. Control is exercised if, and only if, the following elements are present: (1) power to govern the operating and financial policies to obtain benefits from their activities; (1i) exposure or rights to the variable returns of these companies; and (iii) ability to use the power to influence the amount of returns.
The Corporation reassesses whether it controls a subsidiary if facts and circumstances indicate that there are changes to one or more of the elements of control listed above.
The consolidated financial statements include all assets, liabilities, revenues, expenses, and cash flows of Codelco and ¡ts subsidiaries, after eliminating all inter- company balances and transactions.
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Corporación Nacional del Cobre de Chile
– Associates: An associate is an entity over which Codelco has significant influence.
Significant influence is the power to participate in the financial and operating policy decisions of the associate but is not control or joint control over those policies.
Codelco’s interest ownership in associates is recognized in the consolidated financial statements under the equity method. Under this method, the initial investment is recognized at cost and adjusted thereafter to recognize changes in Codelco’s share of the comprehensive income of the associate, less any impairment losses or other changes to the investment in net assets of the associate.
The Corporation adjusts the proportional gains or losses obtained by the associate after acquisition to take into account the effects that may exist in the depreciation of the fair value of the assets considered at the date of acquisition.
– – Acquisitions and disposals: the result of businesses acquired are incorporated in the consolidated financial statements from the date when control is obtained; the results of businesses sold during the period are included in the consolidated financial statements up to the effective date of disposal. Gains or losses on disposal is the difference between the sale proceeds (net of expenses) and the carrying amount of the net assets attributable to the ownership interest that has been sold (and, where applicable, the associated cumulative translation adjustment).
If control is lost over a subsidiary, the retained ownership interest in the investment will be recognized at its fair value.
At the acquisition date of an investment in a subsidiary, associate or joint venture, any excess of the cost of the investment (consideration transferred) plus the amount of the non-controlling interest in the acquiree plus the fair value of any previously held equity interest in the acquiree, where applicable, over Codelco’s share of the net fair value of the identifiable assets and acquired liabilities is recognized as goodwill. Any excess of Codelco’s share of the net fair value of the identifiable assets and acquired liabilities over the consideration transferred, after reassessment, is recognized immediately in profit or loss in the period in which the investment is acquired.
e. Foreign currency transactions and reporting currency conversion – Transactions in currencies other than the Corporation’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, foreign currency transactions denominated in foreign currencies are converted at the rates prevailing at that date. Gains and losses due to the effect of foreign currency transactions are included in the consolidated statement of income for the period within “Exchange gains (losses) in foreign currencies.
At the end of each reporting period, assets and liabilities denominated in Unidades de Fomento (UF or inflation index-linked units of account) are translated into U.S. dollars at the closing exchange rates of each period 9-30-2022: US$ 35.68; 12-31-2021: US$ 36.69;
9-30-2021: 37.06). Expenses and income in local currency have been expressed in dollars
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Corporación Nacional del Cobre de Chile at the observed exchange rate, corresponding to the date of the accounting record of each transaction.
The translation of the financial statements of affiliated associates and ¡ointly controlled entities, whose functional currency is different from Codelco’s presentation currency, is performed as follows for consolidation purposes:
– Assets and liabilities are converted using the prevailing exchange rate on the reporting date.
– Income and expenses for each statement of income are translated at average exchange rates for the period.
– All resulting exchange differences are recognized in comprehensive income and accumulated in equity under the heading Reserve on exchange differences on translation.
The exchange rates used in each reporting period were as follows:
Relationship Closing exchange rates
9-30-2022 12-31-2021 9-30-2021 US$ CLP 0.00104 0.00118 0.00123 US$ GBP 1.11359 1.34880 1.34608 US$ BRL 0.18658 0.17957 0.18323 US$ EURO 0.97876 1.13135 1.15714 US$ AUD 0.64251 0.72480 0.72140 US$ HKD 0.12739 0.12821 0.12845 US$ RMB 0.14018 0.15680 0.15495
f. Offsetting balances and transactions – As a general standard, assets and liabilities, revenue, and expenses, are not offset in the financial statements, except for those cases in which offsetting is required or is allowed by a standard and the presentation reflects the substance of the transaction.
Income or expenses arising from transactions which, for contractual or legal reasons, permit the possibility of offsetting and which the Corporation intends to liquidate for their net value or realize the assets and settle the liabilities simultaneously, are stated net in the statement of income.
g. Property, plant and equipment and depreciation – Items of property, plant and equipment are initially recognized at cost. After initial recognition, they are measured at cost, less any accumulated depreciation and any accumulated impairment losses.
The cost of property, plant and equipment includes the costs of expansion, modernization or improvements that represent an increase in productivity, capacity or efficiency, or an
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Corporación Nacional del Cobre de Chile a increase in the useful life of the assets, and are capitalized as an increase in the cost of the related assets.
The assets included in property, plant and equipment are depreciated, as a general rule, using the units of production method, when the activity performed by the asset is directly attributable to the mine production process. In other cases, a straight-line depreciation criterion is used.
The assets included in property, plant and equipment and certain intangibles (software) are depreciated over their economic useful lives, as described below:
Category Useful life
Land Not depreciated Land on mine site Unit of production Buildings Straight-line over 20-50 years Buildings in underground mine levels Units of production level Vehicles Straight-line over 3-7 years Plant and equipment Unit of production Smelters Unit of production Refineries Unit of production Mining rights Unit of production Support equipment Unit of production Intangibles – software Straight-line over 8 years open pit and underground mine Unit of production evelopment
Estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, and any change in estimates is recognized prospectively.
Additionally, depreciation methods and estimated useful lives of assets, especially plants, facilities and infrastructure may be revised at the end of each year or during the year according to changes in the structure of reserves of the Corporation and productive long- term plans updated as of that date.
This review may be made at any time if the conditions of ore reserves change significantly because of new known information, confirmed, and officially released by the Corporation.
The gain or loss resulting from the disposal or retirement of an asset is calculated as the difference between the price obtained on disposal and the value recorded in the books, recognizing the charge or credit to income for the period.
Construction in progress includes the amounts invested in the construction of property, plant and equipment and in mining development projects. Construction in progress ¡is transferred to assets in operation once the testing period has ended and when they are ready for use; at that point, depreciation begins to be recognized.
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Corporación Nacional del Cobre de Chile
Borrowing costs that are directly attributable to the acquisition or construction of assets that require a substantial period before they are ready for use or sale are capitalized as part of the cost of the corresponding items of property, plant, and equipment.
The ore deposits owned by the Corporation are recorded in the accounting records at US$1. Notwithstanding the above, those reserves and resources acquired as part of acquisition of entities accounted for as business combinations, are recognized at their fair value.
h. Intangible assets – The Corporation initially recognizes these assets at acquisition cost.
The cost is amortized systematically over their useful lives, except in the case of assets with indefinite useful lives, which are not amortized, and are assessed for impairment at least once a year and, in any case, whenever there is an indication that impairment may have occurred. At the end of each reporting period, these assets are measured at their cost less any accumulated amortization (when applicable) and any accumulated impairment losses.
The main intangible assets are described as follows:
Research and Technological Development and Innovation Expenditures: The expenditures for the development of Technology and Innovation Projects are recognized as intangible assets at their cost and are considered to have indefinite useful lives.
Development expenses for technology and innovation projects are recognized as intangible assets at cost, if and only if, all the following have been demonstrated
– The technical feasibility of completing the intangible asset so that it will be available for use or sale;
– – The intention to complete the intangible asset is to use or sell it;
– – The ability to use or sell the intangible asset;
– – That the intangible asset will generate probable future economic benefits;
– – The availability of adequate technical, financial, and other resources to complete the development and to use or sell the intangible asset; and
– – The disbursement attributable to the intangible asset during its development can be reliably appraised
Research expenses for technology and innovation projects are recognized in profit or loss when incurred.
i. Impairment of property, plant and equipment and intangible assets – Property, plant and equipment and intangible assets with finite useful lives are reviewed for impairment to verify whether there is any indication that the carrying amount may not be recoverable. If such an indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment to be recorded.
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Corporación Nacional del Cobre de Chile
For intangible assets with indefinite useful lives, their recoverable amounts are annually estimated at the end of each reporting period.
When an asset does not generate cash flows that are independent from other assets, Codelco determines the recoverable amount of the CGU to which the asset belongs.
The Corporation has defined each of its divisions as a cash generating unit
Recoverable amount of an asset is the higher of fair value less costs of disposal and value in Use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. On the other hand, the fair value less cost of disposal is usually determined for operational assets considering the Life of Mine (*LOM), based on a model of discounted cash flows, while the assets not included in LOM as resources and potential resources to exploit are measured by using a market model of multiples for comparable transactions.
If the recoverable amount of an asset or CGU is estimated to be less than it is carrying amount, an impairment loss is recognized immediately in profit or loss, reducing the carrying amount to its recoverable amount. In the event of a subsequent reversal of the impairment, the carrying amount is increased to the revised estimate of the recoverable amount, but to the extent that it does not exceed the carrying amount that would have been determined had no impairment been previously recognized.
The estimates of future cash flow for a CGU are based on future production forecasts, future prices of basic products and future production costs. Under IAS 36 Impairment of Assets, there are certain restrictions for future cash flows estimates related to future restructurings and future cost efficiencies. When calculating value in use, it is also necessary to base the calculations on the spot exchange rate at the date of calculation
j. Expenditures for exploration and evaluation of mineral resources, mine development and mining operations – The Corporation has defined an accounting policy for each of these expenditures.
Development expenses for deposits under exploitation whose purpose is to maintain production levels are recognized in profit or loss when incurred.
Exploration and evaluation costs such as: drillings of deposits, including expenses necessary to locate new mineralized areas and engineering studies to determine their potential for commercial exploitation are recognized in profit or loss, normally at the pre- feasibility stage.
Pre-operating and mine development expenses (normally after feasibility engineering is reached) incurred during the execution of a project and until its start-up are capitalized and amortized in relation to the future production of the mine. These costs include stripping of
27
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Corporación Nacional del Cobre de Chile E waste material, constructing the mine’s infrastructure and other works carried out prior to the production phase.
Finally, costs for defining of new areas or deposit areas in exploitation and of mining operations (PP8E) are recognized in property, plant and equipment and are amortized through profit or loss over the period during which the benefits are obtained.
k. Stripping costs – Costs incurred in removing mine waste materials (overburden) in open pits that are in production, that provide access to mineral deposits, are recognized in property, plant, and equipment, when the following criteria set out in IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine are met:
– – Itis probable that the future economic benefits associated with the stripping activity will flow to the entity.
– Itis possible to identify the components of an ore body for which access has been improved because of the stripping activity, and
– The costs relating to that stripping activity can be measured reliably.
The stripping costs are amortized based on the production units of production extracted from the ore body related to the specific stripping activity which generated this amount.
l.. Income taxes and deferred taxes – Codelco and its Chilean subsidiaries recognize annually income taxes based on the net taxable income determined as per the standards established in the Income Tax Law and Article 2 of D.L. 2398, as well as the specific tax on mining referred to in Law No 20026 of 2005. lts foreign subsidiaries recognize income taxes according to the tax regulations in each country.
In addition, Codelco’s taxable income in each period is subject to the tax regime established in Article 26 of D.L. No. 1350, which states that tax payments will be made on March, June, September, and December of each year, based on a provisional tax calculation.
The deferred taxes arising from temporary differences and other events that create differences between the accounting and tax bases of assets and liabilities, are recorded in accordance with the standards established in IAS 12 Income tax.
Deferred taxes are also recognized for undistributed profits of subsidiaries and associates, originated by withholding tax rates on remittances of dividends paid out by such companies to the Corporation.
m. Inventories – Inventories are measured at cost when such does not exceed net realizable value. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale (¡.e., marketing, sales, and distribution expenses). Costs of inventories are determined according to the following methods:
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Corporación Nacional del Cobre de Chile
– – Finished products and products in process: These inventories are measured at their average production cost determined using the absorption costing method, including labor, depreciation of fixed assets, amortization of intangibles and indirect costs of each period. Inventories of products in process are classified in current and non-current, according to the normal cycle of operation
– – Materials in warehouse: These inventories are valued at acquisition cost and the Corporation determines an allowance for obsolescence considering that slow-moving materials in the warehouse remain in stock.
– – Materials in transit: These inventories are measured at cost incurred at the end of reporting period. Any difference because of an estimate of net realizable value of the inventories lower than it carrying amount is recognized in profit or loss.
n. Dividends – In accordance with Article 6 of D.L. 1350, the Corporation has a mandatory obligation to distribute its net income as presented in the financial statements. The payment obligation is recognized on an accrual basis.
o. Employee benefits – Codelco recognizes a provision for employee benefits when there is a present obligation (legal or constructive) as a result of services rendered by its employees.
The employment contracts stipulate, subject to compliance with certain conditions, the payment of an employee severance indemnity when an employment contract ends. In general, this corresponds to one monthly salary per year of service and considers the components of the final remuneration which are contractually defined as the basis for the indemnity. This employee benefit has been classified as a defined benefit plan.
Codelco has also agreed to post-employment medical care benefits for certain retirees.
This employee benefit has been classified as a defined benefit plan.
These plans continue to be unfunded as of September 30, 2022.
The employee severance indemnity and the post-employment medical plan obligations are determined using the projected unit credit method, with actuarial valuations being carried out at the end of each reporting period. The defined benefit plan obligations recognized in the statement of financial position represent the present value of the accrued obligations.
Actuarial gains and losses are recognized immediately in other comprehensive income and will not be reclassified to profit or loss.
The Corporation’s management uses assumptions to determine the best estimate of these benefits. The assumptions include an annual discount rate, expected increases in salaries and turnover rate, among other factors.
In accordance with its operating optimization programs to reduce costs and increase labor productivity by incorporating new current technologies andor better management
29
Corporación Nacional del Cobre de Chile practices, the Corporation has established employee retirement programs by amending certain employment contracts or collective union agreements to include benefits encouraging employees to early retire, for which the necessary provisions are made based on the accrued obligation at current value. In case of employee retirement programs which involve multi-year periods, the accrued obligations are updated using a discount rate determined based on financial instruments denominated in the same currency and similar maturities that will be used to pay the obligations.
p. Provisions for decommissioning and site restoration costs – The Corporation recognizes a provision for the estimated future costs of decommissioning and restoration of mining projects in development or production when a mining activity causes a disruption under a constructive or legal obligation. Costs are estimated on the basis of a formal closure plan and cost estimates are annually reviewed.
Costs arising from the obligation to dismantle a plant installation or other site preparation work, discounted to their present value, are provided for and capitalized at the beginning of each project or at the origin of the constructive or legal obligation as soon as the obligation to incur such costs arises.
These decommissioning and restoration costs are recorded in income through the depreciation of the asset that gave rise to such cost, and the use of the provision is made when the decommissioning materializes. Subsequent changes in estimates of decommissioning-related liabilities are added to or deducted from the costs of the related assets in the period in which the adjustment is made.
Other restoration costs, outside the scope of IAS 16, Property, Plant and Equipment, are provided for at their present value against operating results and the use of the provision is made in the period in which the restoration work is performed.
The accretion of the discount on a closure liability due to the passage of time is recognized as a finance expense in the statement of income.
q. Leases – The Corporation evaluates its contracts at initial application to determine whether they contain a lease The Corporation recognizes a right-of-use asset and a corresponding liability for lease with respect to all lease agreements in which Codelco is the lessee, except for short-term leases (defined as a lease with a lease term of 12 months or less) and leases of low-value assets. For these leases, the Corporation recognizes the lease payments as an operating cost on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which the economic benefits of the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that have not been paid at the commencement date, discounted using the interest rate implicit in the lease. If this rate cannot be easily determined, the Corporation uses the incremental borrowing rate.
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Corporación Nacional del Cobre de Chile
The incremental rate for loans used by Codelco is determined by estimating the interest rate that the Corporation would have to pay for borrowing the necessary funds to obtain an asset of an equivalent nature similar in value to the right-of-use asset of the respective lease, in a similar economic environment over a similar term.
Lease payments included in the measurement of the lease liability mainly include fixed payments, variable payments that depend on an index or a rate and the exercise price of a purchase option. Variable payments that do not depend on an index or a rate are excluded.
The lease liability is subsequently measured as follows: the carrying amount increased to reflect the interest on the lease liability (using the effective rate method) and the carrying amount is reduced to reflect the lease payments made.
The Corporation revalues the lease liability as to the discount rate (and makes the corresponding adjustments to the asset for respective right of use) through a modified discount rate when:
– There is a change in the term of the lease, or
– There is a change in the assessment of an option to purchase the underlying asset, or
– There is a change in an index or rate which generates a change in cash flows.
Right-of-use assets comprise the amount of the present value of payments not made at the contract inception date, and lease payments made before or up to the inception date, less lease incentives received and any initial direct costs incurred plus other decommissioning and site restoration costs. The right-of-use assets are subsequently measured at cost less accumulated depreciation and accumulated losses due to impairment.
When the Corporation incurs a cost obligation to dismantle or remove a leased asset, restore the location in which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognized and measured in accordance with lAS 37. Costs are included in the corresponding right-of-use asset unless those costs are incurred to produce inventories.
The right-of-use assets are depreciated during the shorter period between the term of the lease and the useful life of the underlying asset. If a lease transfers the ownership of the underlying asset or the cost of the right-of-use asset reflects that the Corporation expects to exercise its option to purchase, the right-of-use asset is depreciated over the useful life of the underlying asset. Depreciation is made from the start date of the lease.
The Corporation applies IAS 36 to determine if a right-of-use asset is impaired and recognizes any impairment loss identified, as described in the accounting policy for Property, plant and equipment.
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Corporación Nacional del Cobre de Chile
r. Revenue from Contracts with Customers – Revenue is recognized in an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers.
– – Sale of mineral goods and or by-products: Contracts with customers for the sale of mineral goods and or by-products include the performance obligation for the delivery of the physical goods and the associated transportation service, at the place agreed with the customers. The Corporation recognizes revenue from the sale of goods when the performance obligation is satisfied according to the shipment or dispatch of the products, in accordance with the agreed conditions, such revenue being subject to variations related to the content and or sale price at the date of its liquidation. Notwithstanding the foregoing, there are some contracts where the performance obligation is satisfied when there is receipt of the product instead of the buyer’s corresponding destination, thus recognizing revenue at the time of said transfer. When services of transport of goods are provided, the Corporation recognizes revenue when the service obligation is satisfied.
Sales that have discounts associated with volume subject to compliance with goals are recognized net, estimating the probability that the volume target will be reached.
Sales contracts include a provisional price at the shipment date. The final price ¡is generally based on the London Metals Exchange (“LME”) price. Revenue from sales of copper is measured using estimates of the future spread of metal prices on the LME andor the spot price at the date of shipment, with subsequent adjustments made upon final pricing recognized as revenue. The terms of sales contracts with customers contain provisional pricing arrangements whereby the selling price for metal concentrate is based on prevailing spot prices on a specified future date after shipment to the customer (the quotation period). Consequently, the final price is set at the dates indicated in the contracts. Adjustments to provisional sale prices occur based on movements in quoted market prices on the LME up to the date of final pricing. The period between provisional invoicing and final pricing is typically between one and nine months. Changes in fair value over the quotation period and until final pricing are estimated by reference to forward market prices for applicable metals.
As indicated in the note related to hedging policies in the market of metal derivatives, the Corporation enters into operations in the market of metal derivatives. Gains and losses from those which are fair value hedges contracts are recognized as revenues.
– Rendering of services: Additionally, the Corporation recognizes revenue for rendering services, which are mainly related to the processing of minerals bought from third parties. Revenue from rendering of services is recognized when the amounts can be measured reliably and when the services have been provided.
s. Derivatives contracts – Codelco uses derivative financial instruments to reduce the risk of fluctuations in sales prices of its products and of exchange rates.
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Corporación Nacional del Cobre de Chile
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently measured to their fair value at the end of each reporting period.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated in equity under the item “Cash flow hedge reserve. The gain or loss relating to the ineffective portion is immediately recognized in profit or loss and included in the Finance cost or Finance income line items, depending on the effect of such ineffectiveness. The amount recognized in comprehensive income ¡is reclassified to income, in the same line in which the effects generated by the hedged item are recorded once the results of the hedged transactions are recorded in the same line or until the maturity date of such transactions.
A hedge is considered highly effective when ¡t meets the requirements of IFRS 9. At the time of discontinuation of the hedge contract or the associated designated accounting and according to the circumstances of each case, the accumulated gainloss on the derivative instrument remains in equity until the hedge transaction occurs, or if discontinuation is expected to occur, the amount in equity is reclassified to profit or loss.
The total fair value of hedging derivatives is classified as non-current financial asset or liability, if the remaining maturity of the hedged item is greater than 12 months, and as current financial asset or liability if the remaining maturity of the hedged ¡tem is less than 12 months.
The derivative contracts held by the Corporation have been entered into to apply the risk hedging policies and are accounted for as indicated below:
– – Hedging policies for exchange rate risk: The Corporation enters into exchange rate derivatives to hedge exchange rate variations between the U.S. dollar and the currencies of transactions the Corporation undertakes. In accordance with the policies established by the Board of Directors, these hedge transactions are only entered into when there are recognized assets or liabilities, forecasts of highly probable transactions or firm commitments. The Corporation does not enter into derivative transactions for non-hedging purposes.
– -Hedging policies for metal market prices risk: In accordance with the policies established by the Board of Directors, the Corporation entered into derivative contracts to reduce the inherent risks in the fluctuations of metal prices.
Hedging policies seek to protect expected cash flows from product sales operations by adjusting, when necessary, physical sales contracts to its commercial policy. When the sales commitments are fulfilled and the metal derivative contracts are settled, there ¡is an offset between the results of the sales transactions and the results of hedging using metal derivatives.
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Corporación Nacional del Cobre de Chile
Hedging transactions carried out by the Corporation in the metal derivatives market are not undertaken for speculative purposes.
– – Embedded derivatives: The Corporation has established a procedure that allows for evaluation of the existence of embedded derivatives in financial and non-financial contracts. Where there is an embedded derivative, and the host contract is not a financial instrument and the characteristics and risks of the embedded derivative are not closely related to the host contract, the derivative is required to be recognized separately.
t. Financial information by segment — The Corporation has defined its Divisions as its operating segments in accordance with the requirements of IFRS 8, Operating Segments.
The mining deposits in operation, where the Corporation conducts its extractive and processing activities are managed by the following Divisions: Chuquicamata, Radomiro Tomic, Ministro Hales, Gabriela Mistral, Salvador, Andina and El Teniente. In addition, the smelting and refining activities are managed at the Ventanas Division. All these Divisions have a separate operational management, which reports to the Chief Executive Officer, through the North and South-Central Vice-President of Operations, respectively. Income and expenses of the Head Office are allocated to the defined operating segments.
u. Presentation of Financial Statements – For purposes of lAS 1 Presentation of Financial Statements, the Corporation presents its statement of financial position classified as “current and non-current” and ¡ts statements of income “by function” and cash flows using the direct method.
v. Current and non-current financial assets – The Corporation determines the classification of its financial assets at the time of initial recognition and reviews it at each closing date.
The classification depends on the business model in which the investments are managed and the contractual characteristics of their cash flows.
The Corporation’s financial assets are classified into the following categories:
– – Atfair value through profit or loss: Initial recognition: This category includes those financial assets that do not qualify in the business model to collect contractual cash flows, nor do such cash flows come exclusively from capital and interest. These instruments are initially recognized at fair value.
Subsequent recognition: Their subsequent recognition is at fair value, recording in the consolidated statement of comprehensive income, in the line Other gains (losses) any changes in fair value.
– – Amortized cost: Initial recognition: This category includes those financial assets that qualify in the business model and that are held for the purpose of collecting contractual cash flows and that meet the “Solely Payment of Principal and Interest” (SPPI) criterion. This
34
Corporación Nacional del Cobre de Chile category includes certain Trade and other current receivables, and the loans included in other non-current financial assets.
Subsequent recognition: These (debt) instruments are subsequently measured at amortized cost using the effective interest method. The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any impairment allowance.
Interest income ¡is recognized in profit or loss and is calculated by applying the effective interest rate to the gross carrying amount of a financial asset. For financial assets measured at amortized cost that are not part of a designated hedging relationship, exchange differences are recognized in profit or loss in the Foreign exchange difference line item.
– – Atfair value through other comprehensive income: Initial measurement: Financial assets that meet the criteria “Solely payments of principal and interest” (SPPI) are classified in this category and must be maintained within a business model both to collect the cash flows and to sell the financial assets.
These instruments are initially recognized at fair value.
Subsequent recognition: Their subsequent valuation is at fair value. Interest income calculated using the effective interest rate method, foreign exchange gains and losses and impairment are recognized in income. Other net gains and losses are recognized in other comprehensive income. On derecognition, the gains and losses accumulated in other comprehensive income for debt instruments are reclassified to income.
Codelco did not irrevocably choose to designate any equity financial instruments (assets) at fair value with effect on other comprehensive income.
w. Financial liabilities – Financial liabilities are initially recognized at fair value net of transaction costs. Subsequent to their initial recognition, the valuation of the financial liabilities will depend on their classification, within which the following categories are distinguished:
– – Financial liabilities at fair value through profit or loss: This category includes financial liabilities defined as held for trading.
Changes in fair value associated with own credit risk are recorded in other comprehensive income unless doing so creates an accounting mismatch.
– – Financial liabilities measured at amortized cost: This category includes all financial liabilities other than those measured at fair value through profit or loss.
The Corporation includes in this category bonds, obligations and other current payables.
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Corporación Nacional del Cobre de Chile
These financial liabilities are measured using the effective interest rate method, recognizing interest expense based on the effective rate.
The method of the effective interest rate corresponds to the method of calculating the amortized cost of a financial liability and the allocation of interest expenses during the corresponding 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, to the net carrying amount on initial recognition.
Trade and other current payables are financial liabilities that do not explicitly accrue interest and are recognized at their nominal value, which approximates its fair value.
Financial liabilities are derecognized when the liabilities are paid or expire.
X. Impairment of financial assets – The Corporation measures the loss allowance at an amount equal to lifetime expected credit losses for certain of its trade receivables. For these, it uses the simplified approach as required under IFRS 9.
The provision matrix is based on the Corporation’s historical credit loss experience over the expected life of such trade receivables and is adjusted for forward-looking estimates considering the most relevant macroeconomic factors that affect bad debts.
Other accounts receivable and other financial assets are reviewed using reasonable and sustainable information that is available without cost or disproportionate effort in accordance with IFRS 9 to determine the credit risk of the respective financial assets. A provision for impairment losses on trade receivables and other financial assets ¡is established when there is objective evidence that the amounts due may not be fully recovered.
y. Cash and cash equivalents – The statement of cash flows reflects changes in cash that took place during the period, determined under the direct method. The Corporation has defined the following:
– Cash flows: Inflows and outflows of cash or cash equivalents, which are defined as highly liquid investments maturing in less than three months with a low risk of changes in value.
– – Operating activities: Are the principal revenue-producing activities of the Corporation and other activities that are not investing or financing activities.
– Investing activities: These are the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.
– – Financing activities: These are activities that result in changes in the size and composition of net equity and borrowings of the Corporation.
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Corporación Nacional del Cobre de Chile
Bank overdrafts are classified as external resources in current liabilities.
z. Law No. 13196 – Under this law, the return in foreign currency of sales abroad of the Corporation’s actual income from its copper production, including by-products, is taxed at
10%. The amount recognized for this concept is presented in the statement of income within the line item Other expenses by function. (Note 111.22 letter c)).
aa. Cost of sales – Cost of sales is determined according to the absorption costing method, including the direct and indirect costs, depreciation, amortization and any other expenses directly attributable to the production process.
ab. Classification of current and non-current balances – In the consolidated statement of financial position, the balances are classified according to their maturities, that is, as current for those with a maturity equal to or less than twelve months and as non-current for those with a greater maturity. Where there are obligations whose maturity is less than twelve months, but whose long-term refinancing is insured upon a decision by the Corporation whose intention is to refinance, through credit agreements available unconditionally with long-term maturity, these could be classified as non-current liabilities.
3. New standards and interpretations adopted by the Corporation
The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those applied in the preparation of the Corporation’s annual consolidated financial statements for the year ended December 31, 2021, except for the adoption of new standards, interpretations and amendments, effective from January 1, 2022, which are:
a) Reference to the Conceptual Framework – Amendments to IFRS 3:
Reference to Conceptual Framework 2018 instead of 1989. Additionally, for transactions within the scope of |AS 37 or IFRIC 21, an acquirer will apply lAS 37 or IFRIC 1 (instead of Conceptual Framework) to identify liabilities assumed in a business combination. Finally, a statement is added so that an acquirer does not recognize contingent assets acquired in a business combination.
b) Property, Plant and Equipment – Revenue before Intended Use (Amendments to lAS 16)
The income and costs from the sale of items produced while the asset is taken to the location and necessary condition of operation foreseen by the administration, are recognized in results. lt is not allowed to affect the cost of the asset by revenues and costs of such sales.
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Corporación Nacional del Cobre de Chile a
c) Onerous Contracts – Costs of Fulfilling a Contract (Amendments to IAS 37)
It is specified that the cost of fulfilling a contract includes “costs that are directly related to the contract”, which are those that either may be incremental costs of fulfilling that contract or an allocation of other costs that are directly related to fulfill the contracts.
d) Annual Improvements to IFRS Standards 2018-2020
a) IFRS 1 First-time Adoption of IFRS: Allows an affiliate to apply paragraph D16 (a) to measure cumulative translation differences using the amounts reported by its parent, based on the date of transition to IFRS of its parent.
b) IFRS 9 Financial Instruments: clarifies what fees are included when applying the 10 percent test in paragraph B3.3.6.
c) IFRS 16 Leases: removes from Illustrative Example 13, the illustration of the reimbursement of improvements to the leased asset made by the lessor.
d) IAS 41 Agriculture: removes the requirement in paragraph 22 to exclude tax cash flows when measuring the fair value of a biological asset using the present value technique.
The application of these amendments had no impact on the Corporation’s consolidated financial statements, but may affect the accounting for future transactions or arrangements.
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Corporación Nacional del Cobre de Chile
4. New accounting pronouncements
The following new standards, amendments and interpretations had been issued by the IASB, but their application is not yet mandatory:
New IFRS
Date of mandatory application
Summary
IFRS 17, Insurance Contracts
Annual periods beginning on or after January 1, 2023
Establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts, – reinsurance contracts and investment contracts with discretional participating features and supersedes IFRS 4 Insurance contracts.
Classification of Liabilities as Current or Non-Current (Amendments to lAS 1)
Annual periods beginning on or after January 1, 2024
The amendments aim to promote coherence in applying its requirements by helping companies to determine whether, in the statement of financial position, debts and other liabilities with an uncertain settlement date must be classified as current (maturing or potentially maturing in one year or less) or not current.
It is important to note that this amendment must be applied retrospectively and early application is permitted.
Disclosures on accounting policies (Amendments to IAS 1 and IFRS 2 Practice Statement)
Annual periods beginning on or after January 1, 2023
The amendments require an entity to disclose ¡ts material accounting policies.
The additional amendments explain how an entity can identify a material accounting policy. Examples are added of when an accounting policy is likely to be material. To support the amendment, the Board has also developed guidance and examples to explain and demonstrate the application of the “four-step materiality process” described in the IFRS 2 Practice Statement
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Corporación Nacional del Cobre de Chile
New IFRS Date of mandatory Summary application Definition of accounting Annual periods beginning on or | The amendments replace the estimates (amendments to IAS
8) after January 1, 2023 definition of a change in accounting estimates. According to the new definition, accounting estimates are “monetary amounts in the financial statements that are subject to measurement uncertainty”. Entities develop accounting estimates if accounting policies require that financial statement items be measured in a manner that involves measurement uncertainty. The amendments clarify that a change in the accounting estimate resulting from new information or new developments is not a correction of an error.
IFRS 10 Consolidated financial statements and lAS 28 Investments in Associates and Joint Ventures
Not specified
Issued in September 2014. The amendment addresses an inconsistency between the requirements in IFRS 10 and those in lAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.
Deferred tax related to assets and liabilities arising from a single transaction.
(amendments to IAS 12)
Annual periods beginning on or after January 1, 2023
The amendments clarify that the exemption from initial recognition does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition.
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Corporación Nacional del Cobre de Chile
New IFRS Date of mandatory Summary application Initial Application of IFRS 17 An entity that chooses to apply | The amendment permits entities and IFRS 9 – Comparative the amendment shall apply it applying IFRS 17 and IFRS 9 for the
Information (Amendment to when it first applies IFRS 17 first time at the same time to present IFRS 17) comparative information about a not yet approved for use in the – | financial asset as if the classification EU. and measurement requirements of
IFRS 9 had been applied previously to that financial asset.
Management is currently evaluating the impact of the adoption of these new regulations and modifications. It is not expected to have a significant impact on the consolidated financial statements.
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Corporación Nacional del Cobre de Chile lIl. EXPLANATORY NOTES
1. Cash and cash equivalents
The detail of cash and cash equivalents as of September 30, 2022 and December 31, 2021, is as follows: Item 9-30-2022 | 12-31-2021 ThUS$ ThUS$ Cash on hand 130 890 Bank balances 633,877 611,861 On time deposits 945,194 649,955 Mutual funds – Money market 32,180 19,142 Repurchase agreements – 1,770 Total cash and cash equivalents 1,611,381 | 1,283,618
Interest on time deposits is recognized on an accrual basis using the contractual interest rate of each of these instruments.
The Corporation does not hold any significant amounts of cash and cash equivalents that have a restriction on use.
Cash and cash equivalents meet the low credit risk exemption under IFRS 9. The classification of time deposits complies with the requirements of 7.
2. Trade and other receivables
a) Accruals for open sales invoices
The Corporation adjusts its revenues and trade receivable balances, based on future copper prices through the recognition of an accrual for open sales invoices.
When future price of copper is lower than the provisional invoicing price, the accrual is presented in the statement of financial position as follows:
– For those customers that have due balances with the Corporation, the accrual ¡is presented as a deduction from the line-item trade and other current receivables.
– Forthose customers that do not have due balances with the Corporation, the accrual is presented in the line-item trade and other current payables.
When the future copper price is higher than the provisional invoicing price, the accrual is added to the line-item trade and other current receivables.
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Corporación Nacional del Cobre de Chile
Accordingly, as of September 30, 2022, a negative provision of ThUS$326,421 was recorded in the account Trade and other accounts receivable for provisions for unfinished sales invoices. As of December 31, 2021 it was a positive provision of ThUS$187,541
As of September 30, 2022, ThUS$9,293 of negative provision for unfinished invoices associated with customers who do not maintain balances due to Codelco was reclassified to Trade accounts payable of current liabilities, which added to the balance presented in Trade and other accounts receivable, totaled a net negative provision of ThUS$335,714.
b) Trade and other receivables
The following table sets forth trade and other receivables balances, with their corresponding allowances for doubtful accounts:
Item Current Non-current
9-30-2022 | 12-31-2021 | 9-30-2022 | 12-31-2021 ThUS$ ThUS$ ThUS$ ThUS$
Trade receivables (1) 1,689,530 3,752,997 – – Allowance for doubtful accounts (3) (3,744) (11,410)
Subtotal trade receivables, net 1,685,786 3,741,587 – – Other accounts receivable (2) 406,549 460,610 80,220 104,177 Allowance for doubtful accounts (3) (15,868) (7,847) – – Other other accounts receivable, net 390,681 452,763 80,220 104,177 Total 2,076,467 4,194,350 80,220 104,177
(1) Trade receivables correspond to the sales of copper and its by-products, those that in general are sold in cash or through bank transfers.
(2) Other receivables mainly consist of the following items: e Remaining tax credit susceptible to refund VAT and other taxes receivable, amounting to ThUS$176,932 and ThUS$132,674 as of September 30, 2022 and December 31, 2021, respectively.
e Corporation’s employee short-term loans and mortgage loans, both monthly deducted from the employee’s salaries. Mortgage loans granted to the Corporation’s employees for ThUS$24,939 are secured with collateral.
e Reimbursement receivables from insurance companies.
e Accounts receivable for tolling services (Ventanas Smelter).
(3) The Corporation recognizes an allowance for doubtful accounts based on its expected credit loss model.
The reconciliation of changes in the allowance for doubtful accounts for the years ended September 30, 2022 and December 31, 2021, were as follows:
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Corporación Nacional del Cobre de Chile
3.
ltem 9-30-2022 12-31-2021 ThUus$ ThUS$ Opening balance 19,257 16,979 Increases 355 2,278 Movement, subtotal 355 2,278 Closing balance 19,612 19,257
The balance of past due but not impaired balances is as follows:
Ageing 9-30-2022 12-31-2021 ThUus$ Thus$ Less than 90 days 428 4,030 90 days – 1 year 1,729 1,304 Over 1 year 6,858 5,977 Total unprovisioned past-due debt 9,015 11,311
Balances and transactions with related parties
a) Transactions with related persons
In accordance with Law on New Corporate Governance, the members of Codelco’s Board are, in terms of transactions with related persons, subject to the provisions of Title XVI of Law on Corporations, which sets the requirements regarding transactions with related parties in publicly traded companies and their subsidiaries.
Notwithstanding the foregoing, pursuant to the provisions of the final paragraph of Article 147 b) of Title XVI, which contains exceptions to the approval process for transactions with related parties, the Corporation has established a general policy over customary transactions (which was communicated through a significant event notice to the CMP), that defines customary transactions as those carried out with ¡ts related parties in the normal course of business, which contributes to the social interest and are necessary to the normal development of Codelco’s activities.
Likewise, consistent with the referred to above standard, the Corporation has implemented as part of its internal regulatory framework, a specific policy dealing with business between related persons and companies with Codelco’s executives. Codelco’s Corporate Policy No.18 (CCP No. 18), the latest version currently in force, was approved by the Chief Executive Officer and the Board of Directors.
Accordingly, Codelco without the authorization required in CCP No. 18 and of the Board of Directors, as required by Law or by the Corporation by-laws, shall not enter into any contracts or agreements involving one or more Directors, its Chief Executive Officer, the members of Division’s Managing Committees, Vice-presidents, Legal Counsel, General Auditor, Division Chief Executive Officers, Advisors of Senior Management, employees who must make recommendations andor have the authority to award tenders, assignments of purchases andor contracting goods and services, and employees in
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Corporación Nacional del Cobre de Chile management positions (up to fourth hierarchical level in the organization), including their spouses, children and other relatives up to second degree of relation, with a direct interest, represented by third parties or on behalf of another person. Likewise, CCP No. 18 requires administrators of Corporation’s contracts to declare all related persons and disqualify himselfherself if any related persons are involved within the field of hisher job responsibilities.
This prohibition also includes the companies in which such administrators are involved through ownership or management, either directly or through representation of other natural persons or legal entities, as well as those individuals who also have ownership or management in those companies.
The Board of Directors has been informed and approved certain transactions as defined in CCP No. 18.
These operations include those shown in the following table, for the total amounts mentioned, which must be executed within the time periods specified in each contract:
124-2022 | 1-4-2021 | 7:4-2022 | 7-1-2021
Company “axpayer D No. [Country [Nature ofretationship | – Tiansaction | 930-2022 | 9-40-2021 | 9-30-2022 | 0-30-2021 description Amount | Amount | Amount | Amount Tnuss | ThuS$ | ThuS$ | ThUSS [Anglo American Sur S.A 77.762.940-9 | Cie Associate Supples – 2 – –
Centro de Capacitación y Recreación Radomiro Tomic. | 75.985.550-7 | Chie | Oherrelated partes Services | 1589 –
Centro de Especialidades Médicas San Lorenzo Ltda. | 76.124.156-7 | Chile Subsidiary Services 447 387 447
Cínica San Lorenzo Ltda. 88.497.100-4 | Chile Subsidiary Services – 426 – –
Ecometales Limited agencia en Chile. 59.087.530-9 | Chile Subsidiary – | Services and Supplies | – 14,252 661 – 136
Empresa Nacional de Telecomunicaciones S.A. 92.580.000-7 | Chile | Retatve ofemployee Services 415 – – –
Finning Chile S.A. 91.489.000-4 | Chie | Retatve ofemployee | Services and Supplies | – 39,903 – | 39840
Fismidth S.A 89.664.200-6 | Chie | Retatve ofemployee Supplies – | 23695 –
Fundación de salud El Teniente 70.905.700-6 | Chile Subsidiary Services | 6583 – –
Industial y Comercial Arimatemb Ltda. 76.108.720-7 | Chie | Retatve ofemployee Supplies 48 180 48 180 [Salud Isapre de Codelco Ltda 76:334.370-7 | Chile Subsidiary Services | 15422 – –
Kairos Mining S.A. 76.781.030-k | Chile Associate Services | 13332 | 12757
Linde Gas Chile SA 90.100.000-k | Chie | Retatve ofemployee Supplies 47 3 6 16
Marsol S.A. 91.443.000-3 | Chie | Retatve ofemployee Supplles 272 – 212 –
Nueva Ancor Tecmin S.A. 76.411.920-0 | Chie | Retatve ofemployee Supplls 424 – 177
Sociedad Contactual Minera El Abra. 96.701.340-4 | Chi Associate Supplles – 2 –
Sonda SA. 83.628.100-4 | Chie | Retatve ofemployee Services | 1383 –
Suez Medioambiente Chile S.A. 77.441.870-9 | Chie | Retatve ofemployee Supplles 16,987 98] 5707 –
Manufacturas AC Ltda 77.439.3504 | Chile. | Retatve ofemployee Supplles 80 109 1 32
MI Roboto Solutons S.A. 76:869.100-2 | Chile | Retaive ofemployee | Services and Supplies 609 375 605 246 [Tecno FastS.A. 76.320.186-4 | Chile | Relative of employee Services 44041 | 19351 | 44,041 – [Termoequipos SpA 78.122:830-9 | Chie | Retatve ofemployee Supplies 40 4 2
Comercial e Import. Vilanueva Ltda 77.00.2001 | Chile. | Retatve ofemployee Supplles 833 600 221 177
Deloite Advisory SpA 76:863.650-8 | Chie | Retatve ofemployee Services – 7 – –
Fluor Chile Ingeniera y Construcción S.A. 85.555.900-5 | Chie | Retatve ofemployee Services 4,473 – –
Sitans Servicios integrados de transporte Ltda. 96:500.950-7 | Chile | RelaiveofDirector Services – | 2800 –
Symnetos SA. T7812.640-0 | Chie | Retatve ofemployee Services 1008] 1019] 1008
Constuctora Domingo Vilanueva Arancibia S.A 96.846.150-8 | Chie | Retatve ofemployee Services 6468 195 – –
Metso Outotec Chile SpA 93.077.000-0 | Chile | Retatve ofemployee | Services and Supplies | – 57,332 | – 64,767 | 17,765| 64.021
Ingeniería y Constucción Fenix Ltda 76.134:977-5 | Chie | Retatve ofemployee Supplies 1,112 236 – 236
Kanssen S.A 81.198.100 | Chile | Relative ofDirector Supplls 109 6 13 6
Enaex Servicios S.A 76.041.871-4 | Chile | Relative ofDirector Supplles 6446 9| 6446 9
Costella Proyectos 76.282.588-0 | Chie | Retatve ofemployee Services 3423 | 3423 –
Buses JM Pullman S.A. 78,502.770-+ | Chie | Retatve ofemployee Services 11,631 – – lAdetanta Asesorías y Servicios Ltda 76:425.905-k | Chie | Retatve ofemployee Services 135 – –
Emin Ingeniería y Construcción SAA 79.527.230-5 | Chile. | Retatve ofemployee Supplies 56,547 – | 56547
LR! Ingeniería SAA 96.611.980-6 | Chie | Retatve ofemployee Services 4213 | 4213
Georock S.A 77.842.840-7 | Chie | Retatve ofemployee Services 8959 -| 8959 [CDZ Ingeniera Uno La. 77.535.292:2 | Chile. | Retatve ofemployee Services 8511 | 85%
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Corporación Nacional del Cobre de Chile
b) Key Management of the Corporation
In accordance with the policy established by the Board of Directors and its related regulations, the transactions with the Directors, the Chief Executive Officer, Vice Presidents, Corporate Auditor, the members of the Divisional Management Committees and Divisional General Managers shall be approved by the Board of Directors.
During the nine-month and three-month periods ended September 30, 2022 and 2021, the members of the Board of Directors have received the following amounts as per diems, salaries and fees:
14-202 | 1-1-2021 | 7-4-2022 | 7-1-2021 a Transaction – | 9-30-2022 | 9-30-2021 | 9-30-2022 | 9-30-2021 Name Taxpayer ID No. [Country|- Nature ofrelationship description – Í Amount | Amount | Amount | Amount Thuss_ | Tmuss | Tmuss | Tnuss Blas Tomic Errázuriz 5.390891-8 | Chile [Director Directors fee – 38 – – ¡Ghassan Dayoub Psel 14.695.625 | Chile [Director Directors fee – 23 ¡Ghassan Dayoub Psel 14.695.625 | Chile [Director Payroll – 45 – – Hernán de Solminihac Tampier | 6.263,304-2 | Chile: [Director Directors fee 28 67 – 2 lsidoro Palma Penco 4,754.025-9 | Chile: [Director Directors fee 76 76 2 27 Vuan Benavides Feliú 5.633.221-9 | Chile [Chairman ofthe Board ofdirectors| – Directors fee 42 100 – 31 Vuan Morales Jaramillo 5.078.923-3 | Chile: [Director Directors fee 6 67 19 2 Paul Schiodtz Obilinovich 7.70719-9 | Chile: [Director Directors fee – 30 – – Rodrigo Cerda Norambuena – | 12:454.621-4 | Chile: [Director Directors fee – 7 – – Felipe Larraín Bascuñán 7.012.075-5 | Chile: [Director Directors fee 28 4 – 2 Pedro Errázuriz Dominguez 7.051.188-5 | Chile: [Director Directors fee 61 36 19 2 Paticia Núñez Figueroa 9.761.676-0 | Chile: [Director Directors fee 6 36 19 2 Máximo Pacheco Matte 6.371.887-4 | Chile [Chairman ofthe Board ofdirectors| – Directors fee 70 – 2 – Josefina Montenegro Aravena | 10.780.138-3 | Chile [Director Directors fee 33 – 20 Alejandra Wood Huidobro 7.204368-5 | Chile: [Director Directors fee 31 – 19 Nelson Cáceres Hernandez – | 14.379.277-3 | Chile: [Director Directors fee 31 – 19 Nelson Cáceres Hernandez | 14.379.277-3 | Chile [Director Payroll 21 – 17
The Ministry of Finance through Supreme Decree No. 233, dated February 09, 2022, established the compensation for the Corporation’s Directors. The compensation to Board of Director members is as follows:
a. The Directors of Codelco will receive a fixed monthly compensation of Ch$4,413,071 (four million four hundred thirteen thousand seventy-one Chilean pesos) for meeting attendance. The payment of the monthly compensation requires at least one meeting attendance each month.
b. The Chairman of the Board will receive a fixed monthly compensation of Ch$8,826,140 (eight million eight hundred and twenty-six thousand one hundred and forty Chilean pesos).
c. Each member of the Directors’ Committee, whether the one referred to in Article 50 bis) of Law No. 18046 or another established by the Corporation by-laws, will receive a fixed additional monthly compensation of Ch$1,471,022 (one million four hundred and seventy- one thousand and twenty-two Chilean pesos) for meeting attendance, regardless of the number of committees of which they are members. In addition, the Chairman of the Directors Committee will receive a fixed monthly compensation of Ch$2,942,047 (two million nine hundred and forty-two thousand- and forty-seven-pesos Chilean pesos) for meeting attendance
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Corporación Nacional del Cobre de Chile
d. The compensation established in the legal text is effective for a period of two years, as from March 1, 2022, and will not be adjusted during said period
On the other hand, the short-term benefits to key management of the Corporation expensed during the nine-month periods ended September 30, 2022 and 2021, were ThUS$ 11,253 and ThUS$ 10,741, respectively.
The methodology to determine the remuneration of key management was approved by the Board of Directors at a meeting held on January 29, 2003.
During the period from January to September 30, 2022 and 2021, there were payments to key management of Codelco for severance indemnities and other retirement-related payments equivalent to ThUS$ 1,494 and ThUS$ 231, respectively.
There were no payments for other non-current benefits during the nine-month periods ended September 30, 2022 and 2021, other than those mentioned in the preceding paragraph.
There are no share-based payment plans.
Transactions with companies in which Codelco has ownership interest
The Corporation undertakes commercial and financial transactions that are necessary for its activities with its subsidiaries, associates and joint ventures (related parties). The financial transactions correspond mainly to loans granted (mercantile current accounts).
Commercial transactions with related companies mainly consist of purchasessales of products or rendering of services carried out under market conditions and prices, which do not bear any interest or indexation.
The Corporation does not make allowances for doubtful accounts on the main items receivable from its related companies since these have been subscribed with the relevant safeguards in the respective debt agreements.
The detail of accounts receivable and payable between the Corporation and its related parties as of September 30, 2022 and December 31, 2021 is as follows:
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CODELCO
Accounts receivable from related entities:
Country of| Nature of Currency of Current Non-current Taxpayer ID No. Name origin relationship | readjustment 9-30-2022 | 12-31-2021 | 9-30-2022 | 12-31-2021 ThUS$ ThUS$ ThUS$ Thus$
77.762.940-9 ¡Anglo American Sur S.A. Chile Associate US$ 1,826 147,238 – –
76.063.022-5 [Inca de Oro S.A. Chile Associate US$ 872 505
76.255.054-7 Planta Recuperadora de Metales SpA | Chile Associate US$ – 1,319
96.701.340-4 ¡Sociedad Contractual Minera El Abra Chile Associate US$ 10,738 1,869 – –
96.801.450-1 [Agua de la Falda S.A. Chile Associate US$ 5 5 224 224
76.028.880-2 ¡Sociedad Contractual Minera Puren Chile Associate US$ – 5,775 – –
Total 13,441 156,711 224 224
Accounts payable to related entities:
Country of|- Nature of Currency of Current Non-current Taxpayer ID No. Name origin relationship | readjustment 9-30-2022 | 12-31-2021 | 9-30-2022 | 12-31-2021 Thus$ ThUS$ ThUS$ ThUS$
77.762.940-9 Anglo American Sur S.A. Chile Associate US$ 49,901 183,973 – –
96.701.340-4 ¡Sociedad Contractual Minera El Abra Chile Associate US$ 31,635 35,145
76.255.054-7 Planta Recuperadora de Metales SpA | – Chile Associate US$ 2,303 20
76.781.030-K Kairos Mining S.A. Chile Associate CLP 742 2,206 Total 84,581 221,344
The following table sets forth the transactions carried out between the Corporation and its related companies and their corresponding effects in profit or loss for the periods of nine- months and three-months ended September 30, 2022 and 2021:
11212 E] TA2022 A]
29-30-2022 92-30-2021 9-30-2022 9-30-2021 Effecton Effecton Effecton Effecton |[Taxpayer 1D No. Company Transaction description – [Country [Currency| Amount | income – | Amount | – income – | Amount | income – | Amount | income [chargeJícredit [chargeJfcredit (chargellcredit (charge]credit muss | muss | Tmuss | Tmuss | muss | muss | muss | Thus$ IG EOTA500 [Agua dela Falda SA. [Sale services chie | CLP 1 1 1 1 1 1 1 1
96.801.450. Jagua de la Falda SA. [Contibuton chie | us$ 257 19 – – – – –
77.162.409. [Anglo American Sur SA. Dividends received Chie | US$ | 138445 -| 200577 | 02m -| 193,61
77.162.409. [Anglo American Sur SA. Dividends receivable chie | us$ – – – -| (40272) -| (193,161) –
77.162.409 |anglo American Sur SA. Product sales chie | us | 3692 36924 | 105085 105085 | 17435 17.435| 62031 62031
77.162.409 |anglo American Sur SA. [Oñer sales chie | clp | 282 2824| 12,432 12432| 1192 1192| 3047 3047
77.162.409. [Anglo American Sur SA. Produc purchase chie | uss | s1222| (sta222)| r3est| (r30sta| aesde| – (118:408)| 230435] – (239435)
76.063.0225 |ncade Oro SA [Payments on accountofhe company | Chile | CLP 8 8 5 – – – 19 –
77.781.030 [Kairos Mining [Services Chie | CLP | 828 (8281)| 80% (8092) | – 3468 (3468) | – 402 (4.029)
77.781.030 [Kairos Mining [Sale of services Chie | CLP 1 1 1 1 – – – –
77.781.030 [Kairos Mining Dividends received chie | us$ – – 78 – 78
76.255.054. [Plana Recuperadora de Metales SpA [htereston loan AS – ES 133 – – – –
76.255.054. [Plana Recuperadora de Metales SpA Services chie | us | 18088 (18.088) | 20721 (20,721) | – 5896 (5896) | 1948 (1948)
76.255.054. [Plana Recuperadora de Metales SpA Product sales Chie | Uss | 2466 2466| 4049 4049 n a 15 1510
76.255.054. [Plana Recuperadora de Metales SpA [Loan recovery chie | us$ – 540 – (100) –
96.701.340-4. [Soc. Contractual Minera El Abra [Dividends received Chie | Uss | 25478 – – – – – – –
96.701.340-4. [Soc. Contractual Minera ElAbra — [Product purchases. chie | uss | 274908] – (27agos)| 2e6ste| – (2ssitep| 127207] – (127207) s538es| (53898)
96.701.340-4. [Soc. Contractual Minera ElAbra– [Productsales chie | us | 51278 51278 | 16034 16034 | 22339 22309| 5576 556
96.701.340-4. [Soc. Contraciual Minera El Abra [Ober sales chie | us | 1487 148r| 1,120 1100] 75 75 | 37 374
96.701.340-4. [Soc. Contractual Minera ElAbra– [Commissions received Chie | us$ 79 79 66 66 2 2 2 2
96.701.340-4 Soc. Contractual Minera ElAbra_[Ober purchases. chie | us$ 264 (264) 65 (65)| 249 (9) 06 16
d) Additional information
The purchasesales of products transactions with Anglo American Sur S.A., are regular business activity transactions to buysell copper and other products. On the other hand, there are certain transactions related to the contract entered into with the subsidiary Inversiones Mineras Nueva Acrux SpA (whose non-controlling shareholder is Mitsui) and Anglo American Sur S.A., under which the latter agreed to sell a portion of its annual copper output to said subsidiary.
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Corporación Nacional del Cobre de Chile
4.
Inventories
Inventories as of September 30, 2022 and December 31, 2021 are detailed as follows:
Current Non-current Item 9-30-2022 12-31-2021 9-30-2022 12-31-2021 ThUS$ ThUS$ ThUS$ ThUS$
Finished products 215,708 111,516 –
Subtotal finished products, net 215,708 111,516 – – Products in process 1,612,278 1,109,373 604,502 610,558 Subtotal products in process, net 1,612,278 1,109,373 604,502 610,558 Materials in warehouse and others 916,467 755,157 – – ¡Adjustment for obsolescence provision (178,201) (164,591)
Subtotal materials in warehouse and other, net 738,266 590,566 – – [Total inventories 2,566,252 1,811,455 604,502 610,558
Inventories recognized in cost of sales during the nine-month periods ended September 30, 2022 and 2021, correspond to finished products and amount to TRUS$ 8,321,260 and TRUS$ 8,804,463, respectively.
For the period January to September 30, 2022 and 2021, the Corporation has not reclassified strategic inventories to Property, Plant and Equipment.
The reconciliation of changes in the allowance for obsolescence is detailed below:
Movement obsolescence provision 9-30-2022 | 12-31-2021 ThUS$ ThUS$ Opening balance (164,591)| (171,947) (Decrease) Increase in provision (13,610) 7,356 Closing balance (178,201)| (164,591)
During the nine months ended September 30, 2022, inventory write-offs of ThUS$1,955 were recognized (ThUS$3,070 during January – September 2021).
At September 30, 2022 the provision for net realizable value of copper and its effect on income during the period January to September 2022 was ThUS$41,081 and a loss of TRUS$31,944 respectively (profit of ThuS$5,286 for the same period 2021). As of December 31, 2021, the net realizable value provision was ThUS$9,137.
As of September 30, 2022 and 2021, there are no unrealized gains or losses recognized for purchase and sale transactions of inventories with related parties.
As of September 30, 2022 and December 31, 2021, there are no inventories pledged as security for liabilities.
49 (Y)
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Corporación Nacional del Cobre de Chile
5. Income taxes and deferred taxes
a) Deferred tax assets and liabilities
Deferred taxes are presented in the Statement of Financial Position as follows:
Deferred taxes 9-30-2022 12-31-2021 ThUS$ ThUS$ Non-current assets 90,526 94,595 Non-current liabilities 7,978,169 7,004,523 Total deferred taxes, net 7,887,643 6,909,928
The following table shows the deferred tax opening, net, classified as assets or liabilities according to the nature of the temporary differences:
Deferred tax assets 9-30-2022 12-31-2021 ThUS$ ThUS$ Provisions 1,571,975 1,541,835 Tax loss 115,637 114,961 Contracts for the right to use assets (9,298) (5,153) Other (5,961) (4,079) Total deferred tax assets 1,672,353 1,647,564 Deferred tax liabilities 9-30-2022 12-31-2021 ThUS$ ThUS$ Accelerated depreciation 7,601,287 6,405,256 Change in property, plant and equipment 1,427,111 1,714,652 Tax on mining activity 330,285 342,926 Fair value of acquired mineral claims 169,000 70,178 Deferred income taxes of subsidiaries 18,732 10,770 Hedging derivatives (5,905) (7,454) Valuation of severance indemnities 19,486 21,164 Total deferred tax liabilities 9,559,996 8,557,492
b) The effect of deferred taxes recognized in comprehensive income ¡is detailed as follows:
Deferred taxes that affected comprehensive income 9-30-2022 9-30-2021 Thus$ ThUus$ Cash flow hedge (65,728) 48,046 Defined benefit plans 32,187 (54,358) [Total deferred taxes that affected comprehensive income (33,541) (6,312)
c) Composition of income tax (expense)
1-1-2022 1-1-2021 7-1-2022 7-1-2021 Composition 9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUS$ ThUS$ Deferred tax effect (458,133) (1,034,682) (250,643) (124,512) Currenttax expense (748,555)| – (1,659,276) 223,713 (685,486) ¡Adjustments previous periods – 3,798 – – Total income tax (expense) (1,206,688)| – (2,690,160) (26,930)| (809,998)
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Corporación Nacional del Cobre de Chile
d) The following table sets forth the reconciliation of the effective tax rate:
9-30-2022 Items Taxable base Tax Rate
25% 40% 5.00% 25% Addit. 40% | 5.00% Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Tax effecton income before income taxes 1,671,468 1,671,468 1,671,468 (417,867) (668,587) (83,573) (1,170,027) Tax effecton income before income tax subsidiaries 26,396 26,396 26,396 (6,599) (10,558) (1,320) (18,477) Tax effecton consolidated income before income tax 1,697,864 1,697,864 1,697,864 (424,466) (679,145) (84,893) (1,188,504) Permanent differences
Corporate income tax (25%) (169,915) 42,479 42,479 Specific tax on state-owned companies art. 2? D.L. 2.398 (40%) 125,431 (50,172) (50,172) Specific tax on mining activity 209,793 (10,491) (10,491) TOTAL INCOME TAX (381,987) (729,317) (95,384) (1,206,688)
9-30-2021 ltems Taxable base Tax Rate 25% 40% 5,24% 25% Addit. 40% | 5.24% Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Tax effecton income before income taxes 4,105,427 4,105427 4,105,427 (1,026,357) (1,642,171) (215,124) (2,883,652) Tax effecton income before income tax subsidiaries 91,636 91,636 91,636 (22,909) (36,654) (4,802) (64,365) Tax effecton consolidated income before income tax 4,197,063 4,197,063 4,197,063 (1,049,266) (1,678,825) (219,926) (2,948,017) Permanent differences
Corporate income tax (25%) (513,392) 128,348 128,348 Specific tax on state-owned companies art. 2? D.L. 2.398 (40%) (293,866) 117,546 117,546 Specific tax on mining activity (155,819) 8,165 8,165 Differences from prior years’ taxes 3,798 TOTAL INCOME TAX (920,918) (1,561,279) (211,761) (2,690,160)
The Corporation has applied a rate of 25% to calculate deferred income tax and first category income tax. As a state company, the Corporation is classified as those companies Of article 14 letter G of the Income Tax Law, incorporated in the Tax Reform Law No. 21210 of February 24, 2020, maintaining the General Regime of Taxation. Meanwhile, the national subsidiaries and associates, by default, have applied the Partially Integrated taxation system with a rate of 27% for both years. Foreign subsidiaries and associates have applied the tax rates in force in their respective countries.
Article 2 of Decree Law No. 2398 establishes an additional 40% income tax rate on the Corporation’s taxable income plus the share of retained earnings of companies not organized as corporations or joint stock companies and the dividends actually received from the latter.
For the Specific Tax on Mining Activities, in accordance with Law No. 20469, a rate of 5% has been estimated as of September 30, 2022.
On September 2, 2020, Law No. 21256 was published in the Official Journal, for the tax measures that are part of the emergency plan for economic reactivation. According to Article No. 3, added Article No. 23 bis of Law No. 21210, incorporating a temporary depreciation regime that allows full and instant depreciation of fixed assets and that is in force for acquisitions carried out between June 1, 2020, and December 31, 2022. As a state company, the Corporation as a taxpayer that pays taxes based on effective income and complete accounting, availed itself of the indicated benefit as of tax year 2022.
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Corporación Nacional del Cobre de Chile a
6. Current and non-current tax assets and liabilities
The current tax balance is presented net of monthly provisional payments as an asset or liability in Current Taxes determined as indicated in section Il. Main accounting policies,
2.1):
Current tax assets 9-30-2022 12-31-2021
ThUS$ ThUS$ Recoverable taxes 161,380 11,438 Total current tax assets 161,380 11,438
Current tax liabilities 9-30-2022 | 12-31-2021
ThUS$ ThUS$ Provision for Monthly Advance Payments 12,477 14,742 ¡Tax provision 2,022 293,634 Total current tax liabilities 14,499 308,376
9-30-2022 | 12-31-2021 Non-current tax assets
ThUS$ ThUS$ Non-current tax assets 4,699 4,333 Total non-current tax assets 4,699 4,333
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Corporación Nacional del Cobre de Chile
7. Property, plant and equipment
a) The items of property, plant and equipment as of September 30, 2022 and December 31,2021, are as follows:
Property, plant and equipment, gross: 9-30-2022 | 12-31-2021 ThUS$ ThUS$
Works in progress 5,385,404 6,869,931 Land 224,993 369,484 Buildings 6,841,880 6,269,026 Plant and equipment 21,351,323 | 20,291,671 Fixtures and fittings 47,181 47,618 Motor vehicles 2,117,178 2,086,593 Lands improvement 8,876,814 7,549,671 Mining operations 10,427,823 | 10,026,052 Mine development 5,974,986 5,612,654 Other assets 977,028 976,656 Total property, plant and equipment, gross 62,224,610 | 60,099,356
Property, plant and equipment, accumulated e 9-30-2022 | 12-31-2021 depreciation
ThUS$ ThUS$ Works in progress – – Land 19,755 17,949 Buildings 3,615,089 3,500,094 Plant and equipment 12,276,162 | 11,794,536 Fixtures and fittings 45,192 44,294 Motor vehicles 1,686,410 1,622,813 Improvements to land 4,261,150 4,034,574 Mining operations 7,434,189 6,966,153 Mine development 1,229,392 1,148,161 Other assets 556,027 520,889
Total property, plant and equipment, accumulated e 31,123,366 | 29,649,463 depreciation
Property, plant and equipment, net 9-30-2022 | 12-31-2021 ThUS$ ThUS$
Works in progress 5,385,404 6,869,931 Land 205,238 351,535 Buildings 3,226,791 2,768,932 Plant and equipment 9,075,161 8,497,135 Fixtures and fittings 1,989 3,324 Motor vehicles 430,768 463,780 Improvements to land 4,615,664 3,515,097 Mining operations 2,993,634 3,059,899 Mine development 4,745,594 4,464,493 Other assets 421,001 455,767 Total property, plant and equipment, net 31,101,244 | 30,449,893
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Corporación Nacional del Cobre de Chile
b) Movements in property, plant and equipment
Movements Works in Land Buildings Plantand [Fixed installations |; 040, vopictes. |Land improvement | Mining operations | Mine development| – Other assets Total (nttousands 01455) progress equipment 8 accessories in thousands of [Reconciliation of changes in property, plant and equipment Property plant and equipment at beginning of period Opening balance 1-1-2022 6,869,931 351,535] 2,768,932] 8,497,135] 3324 463,780] 3,515,091| 3,059,899] 4,464,493] 455,767 30,449,893 Changes in property, plant and equipment
Increases other than those resuling from business combinatons, property, plant and equipment 2,227,119] y 7 2 1 7 – 274,208| – 25| 2,501,361
Depreciaton, property, plant and equipment – (1,806) (116,732) (515,655) (1,148) (74,594) (231,069) (480,610) (72.862) (35.454) (1,529,930) Impairmentlosses recognized in proftor loss for the period y – – J – – ,
Increase (decrease) through transfers and other changes, property, plant and equipment horeases (decreases) due to transfers from construcion in progress, ropery,plantand equipment (2,588,309) – 395,178 1,120,251] , 49,791 873,509 161,688] 32,609 To horeases (decreases) due lo oher changes, property, plant and equipment (1,123,247) (144491) 289.530 (23,269) (194) 0 468,121 (41.551) 321,364 (107) (613,845) Increase (decrease) through transfers and other changes, property, plant and equipment (8,711,646) (144,491) 575,308 1,096,994 (194) 49,788] 1,331,636] 140,137] 353,963 663, (619,845) Disposals and retirements of service, property, plant and equipment
Refrements, proper, plantand equipment – – (744) (8315) , (2206) – – – – (6,235) Disposals and retirements of service, property, plant and equipment , , (714) (8315) , (2206) – – – – (6,235) Increase (decrease) in property, plant and equipment (1,484,527) (146,297) 467.859 578,026 (1,335) (33,012) 1,100,567] (66,265) 281,101 (34,766) 651,351 Property, plant and equipment at end of period Closing balance 09-30-2022 5,385,404 205,238 3,226,791 9,075,161 1,989] 430,168 4,515,564 2,999,604 4,745,594 421,001 31,101,244
Movements 5 . se hs on Land Buildings an ao Motor vehicles mn 19 [Mining operations | Mine development| – Other assets Total (in thousands of US$) Pr quie ¡Reconciliation of changes in property, plant and equipment Property plant and equipmentat beginning of period Opening balance 1-1-2021 6,391,278] 370,368] 2,877,686] 8,597,454] 5202 529,731] 3,094,164] 3,050,266| 3,991,916] 643,834] 29,551,905] Changes in property, plant and equipment
Increases other than those resuling from business combinatons, property, plant and equipment 2,888,970] y 613] 3,143 216] 28] 482] 318,795 1,874 62 3,214,742] Depreciaton, property, plant and equipment – (4,815) (175,128) (645,816) (2.018) (100,083) (310,779) (703,986) (118,571) (46,569) (2,107,765) Impairmentlosses recognized in proftor loss for the period 5,584 – (66,218) (57.760) (15) 7 (6,006) – – – (124,315) Increase (decrease) through transfers and other changes, property, plant and equipment
Increases (decreases) due to transfers fom constucion in progress, property, plantand equipment (2,293,773) y 108,383 569,413] z 38,496] 716.474] 867,234] (1,572) 1,345
Increases (decreases) due to other changes, property, plant and equipment 29.469] (14,018) 25,120] 41,241 a) (224) 20810 (472,410) 596,846 (1,458) 225,335] Increase (decrease) through transfers and other changes, property, plant and equipment (2,264,304) (14,018) 133,503] 610,654 (41) 38,272] 737,284 394,824 589,274] (113) 225,335] Disposals and retirements of service, property, plant and equipment
Retrements, property, plant and equipment (151,697) y (1,524) (10,540) (20) (4,174) (48) 7 – (142,006) (310,008) Disposals and retirements of service, property, plant and equipment (151,697) z (1,524) (10,540) (20) (4,74) (48) – – (142,006) (310,009) Increase (decrease) in property, plant and equipment 478,653 (18,833) (108,754) (100,319) (1,878) (65,957) 420,933| 9,633] 472,511 (188,067) 897,988| Property, plant and equipment at end of period Closing balance 12-31-2021 6,869,931 351,535] 2,768,932] 8,497,135] 3,324 463,780] 3,515,097] 3,059,899] 4,464,493] 455,767 30,449,893]
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c) The balance of construction in progress is directly associated with the operating activities of the Corporation and relates to the acquisition of equipment for projects in construction and associated costs for their completion.
d) The Corporation has signed insurance policies to cover the possible risks to which the various property, plant and equipment items are subject, as well as the possible claims that may arise for the period of its activities. Such policies sufficiently cover the risks to which they are subject in Management’s opinion.
e) Borrowing costs capitalized for the nine-month periods ended September 30, 2022 and 2021, amounted to ThUS$209,224 y ThUS$171,980, respectively. The annual capitalization average rate as of September 30, 2022 and 2021 was 4.28% and 4.07%, respectively.
f) Expenses on exploration and drilling of deposits recognized in profit or loss and the cash outflows disbursed for the same concepts are presented in the following table:
Expenditure on exploration and drilling resorvoirs 1-1-2022 1-1-2021
9-30-2022 9-30-2021 ThUS$ ThUS$ Netincome for the period 59,449 28,621 Cash outfiows disbursed 51,651 30,385
g) The detail of “Other assets” under “Property, plant and equipment” is as follows:
Other assets, net 9-30-2022 12-31-2021 ThUS$ ThUS$ Mining properties from the purchase of Anglo American Sur S.A 260,000 260,000 Maintenances and other major repairs 127,312 153,132 Other Assets – Calama Plan 28,696 37,782 Other 4,993 4,853 Other assets, net 421,001 455,767
As of September 30, 2021, as a result of an update of the valuation of the mining properties acquired as part of the purchase of a stake in Anglo American in 2012, it was determined that the value of such asset is ThUS$260,000, which implied the recognition of a value adjustment of ThUS$142,000 in income before taxes.
h) The Corporation currently has no ownership restrictions relating to assets belonging to Property, plant and equipment, except for leased assets whose legal title corresponds to the lessor.
1) Codelco has not pledged property, plant and equipment as collateral for debt obligations.
j) In accordance with the provisions of section !!. Significant accounting policies, 2 ¡), referred to impairment of property, plant and equipment and assets, the subsidiary Sociedad de Procesamiento de Molibdeno Ltda. recorded at December 31, 2021, an impairment of assets in the amount of ThUS$125,483 before taxes (see note 21).
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Corporación Nacional del Cobre de Chile
8.
Leases
8.1 Right-of-use assets
As of September 30, 2022 and December 31, 2021, the breakdown of the right of use asset category is:
Detail 9-30-2022 12-31-2021 ThUS$ ThUS$
Right-of-use assets, gross 944650 858,083
Right-of-use assets, accumulated depreciation 541,335 496,544
Total right-of-use assets, net 403,315 361,539 follows: Reconciliation of changes in Right-of-use Assets 9-30-2022 12-31-2021 (in thousands of US$) ThUS$ ThUus$ Opening balance 361,539 461,040 Increases 160,004 83,679 Depreciation (110,163) (149,317) Impairment – (1,168) Increase (decrease) due to other changes (8,050) (32,038) Retirements, right-of-use assets (15) (657) Total movements 41,776 (99,501) Closing balance 403,315 361,539 The composition by asset class ¡is as follows: Right-of-use assets, net, by asset class 9-30-2022 12-31-2021 ThUus$ ThUus$ Buildings 7,156 8,124 Land 322 95 Plant and equipment 194,137 197,043 Fixtures and fittings 4,069 5,644 Motor vehicles 179,528 141,847 Right-of-use assets 18,103 8,786 Total 403,315 361,539
Movements for the periods ended September 30, 2022 and December 31, 2021 are as
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Corporación Nacional del Cobre de Chile
8.2 Liabilities for current and non-current leases
As of September 30, 2022 and December 31, 2021, the payment commitments for leasing operations are summarized in the following table:
L 9-30-2022 12-31-2021
Current ar Non current Gross Interest Equity Gross Interest Equity
ThUS$ ThUS$ ThUS$ ThUS$ ThUs$ ThUS$ up to 90 days 36,995 (4,812) 32,183 35,744 (2,981) 32,763 more than 90 days up to 1 year 97,887 (13,680) 84,207 87,221 (7,880) 79,341 more than 1 year up to 2 years 98,375 (11,418) 86,957 97,429 (6,906) 90,523 over 2 years up to 3 years 80,455 (9,457) 70,998 62,310 (5,303) 57,007 over 3 years up to 4 years 51,977 (7,551) 44,426 54,482 (5,328) 49,154 over 4 years up to 5 years 25,327 (5,263) 20,064 24,910 (3,016) 21,894 more than 5 years 62,828 (25,932) 36,896 25,906 (4,461) 21,445 Total 453,844 (78,113) 375,731 388,002 (35,875) 352,127
Leasing operations are generated by service contracts, mainly for facilities, buildings, plants and equipment.
The expense related to short-term leases, low-value assets and variable leases not included in the measurement of lease liabilities, for the periods ended September 30, 2022 and 2021, is presented in the following table:
1-1-2022 1-1-2021 Lease expense 9-30-2022 9-30-2021 ThUS$ ThUS$ Short-term leases 1,412 6,250 Low value assets 566 5,498 Variable leases not included in the measurement of lease liabilities 452,981 809,533 TOTAL 454,959 821,281
9. Investments accounted for using the equity method
The value of the investment and the accrued results of investments accounted for using the equity method are presented below:
Equity lr value Acerued profit (loss) Accrued profit (loss)
Currency 1422022 | 1-4-2021 | 74-202 | 7-4-2021
Associates Taxpayer 1D No. | Functional 9302022 | 12-31-2021 | 930202 | 1231-2021 | amooo | 9302091 | 0:30:2022 | 09-30-2021 % % ThUS$ ThUS$ ThUS$ THUS$ ThUS$ ThUS$ Agua de la Falda S.A. 96:801.450-1 5] 426% | 42.26% 5,245 4,988 – – – – lAnglo American Sur SA. 77.762.909 | US$ 29,50% | 29.50% 2,844,992 | 2,829,329 56.002 | 244,265 (8.498) 70,798 Inca de Oro SA. 73.063.0225 | US$ 33.85% | 33,85% 12,608 12,670 (60) – – .
Kairos Mining S.A. 76.781.030-K | US$ 40.00% | 40.00% 44 44 . – – .
Minera Purén SCM 76.028.880-2 US$ 35.00% | 35.00% 3,543 3873 (830) (293)] (79) (218) Planta Recuperadora de Meales SpA – | 76.255.054-7. | US$ 34.00% | 34.00% 15,600 14,360 1,117 A] 154 199 ¡Sociedad Contactual Minera El Abra | 96.701.340-4 | US$ 49.00% | 49.00% 652,399 | 680,747 (8,338) 60,714 (15,007) 16,708 [TOTAL 3534431] 3,546,011 53,391 [ 305,607 (23430) 87.487
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a) Associates Agua de la Falda S.A.
As of September 30, 2022, Codelco holds a 42.26% ownership interest in Agua de la Falda S.A., with the remaining 57.74% owned by Minera Meridian Limitada.
The corporate purpose of this company is to exploit deposits of gold and other minerals, in the third region of Chile.
Sociedad Contractual Minera El Abra Sociedad Contractual Minera El Abra was incorporated in 1994, As of September 30, 2022, Codelco holds a 49% ownership interest, with the remaining 51% owned by Cyprus
El Abra Corporation, a subsidiary of Freeport-McMoRan Copper 8 Gold Inc.
The company business activities involve the extraction, production and selling of copper cathodes.
Sociedad Contractual Minera Purén
As of September 30, 2022, Codelco holds a 35% ownership interest, with the remaining 65% owned by Compañía Minera Mantos de Oro.
This company’s corporate purpose is to explore, identify, survey, investigate, develop and exploit mining deposits in order to extract, produce and process minerals.
Inca de Oro S.A.
On June 1, 2009, Codelco’s Board of Directors authorized the incorporation of a new company aimed to develop studies allowing the continuity of the Inca de Oro Project, which is a wholly-owned subsidiary of Codelco.
September 30, 2022, Codelco holds a 33.85% ownership interest in this company (PanAust IDO Ltda. has 66.15%).
Planta Recuperadora de Metales SpA
On December 3, 2012, Planta Recuperadora Metales SpA was incorporated by Codelco, which held a 100% ownership interest in this company.
On July 7, 2014, Codelco reduced its ownership interest in Planta Recuperadora de
Metales SpA to 51%, with the remaining 49% ownership interest held by LS-Nikko Copper Inc.
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Corporación Nacional del Cobre de Chile E
On October 14, 2015, Codelco reduced its ownership interest in Planta Recuperadora de Metales SpA to 34%, with LS-Nikko Copper Inc, holding the remaining 66%.
September 30, 2022, LS-Nikko Copper Inc, is the controlling shareholder of this company based on the control elements set out in the shareholders’ agreement.
The principal business activity of the company is the processing of intermediate products of the refining and processing of copper and other metals aiming to recover copper, other metals and other sub products, their transformation to commercial products and the selling and distribution of all classes of goods or inputs derived from such process.
Anglo American Sur S.A.
The principal activities of the Company are the exploration, extraction, exploitation, production, processing and trading of minerals, concentrates, precipitates, copper bars and all metallic and non-metallic minerals, all fossil substances and liquid and gaseous hydrocarbons. This includes the exploration, exploitation and use of all natural energy sources capable of industrial use and the products or by-products obtained, as well as any other related, connected or complementary activities on which the shareholders agree.
On August 24, 2012, Codelco recognized the acquisition of ownership interest in Anglo American Sur S.A. which resulted in the initial recognition of the cost of the investment for TRUS$ 6,490,000 that corresponded to the proportionate share (29.5%) of the net fair value of the identifiable assets and liabilities acquired.
In determining the share of the fair value of the identifiable assets and liabilities acquired, the Corporation considered the resources and mineral reserves that could be measured reliably. As part of this updating process, and applying the valuation criteria indicated above, the fair value of the assets acquired and liabilities assumed of Anglo American Sur S.A. as of that date amounted to US$ 22,646 million, which in the proportion acquired by Inversiones Mineras Becrux SpA (29.5%) results in an investment at fair value of US $ 6,681 million at the acquisition date.
The allocation of the purchase price at fair value between the identifiable assets and liabilities was prepared by management using its best estimate and considering all relevant and available information at the acquisition date of Anglo American Sur S.A.
The Corporation used a discounted cash flows model to estimate cash flow projections, based on the life of mine. These projections were based on estimated production and future prices of minerals, operating costs and capital costs, among other estimates made at the date of acquisition. Additionally, proven and probable resources to explore were not included in the mine plan, therefore, they were valued separately using a market model. Such resources are included in item “Mineral Resources.
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As of December 31, 2015, the Corporation identified indicators of impairment in the operating units of Anglo American Sur S.A. Consequently, and with the purpose of making the corresponding adjustments to the investment in this associate, the Corporation estimated its recoverable amount, considering the additional value of the assets identified at the date of acquisition of the investment.
In determining the recoverable amount, the Corporation applied the methodology of fair value less costs of disposal. The recoverable amount of the operating units was determined based on the life of mine by using a discounted cash flow model whose main assumptions included ore reserves declared by the associate, copper price, supply costs, foreign exchange rates, discount rate and market information for the long-term asset valuation. The discount rate used was annual rate of 8% after taxes.
Furthermore, the resources not included in the mining plan (LOM) have been valued using a multiples market approach for comparable transactions.
Such methodology is consistent with the methodologies used at the acquisition date, which is described in the previous paragraph.
As of September 30, 2022, control on Anglo American Sur S.A. is held by Inversiones Anglo American Sur S.A. with 50.06%, while one of the companies that make up the non- controlling interest is Inversiones Mineras Becrux SpA., which is controlled by Codelco with 67.80% ofthe shares, and which exercises significant influence over Anglo American Sur S.A. with 29.5%.
As of June 30, 2022, the Corporation evaluated the value of its investment in the associate Anglo American Sur S.A., determining that the recoverable amount of this asset approximates ¡ts book value, which is ThUS$2,853,490. The determination of the recoverable amount is based on a valuation model that uses a discounted cash flow methodology (multiples) and is sensitive to some key assumptions and market variables, such as the copper price projection and the discount rate of projected cash flows, among others. A variation of approximately -5% in the copper price projections used by the Corporation could reduce the recoverable amount of the investment by 8%. Likewise, in the case of the discount rate, an increase of 100 bps could generate a decrease in the recoverable amount of the investment of 5%. In addition, changes in the tax and regulatory framework or in the operation of the asset could generate future decreases or increases in the recoverable amount of the investment. As of September 30, 2022, the Corporation has performed an analysis of the investment in Anglo American Sur S.A., the results of which indicate that the assumptions used in the evaluation performed at the end of the first half of 2022 have not changed significantly and therefore, the conclusions obtained as of June 30, 2022 remain unchanged.
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Kairos S.A.
Until before November 26, 2012, the Corporation held a 40% stake in conjunction with Honeywell Chile S.A. who was the majority shareholder with 60% of the capital stock of Kairos Mining S.A.
On November 26, 2012, the Corporation sold part of its stake to Honeywell Chile SA, which implies that Codelco maintained a 5% interest as of December 31, 2012, while the remaining 95% was held Honeywell Chile S.A. The result of this pre-tax operation was ThUS$ 13.
On June 6, 2019, Codelco purchased 350 shares of Kairos Mining from Honeywell Chile
S.A., increasing its participation from 5% to 40%.
September 30, 2022, the control of the company lies in Honeywell Chile S.A. which owns 60% of the shares while Codelco owns the remaining 40%.
The purpose of the company ¡is to provide automation and control services for industrial and mining activities and to provide technology and software licenses.
The following tables present the assets and liabilities as of September 30, 2022 and December 31, 2021 of investments in associates, as well as the main movements and their respective results for the nine-month and three-month periods ended September 30, 2022 and 2021.
Assets and liabilities 9-30-2022 12-31-2021 ThUS$ ThUS$ Current assets 1,532,889 2,456,750 Non-current assets 5,800,640 5,507,333 Current liabilities 776,863 1,282,822 Non-current liabilities 1,801,663 1,927,360
1-1-2022 1-1-2021 7-1-2022 7-1-2021 Profit (loss) 9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUS$ ThUS$ Revenue 2,433,635 3,165,746 742,511 1,061,551 Ordinary expenses (2,228,517)| (2,186,899) (796,391) (778,891) Profit for the period 205,118 978,847 (53,880) 282,660
1-1-2022 1-1-2021 Movement Investment in Associates 9-30-2022 9-30-2021 ThUS$ ThUS$
Opening balance 3,546,011 3,418,958 Contribution 257 193 Dividends (65,445) (193,455) Net income for the period 53,391 305,607 Comprehensive income 161 (336) Other 56 –
Closing balance 3,534,431 3,530,967
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The following tables detail the assets and liabilities of the significant associates as of September 30, 2022 and December 31, 2021, as well as the main movements and their respective results during the nine-month and three-month periods ended September 30, 2022 and 2021: Anglo American Sur S.A.
Assets and liabilities 9-30-2022 | 12-31-2021 ThUS$ ThUS$ Current assets 720,000 1,511,000 Non-current assets 4,730,000 4,090,000 Current liabilities 632,166 865,000 Non-current liabilities 1,499,000 1,676,000
1-1-2022 1-1-2021 7-1-2022 7-1-2021 Profit (loss) 9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUS$ ThUS$ Revenue 1,848,000 2,637,000 524,000 897,000 Ordinary expenses and other (1,638,235) | (1,783,929) (546,043) (648,399) Profit for the period 209,765 853,071 (22,043) 248,601
Sociedad Contractual Minera El Abra
Assets and liabilities 9-30-2022 | 12-31-2021 ThUS$ ThUS$ Current assets 776,016 800,169 Non-current assets 940,066 1,048,549 Current liabilities 122,863 145,145 Non-current liabilities 261,796 314,292
1-1-2022 1-1-2021 7-1-2022 7-1-2021 Profit (loss) 9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUS$ ThUS$ Revenue 559,245 503,464 210,978 156,892 Ordinary expenses and other (566,056) (379,558) 241,604 (122,794) Profit for the period (6,811) 123,906 (30,626) 34,098
b) Additional information on unrealized profits (losses)
Codelco carries out copper purchase and sale operations with Sociedad Contractual Minera El Abra. As of September 30, 2022 and December 31, 2021, the value of finished products under the Inventories caption did not present balances for unrealized profit provision.
As of September 30, 2022 and December 31, 2021, the Corporation has a balance of
ThUS$3,920 for unrealized gains on the purchase of LNG terminal use rights from Sociedad Contractual Minera El Abra.
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c) Share of profit or loss for the period
The income before tax, corresponding to the proportion on the income of Anglo American Sur S.A. recognized for the period ended September 30, 2022, was a profit of TNUS$ 61,881 (September 30, 2021, profit of ThuS$ 251,656) while the adjustment to such income corresponding to the depreciation and write-offs of the fair values of the net assets of such company recognized at the acquisition date, resulted in a lower income before tax of ThUS$ 5,879 (September 30, 2021 loss of TRUS$ 7,391) and ¡is being deducted from “Equity in income of associates and joint ventures accounted for using the equity method” in the consolidated statement of comprehensive income.
10. Subsidiaries
11.
The following tables set forth a detail of assets, liabilities and profit (loss) of the Corporation’s subsidiaries, prior to consolidation adjustments:
Assets and liabilities 9-30-2022 12-31-2021 ThUS$ ThUS$ Current assets 322,597 530,415 Non-current assets 3,457,105 3,458,789 Current liabilities 145,585 608,527 Non-current liabilities 551,576 478,228 Profit (loss) 1-1-2022 1-1-2021 7-1-2022 7-1-2021
9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUS$ ThUS$ Income 1,055,383 1,536,634 245,210 493,739 Ordinary expenses and other (985,846) (1,280,939) (246,747) (419,968) Profit (Loss) 69,537 255,695 (1,537) 73,771
Current and non-current financial assets
Current and non-current financial assets included in the statement of financial position are as follows:
9-30-2022 Classification in statement of financial position Atfair value Hedging derivatives . s e Total financial through profitor | Amortized cost| Metal futures [Cross currency assots loss contracts swap ThUS$ ThUuS$ ThUs$ Thus$ ThUS$ Cash and cash equivalents 32,180 1,579,201 – 1,611,381 Trade and other current receivable 1,452,579 623,888 2,076,467 Non – current receivable – 80,220 80,220 Current receivable from relates entities 13,441 13,441 Non – current receivable from related entities 224 – 224 Other current financial assets 36,522 15,324 – 51,846 Other non – current financial assets – 5,257 5,427 28,566 39,250 TOTAL 1,484,759 2,338,753 20,751 28,566 3,872,829
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CODELCO
Corporación Nacional del Cobre de Chile
As of September 30, 2022, the balance of the caption Other financial assets, current includes ThUS$ 36,335 invested in term deposit instruments with a maturity of more than 90 days. As of December 31, 2021, the amount invested in this type of instrument was ThUS$ 320,275
12-31-2021 Classification in statement of financial position Atfair value Hedging derivatives . , , Total financial through profitor | Amortized cost| Metal futures |Cross currency assets loss contracts swap
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ [Cash and cash equivalents 19,142 1,264,476 – – 1,283,618 Trade and other current receivable 3,039,967 1,154,383 – – 4,194,350 Non – current receivable – 104,177 – – 104,177 Current receivable from relates entities – 156,711 – – 156,711 Non – current receivable from related entities – 224 – – 224 ¡Other current financial assets – 320,279 61 – 320,340 ¡Other non – current financial assets – 5,109 – 33,174 38,283 TOTAL 3,059,109 3,005,359 61 33,174 6,097,703
Fair value through profit or loss: As of September 30, 2022 and December 31, 2021, this category includes unfinished product sales invoices. Section 11.2.r.
Amortized cost: It corresponds to financial assets held within a business model whose objective is to hold financial assets to collect contractual cash flows that are solely payments of principal and interest on the principal outstanding. These assets are not quoted in an active market.
The effects on profit or loss recognized for these assets are mainly from financial income and exchange differences from balances denominated in currencies other than the functional currency.
No material impairments were recognized in trade and other receivables.
Derivatives for Hedging: Corresponds to the balance for changes in the fair value of derivative contracts to cover existing transactions (cash flow hedges) and that affect profit or loss when transactions are settled or when, to the extent required by accounting standards, a compensation effect is charged (credited) to the income statement. The detail of derivative hedging transactions ¡is included in the Note 28.
As of September 30, 2022 and December 31, 2021 there were no reclassifications between the different categories of financial instruments.
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Corporación Nacional del Cobre de Chile
12. Other financial liabilities Other financial liabilities consist of loans with financial institutions and bond issuance obligations, which are recorded by the Corporation at amortized cost using the effective interest rate method.
The following tables set forth other currentnon-current financial liabilities:
9-30-2022 ltems Current Non-current Hedging Hedging Amortized cost | derivatives Total Amortized cost | derivatives Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Loans from financial entities 6,885 – 6,885 970,033 – 970,033 Bond obligations 368,403 – 368,403 15,393,944 – 15,393,944 Hedging obligations – 4,848 4,848 – 194,288 194,288 Other financial liabilities – – 62,383 – 62,383 Total 375,288 4,848 380,136 16,426,360 194,288 16,620,648
12-31-2021 ltems Current Non-current Hedging Hedging Amortized Cost| . derivatives Total Amortized Cost | derivatives Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Loans from financial entities 18,003 – 18,003 969,416 – 969,416 Bond obligations 557,411 – 557,411 15,696,670 – 15,696,670 Hedging obligations – 29,789 29,789 – 186,611 186,611 Other financial liabilities – – 50,943 – 50,943 Total 575,414 29,789 605,203 16,717,029 186,611 16,903,640
– Loans from financial institutions: The loans obtained by the Corporation aim to finance production operations.
In addition to the credits mentioned in the previous paragraph, Codelco, through the subsidiary company Inversiones Gacrux SpA., has a credit agreement with Oriente Copper Netherlands
B.V. since 2012 (a subsidiary of Mitsui 8 Co. Ltd.), which was subscribed to with the aim of allocating this financing to the acquisition of the shareholding of Anglo American Sur SA, by the subsidiary company Inversiones Mineras Becrux SpA. (Subsidiary of Inversiones Gacrux SpA.). This loan has no associated personal guarantees and its rate is fixed at 3.25% per year and has a duration of 20 years, being payable in 40 semiannual installments of principal and interest on unpaid balances.
On May 20, 2021 the total amount owed to Oriente Copper Netherlands B.V. was paid in full.
– Bond obligations:
On May 10, 2005, the Corporation issued and placed bonds in the domestic market for a nominal amount of UF 6,900,000 of a single series labeled Series B, which consists of 6,900
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On September 21, 2005, the Corporation issued and placed bonds in the U.S. market under Rule 144-A and Regulation S, for a nominal amount of ThUS$500,000. These bonds are payable in a single installment on September 21, 2035, at an annual interest rate of 5.6250% and semi-annual interest payments.
On October 19, 2006, the Corporation issued and placed bonds in the U.S. market under Rule
144-A and Regulation S, for a nominal amount of ThUS$500,000. These bonds are payable in a single installment on October 24, 2036, at an annual interest rate of 6.15% and semi- annual interest payments.
On November 3, 2011, the Corporation issued and placed bonds in the U.S. market under Rule 144-A and Regulation S, for a nominal amount of ThUS$1,150,000. These bonds are payable in a single installment on November 4, 2021, at an annual interest rate of 3.875% and semi-annual interest payments. On August 3, 2017, February 6, 2019 and October 2, 2019, principal was paid for an amount of ThUS$665,226, ThUS$247,814 and ThUS$9,979 respectively. On December 16, 2020, principal was paid for an amount of ThUS$14,361.
On July 17, 2012, the Company issued and placed bonds in the U.S. market under Rule 144- A and Regulation S, for a nominal amount of ThUS$2,000,000. These bonds are payable in two installments (i) the first tranche on July 17, 2022 in the amount of US$1,250,000 at a 3% annual interest rate. On August 22, 2017, February 6, 2019 and October 8 and 22, 2019, principal was paid in the amounts of ThUS$412,514, ThUS$314,219, ThUS$106,972 and ThUS$3,820 respectively. On December 16, 2020, principal was paid for an amount of ThUS$83,852. And (ii) the other tranche matures on July 17, 2042 and ¡is in the amount of ThUS$750,000 at an annual interest rate of 4.25%.
On August 13, 2013, the Corporation issued and placed bonds in the U.S. market, under Rule
144-A and Regulation S, for a nominal amount of ThUS$750,000, payable in a single installment on August 13, 2023, at an annual interest rate of 4.5% and semi-annual interest payments. On August 22, 2017, February 12 and February 26, 2019, principal in the amounts of ThUS$162,502, TRUS$228,674 and ThUS$270 respectively, was paid. On October 8 and 22, 2019, principal was paid for TRUS$23,128 and ThUS$555 respectively. On May 6, 2020, the remaining principal due was increased for a nominal amount of ThUS$131,000, reaching a total amount of ThUS$465,871 with an annual coupon of 4.50%. On December 16, 2020, principal was paid for an amount of ThUS$79,688. On October 22, 2021, principal was amortized in the amount of ThUS$157,965, reaching a total amount of TNUS$228,218.
On October 18, 2013, the Corporation issued and placed bonds in the U.S. market, under Rule
144-A and Regulation S, for a nominal amount of ThUS$950,000, payable in a single installment on October 18, 2043, at an annual interest rate of 5.625% and semi-annual interest payments.
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On July 9, 2014, the Corporation issued and placed bonds in the international financial markets, under Rule 144-A and Regulation S, for a nominal amount of EUR$600,000,000, payable in a single installment on July 9, 2024, at an annual interest rate of 2.25% and annual interest payments. On October 22, 2021, capital was amortized in the amount of ThEUR$200,116, reaching a total amount of TREUR$399,884.
On November 4, 2014, the Corporation issued and placed bonds in the U.S. market, under Rule 144-A and Regulation S, for a nominal amount of ThUS$980,000, payable in a single installment on November 4, 2044, at an annual interest rate of 4.875% and semi-annual interest payments.
On September 16, 2015, the Corporation issued and placed bonds in the U.S. market, under Rule 144-A and Regulation S, for a nominal amount of ThUS$2,000,000, payable in a single installment on September 16, 2025, at an annual interest rate of 4.5% and semi-annual interest payments. On August 22, 2017 and February 12, 2019, principal was paid for an amount of ThUS$378,655 and ThUS$552,754 respectively. On December 22, 2020, capital was amortized in the amount of ThUS$392,499. On January 7, 2021, capital was amortized in the amount of ThUS$5,000. On October 22, 2021, principal was amortized in the amount of ThUS$273,867, reaching a total amount of ThUS$397,235.
On August 24, 2016, the Corporation issued and placed bonds in the domestic market for a nominal amount of UF 10,000,000 of a single series labeled Series C, which consists of 20,000 bonds for UF 500 each. These bonds are payable in a single installment on August 24, 2026, at an annual interest rate of 2.5% and semi-annual interest payments.
On July 25, 2017, the Corporation made an offer in New York to buy its bonds issued in dollars with maturities between 2019 and 2025, repurchasing US$2,367 million.
Later, on August 1, 2017, the Corporation issued and placed bonds in the North American market, under standard 144-A and Regulation S, for a total nominal amount of ThUS$
2,750,000. One portion corresponds to an amount of ThUS$ 1,500,000, maturing on August 1, 2027 with an annual coupon rate of interest of 3.625% and semi-annual interest. On December 22, 2020, principal was paid for an amount of ThUS$227,154. On January 7, 2021, principal was paid in the amount of ThUS$5,000. The other portion contemplates a maturity date of August 1, 2047, corresponding to an amount of ThUS$ 1,250,000 with an annual coupon of 4.5% and semi-annual interest payments.
As a result of these transactions, 86% of the funds from the new issue (US$2,367 million) were used to refinance old debt. The average interest rate of refinanced funds decreased from
4.36% to 4.02%.
On May 18, 2018, Codelco issued a bond for US$600 million with 30-year maturity in the market of Formosa, Taiwan. The bond issued is denominated in US dollars, had a yield of
4.85% and a prepayment option at the issue value that can be exercised from the fifth year onwards at its par value.
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On January 28, 2019, the Corporation in New York made an offer to purchase ¡ts bonds issued in dollars with maturities between 2020 and 2025, repurchasing US$1,527 million.
Subsequently, on February 5, 2019, the Corporation issued and placed bonds in the North American market, under Rule 144-A and Regulation S, for a total nominal amount of ThUS$1,300,000, which maturity will be 5 February 2049 with a coupon of 4.375% per annum and interest payments on a semi-annual basis.
On July 22, 2019, the Corporation made a bond issue and placement, Regulation S, for a nominal amount of AUD $ 70,000,000, whose maturity will be in a single installment on July 22, 2039, with a coupon of 3.58% annual and interest payment annually.
On August 23, 2019, the Corporation made a bond issue and placement, Regulation S, for a nominal amount of ThUS$130,000, whose maturity will be in a single installment on August 23, 2029, with a coupon of 2.869% annual and interest payment semiannually.
On September 30, 2019, Codelco launched a tender offer for bonds maturing between 2020 and 2023, in which a repurchase amount of US$152 million was reached.
On September 30, 2019, the Corporation made an issue and placement of bonds in the North American market, under rule 144-A and Regulation S, for a total nominal amount of ThUS$2,000,000 whose maturity will be, under one tranche, on September 30, 2029 corresponding to an amount of TRUS$1,100,000 with a 3% annual coupon. The other tranche contemplates a maturity on January 30, 2050, corresponding to an amount of ThUS$900,000.
On January 14, 2020 and October 22, 2021, a capital increase was made for a nominal amount of ThUS$1,000,000 and ThUS$780,000, respectively, reaching a total amount of ThUS$2,780,000 with a coupon of 3.70% per annum.
On October 22, 2021, together with the aforementioned capital increase of TNUS$ 780.000 of the international bond maturing in 2050, a process of repurchase of bonds maturing in 2023 and 2025 in the amount of ThUS$431,832 and the repurchase of a Euro bond in the amount of MEUR$200,116 maturing in 2024 was concluded.
The effect recognized in income associated with this refinancing was a charge of US$23 million in after-tax income for the year 2021.
On January 14, 2020, the Corporation issued and placed bonds in the North American market, under rule 144-A and Regulation S, for a nominal amount of ThUS $ 1,000,000, the maturity of which will be in a single installment on 14 January 2030, with a coupon of 3.15% per annum and payment of interest every six months.
On May 6, 2020, the Corporation issued and placed bonds in the North American market, under Rule 144-A and Regulation S, for a nominal amount of ThUS$800,000 whose maturity will be in a single installment on January 15, 2031, with a coupon of 3.75% per annum and interest paid every six months.
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On December 7, 2020, the Corporation made in New York an offer to purchase its bonds issued in dollars with maturities between 2021 and 2027, repurchasing ThUS$797,554.
On December 14, 2020, the Corporation carried out an issuance and placement of bonds in the North American market, under standard 144-A and Regulation S, for a total nominal amount of ThUS$500,000 whose maturity will be in a single installment on January 15, 2051, with a coupon of 3.15% per annum and interest payment on a semi-annual basis.
As a result of these transactions, 100% of the funds from the new issuance (US$500 million) were used to refinance old debt. The average nominal rate of the refinanced funds decreased from 4.08% to 3.15%.
As of September 30, 2022 and 2021, the Corporation is not required to comply with any financial covenants related to borrowings from financial institutions and bond obligations.
– Financial debt commissions and expenses:
Transaction costs incurred in obtaining financial resources are deducted from the loan proceeds and are amortized using the effective interest rate.
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As of September 30, 2022, the details of loans from financial institutions and bond obligations are as follows:
9-30-2022 Current Non-current Taxpayer ID No.| Country Loans fom Institution Maturity | Interestrate | Currency| Amount contracted | Type of amortization | Paymentof Interest Nominal , Efectivo balance balance financial entities interest rate interestrate ThUS$ Thus$ Foreign Panama | Bilateral Credit Banco Latinoamericano de Comercio |12-18-2026| Variable US$ 75,000,000| At Maturity Semi-annual 4.01% 4.20% 844 74,610 Foreign USA Bilateral Credit Export Dev. Canada 08-12-2027| Variable US$ 300,000,000| At Maturity Quarterly 4.07% 4.18% 1,698 299,346 Foreign USA Bilateral Credit Export Dev. Canada 10-25-2028| Variable US$ 300,000,000| At Maturity Quarterly 4.00% 4.13% 2,232 298,856 Foreign USA Bilateral Credit Export Dev. Canada 07-25-2029| Variable US$ 300,000,000| At Maturity Quarterly 4.02% 4.23% 2,111 297,221 TOTAL 6,885 970,033 , , Nominal Effective Current Non-current Bond obligations Country of Registration Maturity | Interest rate | Currency | Amount contracted | Type of amortization | Paymentof Interest . balance balance interest rate interestrate ThUS$ Thus$
144-A REG.S Luxembourg 08-13-2023| Fixed US$ 750,000,000 | AtMaturity Semi-annual 4.50% 4.37% 229,805 –
144-A REG.S Luxembourg 07-09-2024| Fixed EUR 600,000,000 | AtMaturity Annual 2.25% 2.47% 1,982 389,565 BCODE-B Chile 04-01-2025| Fixed UF 6,900,000 | AtMaturity Semi-annual 4.00% 3.24% – 250,684
144-A REG.S Luxembourg 09-16-2025| Fixed US$ 2,000,000,000 | At Maturity Semi-annual 4.50% 4.74% 695 394,598 BCODE-C Chile 08-24-2026| Fixed UF 10,000,000 | AtMaturity Semi-annual 2.50% 2.47% 886 366,539
144-A REG.S Luxembourg 08-01-2027| Fixed US$ 1,500,000,000 | At Maturity Semi-annual 3.63% 4.18% 7,532 1,237,208 REG.S Luxembourg 08-23-2029| Fixed US$ 130,000,000 | At Maturity Semi-annual 2.87% 2.97% 383 129,154
144-A REG.S Luxembourg 09-30-2029| Fixed US$ 1,100,000,000 | At Maturity Semi-annual 3.00% 3.14% – 1,090,317
144-A REG.S Luxembourg 01-14-2030| Fixed US$ 1,000,000,000 | At Maturity Semi-annual 3.15% 3.28% 6,650 991,412
144-A REG.S Luxembourg 01-15-2031| Fixed US$ 800,000,000 | AtMaturity Semi-annual 3.75% 3.79% 6,250 797,491 REG.S Luxembourg 11-07-2034] – Fixed HKD 500,000,000 | AtMaturity Annual 2.84% 2.92% 1,616 63,172
144-A REG.S Luxembourg 09-21-2035| Fixed US$ 500,000,000 | AtMaturity Semi-annual 5.63% 5.78% 703 493,036
144-A REG.S Luxembourg 10-24-2036| Fixed US$ 500,000,000 | AtMaturity Semi-annual 6.15% 6.22% 13,325 496,896 REG.S Luxembourg 07-22-2039| Fixed AUD 70,000,000 | At Maturity Annual 3.58% 3.65% 304 44,544
144-A REG.S Luxembourg 07-17-2042| Fixed US$ 750,000,000 | AtMaturity Semi-annual 4.25% 4.41% 6,464 734,711
144-A REG.S Luxembourg 10-18-2043| – Fixed US$ 950,000,000 | At Maturity Semi-annual 5.63% 5.76% 24,047 934,542
144-A REG.S Luxembourg 11-04-2044] Fixed US$ 980,000,000 | At Maturity Semi-annual 4.88% 5.01% 19,375 962,539
144-A REG.S Luxembourg 08-01-2047| Fixed US$ 1,250,000,000 | At Maturity Semi-annual 4.50% 4.73% 9,219 1,208,244 144 – REG.S Taiwan 05-18-2048| Fixed US$ 600,000,000 | AtMaturity Semi-annual 4.85% 4.91% 10,670 594,752
144-A REG.S Luxembourg 02-05-2049| Fixed US$ 1,300,000,000 | At Maturity Semi-annual 4.38% 4.97% 8,689 1,187,659
144-A REG.S Luxembourg 01-30-2050| Fixed US$ 2,680,000,000 | AtMaturity Semi-annual 3.70% 3.93% 16,527 2,579,290
144-A REG.S Luxembourg 01-15-2051| Fixed US$ 500,000,000 | AtMaturity Semi-annual 3.15% 3.75% 3,281 447,591 TOTAL 368,403 | 15,393,944
Nominal and effective interest rates presented above correspond to annual rates.
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Corporación Nacional del Cobre de Chile
As of December 31, 2021, the details of loans from financial institutions and bond obligations are as follow:
1231-2021 , Interest Paymentof | – Nominal Effective – | Curent balance | Non-curent balance Taxpayer ID No. | – County Loans from financial entities Institution Ma O a e a muss muss Japan Bank Intemational Halfyeary principal Foreign – [dapan Bilateral Credit : 05-24-2022 | Variable | US$ 224,000,000 payments from 2015 to | Semannual | – 0.69% 0.85% 16,001 – Cooperation the maturity of Foreign [Panama Bilateral Credit Canos Latnoametcano del 1248-2026 | Variable | US$ 75,000,000| At Maturty Semiannual | – 1.52% 1.66% 28 74,547 Foreign – [USA Bilateral Credit Export Dev. Canada 08-12-2027 | Variable | US$ 300,000,000| At Maturiy Quartery 1.27% 1.34% 520 299,230 Foreign – [USA Bilateral Credit Export Dev. Canada 10-25-2028 | Variable | US$ 300,000,000| At Maturiy Quartery 1.34% 1.43% 748 298,723 Foreign – [USA Bilateral Credit Export Dev. Canada 07-25-2029 | Variable | US$ 300,000,000| At Maturiy Quartery 1.34% 1.50% 706 296,916 TOTAL 18,003| 969,416 Bond obligatons County of Registration | Maturiy | MESS | Currency | Amount contracted |. Type of amorization | P2Ymentof | Nombal | Effective | Curentbalance [ Non-curent balance rate Interest interest rate interest rate ThUS$ ThUS$
144-A REG.S Luxembourg 07-17-2022 | Fed | US$ 1,250,000,000 | At Maturty Semiannual | – 3,00% 3.13% 332,870 –
144-A REG.S Luxembourg 08-13-2023 | Fixed | US$ 750,000,000 | At Maturiy Sembannual | – 4.50% 4.36% 5,693 228,670
144-A REG.S Luxembourg 07-09-2024 | Fixed | EUR 00,000,000 | At Maturity Annual 2.25% 2.47% 4,880 449,817 BCODE-8 Chi 04-01-2025 | Fixed | UF. 6,900,000 | At Maturty Semiannual | – 4,00% 3.24% 2574 259,086
144-A REG.S Luxembourg 09-16-2025 | Fixed | US$ 2,000,000,000 | At Maturiy Semiannual | – 4.50% 4.75% 5,263 393,990 BCODE-C Chi 08-24-2026 | Fixed | UF. 10,000,000 | At Maturty Sembannual | – 2,50% 2.47% 3,1196 378,561
144-A REG.S Luxembourg 08-01-2027 | Fixed | US$ 1,500,000,000 | At Maturty Sembannual | – 3.63% 4.18% 19,108 1,232,979 REG.S Luxembourg 08-23-2029 | Fixed | US$ 130,000,000 | At Maturty Semiannual | – 2,87% 2.97% 1,318 129,072
144-A REG.S Luxembourg 09-30-2029 | Fixed | US$ 1,100,000,000 | At Maturty Sembannual | 3,00% 3.14% 8,387 1,089,401
144-A REG.S Luxembourg 01-14-2030 | Fixed | US$ 1,000,000,000 | At Maturty Sembannual | – 3.15% 3.28% 14,295 990,643
144-A REG.S Luxembourg 01-15-2031 | Fixed | US$ 800,000,000 | At Maturiy Sembannual | – 3,75% 3.79% 13,859 797,301 REG.S Luxembourg 11-07-2034 | Fixed | HKD 500,000,000 | At Maturity Annual 2.84% 2.92% 274 63,549
144-A REG.S Luxembourg 09-21-2035 | Fixed | US$ 500,000,000 | At Maturiy Semiannual | – 5.63% 5.78% 7,847 492,772
144-A REG.S Luxembourg 10-24-2036 | Fixed | US$ 500,000,000 | At Maturiy Sembannual | – 6.15% 6.22% 5,745 496,794 REG.S Luxembourg 07-22-2039 | Fixed | AUD 70,000,000 | At Maturiy Annual 3.58% 3.55% 806 50,284
144-A REG.S Luxembourg 07-17-2042 | Fixed | US$ 750,000,000 | At Maturiy Sembannual | – 4.25% 4.41% 14,465 734,351
144-A REG.S Luxembourg 10-18-2043 | Fixed | US$ 950,000,000 | At Maturity Sembannual | – 5.63% 5.76% 10,864 934,264
144-A REG.S Luxembourg 11-04-2044 | Fixed | US$ 980,000,000 | At Maturity Semiannual | – 4.88% 5.01% 7,523 962,219
144-A REG.S Luxembourg 08-01-2047 | Fixed | US$ 1,250,000,000 | At Maturty Semiannual | – 4,50% 4.73% 23,387 1,207,588
144- REG.S Taiwan 05-18-2048 | Fixed | US$ 00,000,000 | At Maturiy Sembannual | – 4.85% 4.91% 3,457 594,676
144-A REG.S Luxembourg 02-05-2049 | Fixed | US$ 1,300,000,000 | At Maturty Semiannual | – 4.38% 4.97% 22,873 1,186,122
144-A REG.S Luxembourg 01-30-2050 | Fixed | US$ 2,680,000,000 | At Maturiy Semiannual | – 3,70% 3.93% 41,495 2,577,759
144-A REG.S Luxembourg 01-15-2051 | Fixed | US$ 500,000,000 | At Maturiy Sembannual | 3.15% 3.75% 7,232 446,822 TOTAL 557,41 15,696,670
Nominal and effective interest rates presented above correspond to annual rates.
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Corporación Nacional del Cobre de Chile
The undiscounted amounts that the Corporation will have to disburse to settle the obligations with financial institutions, are as follows:
9-30-2022 CURRENT NON-CURRENT Name Type of Interest rate Interestrate Type of Less than: Over Total One to Three to Over Total non- creditor currency effective nominal amortization 90 days 90 days current three years five years five years current Banco Latinoamericano de Comercio US$ 4.20% 4.01% Semi-annual 1,530 1,522 3,052 6,111 79,556 – 85,667 Export Dev. Canada US$ 4.18% 4.07% Quarterly 3,122 9,265 12,387 24,810 324,776 – 349,586| Export Dev Canada US$ 4.13% 4.00% Quarterly 3,065 9,095 12,160 24,354 24,321 315,226! 363,901 Export Dev Canada US$ 4.23% 4.02% Quarterly – 9,181 9,181 24,494 24,460 327,409! 376,363| BONO 144-A REG.S 2023 US$ 4.37% 4.50% Semi-annual – 238,488 238,488 – – – – BONO 144-A REG.S 2025 US$ 4.74% 4.50% Semi-annual – 17,876| 17,876 432,986 – – 432,986 BONO 144-A REG.S 2027 US$ 4.18% 3.63% Semi-annual – 45,959 45,959 91,919 1,359,765| – 1,451,684| BONO REG.S 2029 US$ 2.97% 2.87% Semi-annual – 3,730 3,730 7,459 7,459 137,459 152,377| BONO 144-A REG.S 2029 US$ 3.14% 3.00% Semi-annual – 33,000 33,000 49,500 66,000 1,182,500| 1,298,000| BONO 144-A REG.S 2030 US$ 3.28% 3.15% Semi-annual – 31,500 31,500 63,000 63,000 1,078,750| 1,204,750| BONO 144-A REG.S 2031 US$ 3.79% 3.75% Semi-annual – 30,000 30,000 60,000 60,000 905,000! 1,025,000| BONO 144-A REG.S 2035 US$ 5.78% 5.63% Semi-annual – 28,125 28,125 56,250 42,188 739,063 837,501 BONO 144-A REG.S 2036 US$ 6.22% 6.15% Semi-annual 15,375| 15,375| 30,750 61,500 61,500 792,125! 915,125 BONO 144-A REG.S 2042 US$ 4.41% 4.25% Semi-annual – 31,875 31,875 63,750 63,750 1,228,125! 1,355,625| BONO 144-A REG.S 2043 US$ 5.76% 5.63% Semi-annual 26,719 26,719 53,438 106,875 106,875 1,831,719 2,045,469 BONO 144-A REG.S 2044 US$ 5.01% 4.88% Semi-annual 23,888 23,888 47,776 95,550 95,550 1,816,063| 2,007,163 BONO 144-A REG.S 2047 US$ 4.73% 4.50% Semi-annual – 56,250 56,250 112,500 112,500 2,375,000 2,600,000 BONO 144 REG.S 2048 US$ 4.91% 4.85% Semi-annual 14,550] 14,550] 29,100 58,200 58,200 1,211,100 1,327,500| BONO 144-A REG.S 2049 US$ 4.97% 4.38% Semi-annual – 56,875 56,875 113,750 113,750 2,522,813 2,750,313 BONO 144-A REG.S 2050 US$ 3.93% 3.70% Semi-annual – 99,160 99,160 198,320 198,320 4,911,100 5,307,740 BONO 144-A REG.S 2051 US$ 3.75% 3.15% Semi-annual – 15,750| 15,750 31,500 31,500 870,125! 933,125 0 Total ThUS$ 88,249 798,183 886,432 1,682,828 2,893,470 22,243,577 26,819,875| BONO BCODE-B 2025 UF. 3.24% 4.00% Semestral – 276,000 276,000 7,314,000 > – 7,314,000 BONO BCODE-C 2026 UF. 2.47% 2.50% Semestral – 248,457 248,457 496,913 10,248,457! – 10,745,370 Total U.F. – 524,457 524,457 7,810,913 10,248,457 – 18,059,370 Subtotal ThUS$ . 18,711 18,711 278,668 365,632. – 644,300 [ BONO 144-A REG.S 2024 [ EUR [ 2.47% [ 2.25% Annual – 8,997,390 8,997,390 8,997,390 399,884,000 -| 408,881,390| Subtotal ThUS$ – 8,806 8,806 8,806 391,391 – 400,197 [BONO REG.S 2039 Tavo [| 366% [ 3.58% Annual ” 2,506,000 2,506,000 5,012,000 5,012,000| 100,072,000| 110,096,000 Subtotal ThUS$ . 1,610 1,610 3,220 3,220| 64,298 70,738 [ BONO REG.S 2034 [ HKD [ 2.92% [ 2.84% Annual 14,200,000, – 14,200,000 28,438,904 28,400,000; 613,677,808 670,516,712 Subtotal ThUS$ 1,809 – 1,809 3,623 3,618 78,178 85,419 Total ThUS$ 90,058 827,310 917,368 1,977,145 3,657,331 22,386,053| 28,020,529|
Nominal and effective interest rates presented above correspond to annual rates.
7
Corporación Nacional del Cobre de Chile
12-31-2021 CURRENT NON-CURRENT Creditor Type of Interest rate Interest rate Type of Less than: Over Total One to Three to Over Total non- name currency effective nominal amortization 90 days 90 days current three years five years five years current Japan Bank International Cooperation US$ 0.85% 0.69% Semi-annual – 16,056 16,056 – – – – Banco Latinoamericano de Comercio US$ 1.66% 1.52% Semi-annual – 1,153 1,153 2,310 77,297 – 79,607 Export Dev. Canada US$ 1.34% 1.27% Quarterly 976 2,896 3,872 7,753 7,743 302,896! 318,392 Export Dev Canada US$ 1.43% 1.34% Quarterly 1,030 3,057 4,087 8,185 8,174 308,174! 324,533 Export Dev Canada US$ 1.50% 1.34% Quarterly > 1,030 1,030 – 8,185 314,242! 322,427 BOND 144-A REG.S 2022 US$ 3.13% 3.00% Semi-annual 4,929 333,552 338,481 – – > – BOND 144-A REG.S 2023 US$ 4.36% 4.50% Semi-annual 5,135| 5,135 10,270 238,488 – > 238,488 BOND 144-A REG.S 2025 US$ 4.75% 4.50% Semi-annual 8,938| 17,876 26,814 – 415,111 > 415,111 BOND 144-A REG.S 2027 US$ 4.18% 3.63% Semi-annual 22,980 22,980 45,960 – 91,919 1,313,805| 1,405,724 BONDS REG.S 2029 US$ 2.97% 2.87% Semi-annual 1,865 1,865| 3,730 7,459 7,459 141,189 156,107 BOND 144-A REG.S 2029 US$ 3.14% 3.00% Semi-annual 16,500| 16,500 33,000 66,000 66,000 1,199,000| 1,331,000 BOND 144-A REG.S 2030 US$ 3.28% 3.15% Semi-annual 15,750| 15,750 31,500 63,000 63,000 1,110,250| 1,236,250 BOND 144-A REG.S 2031 US$ 3.79% 3.75% Semi-annual 15,000| 15,000 30,000 60,000 60,000 935,000! 1,055,000 BOND 144-A REG.S 2035 US$ 5.78% 5.63% Semi-annual 14,063| 14,063 28,126 56,250 56,250 753,125! 865,625 BOND 144-A REG.S 2036 US$ 6.22% 6.15% Semi-annual > 30,750 30,750 61,500 61,500 807,500| 930,500 BOND 144-A REG.S 2042 US$ 4.41% 4.25% Semi-annual 15,938| 15,938 31,876 63,750 63,750 1,260,000| 1,387,500 BOND 144-A REG.S 2043 US$ 5.76% 5.63% Semi-annual > 53,438 53,438 106,875 106,875 1,858,438! 2,072,188 BOND 144-A REG.S 2044 US$ 5.01% 4.88% Semi-annual > 47,775 47,775 95,550 95,550 1,839,950| 2,031,050 BOND 144-A REG.S 2047 US$ 4.73% 4.50% Semi-annual 28,125 28,125 56,250 112,500 112,500 2,431,250 2,656,250 BOND 144 REG.S 2048 US$ 4.91% 4.85% Semi-annual > 29,100 29,100 58,200 58,200 1,225,650| 1,342,050 BOND 144-A REG.S 2049 US$ 4.97% 4.38% Semi-annual 28,438 28,438 56,876 113,750 113,750 2,579,688 2,807,188 BOND 144-A REG.S 2050 US$ 3.93% 3.70% Semi-annual 49,580 49,580 99,160 198,320 198,320 5,010,260 5,406,900 BOND 144-A REG.S 2051 US$ 3.75% 3.15% Semi-annual 7,875| 7,875 15,750 31,500 31,500 885,875| 948,875 Total ThUS$ 237,122! 757,932 995,054 1,351,390 1,703,083 24,276,292 27,330,765 BONDS BCODE-B 2025 UF. 3.24% 4.00% Semi-annual 138,000 138,000 276,000 552,000 7,038,000 > 7,590,000 BONDS BCODE-C 2026 UF. 2.47% 2.50% Semi-annual 124,228 124,229 248,457 496,913 10,496,914 > 10,993,827 Total U.F. 262,228! 262,229 524,457 1,048,913 17,534,914 – 18,583,827 Subtotal ThUS$ 9,621 9,621 19,242 38,485 643,357 > 681,842 [ BOND 144-A REG.S 2024 [ EUR [ 2.47% | 2.25% [ Annual > 8,997,390 8,997,390 17,994,780| 399,884,000 -| 417,878,780 Subtotal ThUS$ ” 10,179 10,179 20,358 452,409 > 472,767 [ BONDS REG.S 2039 [ AUD [ 3.65% | 3.58% Annual – 2,506,000 2,506,000 5,012,000 5,012,000| 102,578,000| 112,602,000 Subtotal ThUS: > 1,816 1,816 3,633 3,633 74,349 81,615 [ BONDS REG.S 2034 [ HKD [ 2.92% | 2.84% Annual – 14,200,000 14,200,000 28,438,904 28,400,000| 613,677,808| 670,516,712 Subtotal ThUS: > 1,821 1,821 3,646 3,641 78,680 85,967 Total ThUS$ 246,743| 781,369 1,028,112 1,417,512 2,806,123 24,429,321 28,652,956
Nominal and effective interest rates presented above correspond to annual rates.
73
( ))
Corporación Nacional del Cobre de Chile a
The table below details changes in CODELCO’s financing activities in the statement of cash flow, including both cash and non-cash changes for the three-month period ended September, 2022, and for the year ended December 31, 2021:
Changes that do not represent cash flow [Opening bal Financial | cp, Fair val MOR Closing bal pening balance! e xchange | Fairvalue | deferred in losing balance Liabilities for at 1-1-2022 Cash flows offinancing activities costs | afterence | adjustment | amortized Other ax 09-30.2022 financing activities Mm cost From Used Total Thus$ ThUS$ THus$ | Thus$ | Thuss | Thuss ThuS$ Thus$ Thus$ Thus$ Loans fom fnancial entes 987419 (een (e892m| 17873 – – 627 225 97618 Bond obligatons 16,254,081 – | (905415) – (905415)]| – 492.382 (84,315) – – 5614 | – 15762347 Hadging obligatons 180,320 | (65218) (6s214| 19,543 77328 | (48014) – 5130 199,088 Dividends paid – (259,900)| – (259,900) – – – – – – Financial ases for hedge derivatves (83,174) – – – 6992 (2.384) – – (28,566) Leases 362,127 – | (102,286) – (102286]| – 16407 (17,622) – 127,105 375,731 [Oher 50,943 -| 9747) (49747) – – – – 61,187 62.383 [Total labilities on financing activities | 17,797,716 | (i:381,489)[ (1:3e1,ae9)[ 539 Ó0s| -(17,522)| (80,398) 627] 199.262] 17.347.901 Changes that do not represent cash How names Debt expense be , Financial . : Liabiltis for A cos | Exchange | Fairvalue | deferredin | yy, [Closingbalance financing activities at1-1-2022 cy | óference | adjustment | amortized at 12-31-2021 cost From Used Total Thus$ ThUS$ THuss | Tmuss | Thuss | Thuss ThUS$ Thus$ Thus$ Thuss Loans fom fnancial entes 1,570,442 | (688,253) – (588253]| 24.074 – 1.40 (20,338) 987,419 Bond obligatons 16,506,214 780,000 | (1,558,768)| – (778758)| – 70.017 | – (113143) – | (30,249) – 16254.081 Hadging obligatons 129,208 -| (62960) (62960 | 25316 84,188 8,828 – 1,740 180,320 Dividends paid -| (2,033,206) (2,033,206) – – – – – Financial ases for hedge derivatves (127,502) – – – 28,975 58,189 – 7,164 (83,174) Leases 485,008 – | (138,668) – (138668]| – 18,206 (88,535) – 26,116 362,127 [Oher 50.469 -| (177202)) – (177292) – – – -| im766 50,943 [Total iabilities on financing activities [18,619,839 780,000] (4,559,137)[ -(3,179,137)[ 737,613] –(38:518)| –6r017 1494] 156,99 | 17,797,116
(1) The finance costs consider the capitalization of interest, which, as of September 30, 2022 and 2021, amounted to ThUS$ 209,224 and ThUS$ 171,980 respectively.
13. Fair Value of financial assets and liabilities
The carrying amount of financial assets is a reasonable approximation to their fair value, therefore, no additional disclosures are required in accordance with IFRS 7.
Regarding financial liabilities, the following table shows a comparison as of September 30, 2022 between the carrying amount and the fair value of financial liabilities other than those whose carrying amount is a reasonable approximation of fair value:
Comparison book value vs fair value | Accounting treatment As of September 30, 2022 for valuation Book value Fair value Thus$ Thus$ Financial liabilities: Bond obligations Amortized cost 15,762,347 13,257,608
74
Corporación Nacional del Cobre de Chile
14. Market value hierarchy for items at market value
Each of the market values calculated for the Corporation’s portfolio of financial instruments is supported by a calculation methodology and data inputs. An analysis of each of these methodologies has been carried out to determine to which of the following levels they can be assigned:
– Level 1 corresponds to fair value measurement methodologies using market shares (unadjusted) in active markets to which the Corporation has access at the measurement date and considering identical Assets and Liabilities.
– Level 2 corresponds to fair value measurement methodologies using quoted market price data, not included in Level 1, that are observable for the Assets and Liabilities measured, either directly (prices) or indirectly (derived from prices).
– Level 3 corresponds to fair value measurement methodologies using valuation techniques that include data on the Assets and Liabilities valued, which are not based on significant observable market data.
Based on the methodologies, inputs, and definitions described above, the following market levels have been determined for the Corporation’s portfolio of financial instruments held as of
September 30, 2022:
Financial assets and liabilities at fair value classified by hierarchy 9-30-2022 Level 1 Level 2 Level 3 Total ThUS$ ThUS$ ThUS$ ThUS$ Financial assets: Hybrid contracts with non-finalized price 1,452,579 1,452,579 Cross currency swap – 28,566 28,566 Mutual funds shares 32,180 – 32,180 Metal futures contracts 20,751 20,751 Financial liabilities: Metal futures contracts 48 – 48 Cross currency swap – 199,088 199,088
There were no transfers between the different levels of market hierarchy for the reporting period.
75 (Y)
CODELCO
( ))
Corporación Nacional del Cobre de Chile
CODELCO
15. Trade and other accounts payable
a) Details of trade accounts payable, sundry accounts payable and other current accounts payable are shown in the following table:
Current Liabilities Item 9-30-2022 12-31-2021 ThUS$ ThUS$ Trade creditors 985,504 1,262,221 Payables to employees 18,143 19,691 Withholdings 89,434 97,252 Withholding taxes 15,549 48,139 Other accounts payable 72,786 70,126 Total 1,181,416 1,497,429
Trade creditors mainly include operating accounts payable, and obligations associated with investment projects.
b) The following is a schedule of maturities of payments to trade creditors as of September 30, 2022, and December 31, 2021:
As of September 30, 2022 Amounts according to payment tems Creditors with current due date Up to 30 days | 31-60 61-90 91-120 121-365 | 366 and over Total Average payment period (Goods 381,431 228 91 – 2 – 381,774 158 Services 489,326 5,906 157 – 35 – 495,424 19.5 Other 87,100 540 – – – – 87,640 84 Total 957,857 6,674 248 – E – 964,838 165 As of September 30, 2022 Amounts according to payment tems e Average Suppliers with overdue payments Up to 30 days | 31-60 61-90 91-120 121-365 | 36Bandover | – Total payment pefod [Goods 1,894 908 1,329 458 680 1,792 7,061 333,3 Services 3,497 2,210 498 1,761 228 415 8,609 240.1 Other 241 266 256 307 257 3,870 4,996 380.9 Total 5,632 3,384 2,082 2,526 1,465 5,877 20,666 351.2 As of December 31, 2021 Amounts according to payment lems Creditors with current due date Up to 30 days | 31-60 61-90 91-120 121-365 | 366andover | – Total Average payment period [Goods 523,424 150 49 30 2 – 523,677 15.0 Services 506,639 6,443 195 18 95 – 573,490 156 Other 137,003 1,158 . ñ – – 138,232 132 Total 1,227,066 7,751 244 219 19 – [1,235,399 151 As of December 31, 2021 Amounts according to payment terms o Average Suppliers with overdue payments Up to 30 days | 31-60 61-90 91-120 121-365 | 36Bandover | – Total payment period Goods 4,276 795 166 125 504 2404 82m 301.5 Services 6513 2,182 651 15 2432 1,436 13,329 338.4 Other 246 147 288 347 303 3891 5222 266.8 Total 11,035 3124 1,105 588 3,239 7,731 26,822 285.3
76
CO) CODELCO
Corporación Nacional del Cobre de Chile
16. Other provisions
The detail of other current and non-current provisions at the dates mentioned is as follows:
Other provisions Current Non-current
9-30-2022 12-31-2021 9-30-2022 12-31-2021 ThUS$ ThUS$ ThUS$ ThUS$ Sales-related provisions (1) 10,750 8,627 – – Operating (2) 376,948 523,177 – – Law No. 13196 81,158 151,509 – – Other provisions 45,854 58,714 870 496 Closure, decommissioning and restoration (3) – – 2,098,033 2,407,814 Legal proceedings – – 60,475 49,275 Total 514,710 742,027 2,159,378 2,457,585
(1) Corresponds to sales-related accruals, which includes charges for freight, loading, and unloading that were not invoiced at the end of the year.
(2) Corresponds to provisions made for customs duties, freight for acquisitions and electricity, among others.
(3) Corresponds to provisions for future closure costs related mainly to tailings dams, mine site closures and other assets. This cost value is calculated at discounted present value, using flows associated with plans with an evaluation horizon ranging from 10 to 60 years. The rates used to discount future cash flows are calculated based on the Life of Mine “LOM” of each of the operations, distinguishing rates in UF for those obligations in Chilean pesos and rates in
U.S. dollars for those obligations in U.S. dollars. These discount rates include the risks associated with the liability being determined, except those included in the cash flows.
Below is a table with the discount rates used:
9-30-2022 12-31-2021 Division Local Currency | Dollar Currency | Local Currency | Dollar Currency
Rate Rate Rate Rate Gabriela Mistral 2.00% 2.29% 2.28% 0.51% Andina 2.24% 2.57% 2.64% 1.10% Ministro Hales 2.24% 2.57% 2.64% 1.10% Chuquicamata 2.33% 2.97% 2.73% 1.37% Radomiro Tomic 2.36% 3.05% 2.83% 1.56% Salvador 2.36% 3.05% 2.83% 1.56% Teniente 2.47% 3.31% 2.93% 1.78% Fundición Ventanas 2.47% 3.31% 2.93% 1.78%
The Corporation determines and recognizes this liability in accordance with the accounting policy described in Note 2, letter p) on Significant Accounting Policies.
17
0 : , Y) Corporación Nacional del Cobre de Chile E
Changes in Other provisions, were as follows:
Movements 1-1-2022
9-30-2022 Otho r Provision for | Contingencie Provisions, . Total site closure s non-current ThUS$ ThUS$ ThUS$ ThUS$ Opening balance 496 2,407,814 49,275 2,457,585 Closing provision adjustment – (311,906) – (311,906) Financial expenses – 35,958 (1) 35,957 Payment of liabilities – (5,837) (5,837) Exchange rate difference (14) (30,944) 13,166 (17,792) Other increases (decreases) 388 (2,889) 3,872 1,371 Closing balance 870 2,098,033 60,475 2,159,378
17. Employee benefits
a) Provisions for post-employment benefits and other long-term benefits
Provision for post-employment benefits mainly corresponds to employee severance indemnities and medical care plans. The provision for severance indemnities recognizes the contractual obligation that the Corporation has with its employeesretirees. The provision for medical care plans recognizes the contractual obligation that the Corporation has with its retirees to cover their medical care costs. Both benefits operate within the regulatory framework set forth in the collective bargaining or other agreements between the Corporation and its employees.
These provisions are recorded in the statement of financial position at the present value of the estimated future obligations. The discount rate used is determined based on the rate of financial instruments corresponding to the same currency in which the obligations will be paid and with similar maturities.
The defined benefit obligations are denominated in Chilean pesos; therefore the Corporation is exposed to foreign exchange rate risk.
The results arising from adjustments and changes in actuarial variables are charged or credited to the statement of comprehensive income for the period in which they occur.
During the nine-month period ended September 30, 2022, there were no relevant modifications to the post-employment benefit plans.
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The following actuarial assumptions were used in the actuarial calculation of the defined benefit plans:
9-30-2022 12-31-2021 Assumptions Severanoe indemnities Health plan [Retirement plan| Health plan provision ¡Annual nominal discount rate 5.70% 5.18% 5.89% 5.89% Voluntary Annual Turnover Rate for Retirement (Men) 5.50% 5.50% 5.50% 5.50% Voluntary Annual Turnover Rate for Retirement (Women) 6.20% 6.20% 6.20% 6.20% Salary Increase (real annual average) 4.64% – 3.98% – Future rate of long-term infation 3.60% 3.10% 3.10% 3.10% Expected inflation health care rate – 5.88% – 5.88% Mortality tables used for projections CB14-RV14 | CB14-RV14 | CB14-RV14 | CB14-RV14 ¡Average duration of future cash flows (years) 9.88 16.76 10.03 16.55 Expected Retirement Age (Men) 60 60 60 60 Expected Retirement Age (Women) 58 58 58 58
The discount rates correspond to the rates in the secondary market of government bonds issued in Chile. The projected annual inflation corresponds to an awareness above the long- term target publicly declared by the Central Bank of Chile and is derived from the market expectation as of September 30, 2022. The rotation rates have been determined after reviewing the Corporation’s own experience by studying the cumulative behavior of outflows over the last three years with respect to the current allocations. The expected rate of salary increases has been estimated using the long-term behavior of historical salaries paid by the Corporation. The mortality tables used were those issued by the CMF, which are considered an appropriate representation of the Chilean market given the lack of comparable statistical series to develop independent studies. The financial duration of the liabilities corresponds to the average maturity of the payment flows of the respective defined benefits.
b) The detail of current and non-current provisions for employment benefits as of the dates mentioned ¡s as follows:
Employee benefits provisions Current Non-current
9-30-2022 | 12-31-2021 | 9-30-2022 | 12-31-2021 ThUS$ Thus$ ThUuS$ ThUS$ Employees’ collective bargaining agreements 130,268 185,708 – – Severance indemnities 16,997 19,447 529,156 532,044 Bonus 42,929 52,288 – – Vacation 141,694 141,683 – – Medical care programs (1) 347 358 400,915 388,697 Retirement plans (2) 1,256 4,346 6,794 7,518 Other 12,830 15,493 6,588 6,283 Total 346,321 419,323 943,453 934,542
(1) Corresponds to a provision recognized for the obligations with health care institutions as agreed with current and former employees.
(2) Corresponds to the provision made for those employees who have agreed, or are expected to agree, to retire in accordance with current employee termination plans.
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The reconciliation ofthe balances of the provisions for post-employment benefits is presented below: Movements 1-1-2022 1-1-2021
9-30-2022 12-31-2021 Retirement Health plan Retirement Health plan plan plan ThUS$ ThUS$ ThUS$ ThUS$
Opening balance 551,491 389,055 649,780 607,994 Service cost 80,053 13,083 76,572 15,402 Finance cost 10,283 7,306 6,219 5,773 Property taxes paid (27,712) (33,615) (55,747) (41,112) Actuarial (gains) losses 1,346 44,848 (20,341) (132,625) Subtotal 615,461 420,677 656,483 455,432 (Gains) Losses on foreign exchange rate (69,308) (19,415) (104,992) (66,377) Closing balance 546,153 401,262 551,491 389,055
The balance of the defined benefit liability as of September 30, 2022, comprises a portion of ThUS$ 16,997 and ThUS$ 347 for the severance indemnity and the medical care plan, respectively. As of September 30, 2023, a balance of TRUS$ 537,380 has been projected for the provision for severance indemnities and ThUS$ 401,261 for health benefits The flows of compensation payments during the next twelve months reach an expected monthly average of ThUS$ 1,416 for severance indemnities and ThUS$ 29 for health benefit plans.
Actuarial results are composed of the following items
9-30-2022 12-31-2021 Technical remeasurements Retirement plan | Health plan | Retirement plan | Health plan ThUS$ ThUs$ ThUS$ ThUs$ Revaluation of demographic assumptions – (1,173) (18,658) Revaluation of financial assumptions 894 38,068 (19,156) (94,747) Revaluation by experience 452 6,780 (12) (19,220) Total net effect 1,346 44,848 (20,341)| (132,625)
The following is a review of the sensitivities of the provisions, when going from a medium scenario to a low or high scenario with unitary percentage variations, respectively, and both effects of reduction or increase on the book balance of these provisions: ¡Severance Benefits for Years of Service Low Medium High Reduction Increase Financial effect on interestrates 5.453% 5.703% 5.953% 1.29% -1.25% Financial effect on the real increase in income 4.386% 4.636% 4.86% -1.12% 1.15% Demographic effect ofjob rotations 5.070% 5.570% 6.070% 0.11% 0.10% Demographic effecton mortality tables -25.00% | CB14-RV14, Chile! 25.00% 0.04% -0.04%
Health Benefits and Other Low Medium High Reduction Increase Financial effect on interestrates 4.933% 5.183% 5.433% 3.24% -3.06% Financial effect on health inflation 5.384% 5.884% 6.384% -3.06% 3.21% Demographic efect, planned retirement age 5856 6058 6260 5.16% -5.07% Demographic effecton mortality tables -25.00% | CB14-RV14, Chile! 25.00% 14.64% -8.83%
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18.
c) Provisions for early retirement plans and termination bonuses
In accordance with ¡ts operating optimization programs to reduce costs and increase labor productivity by incorporating new current technologies andor better management practices, the Corporation has established employee retirement programs by amending certain employment contracts or collective union agreements to include benefits encouraging employees to early retire, for which the necessary provisions are made based on the accrued obligation at current value.
As of September 30, 2022 and December 31, 2021, there is a current balance of ThUS$ 1,256 and ThUS$ 4,346 for obligations for early retirement plans and conflict termination bonds, respectively, while the non-current balance corresponds to ThUS$ 6,794 and ThUS$ 7,518, respectively. These amounts have been determined using a discount rate equivalent to that used for calculating employee benefits provisions and whose outstanding balances are part of the balances as of September 30, 2022 and December 31, 2021.
d) Employee benefits expenses
The employee benefit expenses recognized classified by nature are as follows:
1-1.2022 1-1-2021 7-1-2022 7-1-2022 Expense by Nature of Employee Benefits 9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUS$ ThUS$
Benefits – Short term 1,059,052 1,048,008 346,648 345,787 Benefits – Post employment 13,083 11,548 6,562 2,479 Early retirement plans and conflict termination bonuses 7,211 10,480 1,260 4,913 Benefits for years of service 80,053 52,415 25,014 16,302 Total 1,159,399 1,122,451 379,484 369,481
Equity
The Corporation’s total equity as of September 30, 2022 is ThUS$ 11,774,774 (ThUS$ 11,574,901 as of December 31, 2021 and ThUS$ 11,776,564 as of September 30, 2021).
In accordance with article 6 of Decree Law No. 1350 of 1976, it is established that, before March 30 of each year, the Board must approve the Corporation’s Business and Development Plan for the next three-year period. Taking that plan as a reference and keeping in mind the Corporation’s balance sheet for the immediately preceding year and aiming to ensure ¡ts competitiveness before June 30 of each year the amounts that the Corporation shall allocate to the formation of capitalization funds and reserves shall be determined by decree from the Ministries of Mining and Treasury.
Net income shown in the Statement of Financial Position, after deducting the amounts referred to in the previous paragraph, shall belong to the State and become part of the Nation’s general income.
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2 . s ( )) Corporación Nacional del Cobre de Chile a
On June 22, 2022, the Ministry of Finance agreed with the Corporation to a four-year average reinvestment plan of 30% of profits between 2021 and 2024, which will significantly contribute to the financing of Codelco’s investment plan, while considerably reducing ¡ts debt requirements. Consistent with the above, on the same date the Ministry of Finance issued exempt decree No. 194 authorizing the Corporation to allocate up to TRUS$582,750 of the net income from the balance sheet for the year 2021 and its final amount will be determined and recorded once the accounting year 2022 is closed and the final profit for the year is known.
During the year ended December 31, 2021, payments were made to the Treasury for a total of ThUS$ 2,033,206 for advance dividends charged to the profits of the period, which discounted from the dividends paid in excess in 2020, reflect a balance in favor of ThUS$249,943 as of December 31, 2021 for such concept.
In the months of May and June 2022, dividends totaling ThUS$ 259,900 have been paid. As of September 30, 2022, no dividends payable are recognized in respect of earnings for the period from January to September 2022.
The Consolidated Statement of Changes in Equity discloses the changes in the Corporation’s equity.
The movement and composition of other equity reserves is presented in the Consolidated Statement of Changes in Equity.
Reclassification adjustments from other comprehensive income to income for the years meant a loss of ThUS$ 1,659 and a loss of ThUS$ 6,367 for the nine-month periods ended September 30, 2022 and 2021, respectively.
a) Other reserves
Details of other equity reserves are shown in the following table, according to the dates indicated for each case.
Other reserves 9-30-2022 | 12-31-2021 ThUS$ ThUS$ Reserve on exchange differences on translation (10,698) (6,221) Reserve of cash flow hedges 4,138 (31,254) Capitalization fund and reserves 4,962,393 | 4,962,393 Actuarial results reserve in defined benefit plans (273,580) (259,573) Fixed asset revaluation reserve Law 18110 year 1982 624,567 624,567 Other reserves (4,244) (3,506) Total other reserves 5,302,576 | 5,286,406
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b) Non-controlling interests
19.
The detail of non-controlling interests, included in total equity and total profit or loss, as of the dates mentioned, ¡is as follows:
( ))
CODELCO ¡Companies Non-controlling interests Equity Profit
9-30-2022 12-31-2021 9-30-2022 12-31-2021 1-1-2022 1-1-2021 7-1-2022 7-1-2021
9-30-2022 9-30-2021 9-30-2022 9-30-2021 % % ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Inversiones Gacrux SpA 32.20% 32.20% 919,211 946,389 19,531 80,957 (2,454) 23,570 Other – – 11 23 (45) 12 (4) 7 Total 919,222 946,412 19,516 80,969 (2,458) 23,577
The percentage of non-controlling interest in Inversiones Mineras Becrux SpA (previously Inversiones Mineras Acrux SpA) generates a non-controlling interest in the subsidiary Inversiones Gacrux SpA, which presents the following figures relating to its statement of financial position, statement of income and cash flows:
Assets and liabilities
9-30-2022 | 12-31-2021 ThUs$ ThUs$
Current assets Non-current assets Current liabilites Non-current liabilities
68,035 304,053 2,844,992 2,829,329 50,418 186,350 219,467 313,750
Net cash flows from (used in) financing activities
(146,688)| (322,810)
Revenue
1-1-2022 1-1-2021 7-1-2022 7-1-2021 Profit (loss) 9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUS$ ThUS$ Income 578,852 1,005,690 111,922 314,282 Ordinary expenses and other (522,235) (753,783) (120,972) (243,707) Profitfor the period 56,617 251,907 (9,050) 70,575
1-1-2022 1-1-2021 Cash flows 9-30-2022 9-30-2021 ThUS$ ThUuS$ Net cash flows from (used in) operating activities 138,590 295,890 Net cash flows from (used in) investing activities (930) 141
Revenues from ordinary activities for the nine and three-month periods ended September 30,
2022 and 2021 were as follows:
Item
1-1-2022 1-1-2021
9-30-2022 9-30-2021 ThUS$ ThUS$
7-1-2022
9-30-2022 ThUS$
7-1-2021
9-30-2021 ThUS$
Revenue from sales of own copper
9,712,414 | 12,470,592
2,574,749 3,999,740
Revenue from sales of third-party copper 1,054,622 1,344,512 276,120 461,134 Revenue from sales of molybdenum 587,532 531,741 184,941 229,797 Revenue from sales of other products 526,071 537,030 152,639 170,484 Profit (loss) in futures market (855) (15,696) 395 (7,895)
Total
11,879,784 | 14,868,179
3,188,844 4,853,260
The Corporation’s revenue is recognized at a point in time.
The breakdown of revenue is presented in explanatory note No.24 Operating Segments.
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20. Expenses by nature
21.
Expenses by nature for the nine and three-month periods ended September 30, 2022 and 2021 were as follows:
1-1-2022 1-1-2021 7-1-2022 7-1-2021
Item 9-30-2022 9-30-2021 9-30-2022 9-30-2021
ThUuS$ Thus$ Thus$ ThuS$ Short-term benefits to employees 1,059,052 1,048,008 346,648 345,787 Depreciation (1) 1,640,093 1,635,567 525,230 521,197 ‘Amortization intangible assets 246 1,217 78 95 Total 2,699,391 2,684,792 871,956 867,079
(1) Depreciation includes the expense of Property, plant and equipment and right-of-use assets (see note 7b and note 8.1).
Asset impairment
As of December 31, 2021, the Corporation’s subsidiary “Sociedad de Procesamiento de Molibdeno” calculated the recoverable amount of its assets in order to test for impairment of the associated assets. As the Company’s projected cash flows are highly dependent on rhenium price projections, this variable was adjusted downward in 2021, based on actual market prices. This recoverable amount amounted to US$237 million, which when compared to the carrying amount of the cash generating unit’s assets of US$362 million, an impairment of ThUS$125,483 (before tax) was determined, which was recorded by reducing the Property, Plant and Equipment caption by ThUS$124,315 and in the right-of-use assets caption by ThUS$1,168 as of December 31, 2021. The recoverable amount determined corresponds to the value in use using a discount rate of 7.24% per year before taxes. The main variables used to determine the recoverable amount of this asset correspond to the price of rhenium, exchange rates and discount rates.
As of September 30, 2022 and December 31, 2021, there are no indications of additional impairments or reversals of impairment recognized in previous years, for the rest of the cash- generating units, as well as for their associates.
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CODELCO
22. Other income and expenses by function
Other income and expenses by function for the nine and three-month periods ended September 30, 2022 and 2021 are detailed below:
a) Other income
Item 1-1-2022 1-1-2021 7-1-2022 7-1-2021
9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUus$ ThUS$ Penalties to suppliers 4,480 2,276 1,347 1,373 Delegated Administration 2,997 3,178 932 971 Miscellaneous sales (net) 14,354 13,982 1,750 12,106 Insurance claims indemnities – 21 – 21 Material Return 610 13,669 610 12,183 Gacrux debt prepayment result – 21,342 – 1 Other miscellaneous income 17,035 28,869 3,894 (2,050) Total 39,476 83,337 8,533 24,605
b) Other expenses
1-1-2022 1-1-2021 7-1-2022 7-1-2021 ltem 9-30-2022 | 9-30-2021 9-30-2022 9-30-2021
Thus$ Thus$ ThUSS ThUS$ Law No. 13196 (834,555)] – (1,143,789) (229,872) (879,986) Study expenses (1) (80,243) (42,135) (85,417) (12.497) Bonus for the end of colecive bargaining (23,576) (115,247) 1,300 (84,938) Expense plan (7211) (10,480) (1,260) (4,913) Mining property value adjustment – (142,000) – (142,000) Wrie-of ofinvesiment projects (110) (83,100) – (83,100) Loss on disposal offxed assels (6,235) (8,321) (866) (1,034) Heath plans (13,083) (11,548) (6,562) (2479) Adjustment ofinventory (1,955) (8,070) (537) (743) Material obsolescence (23512) (18,424) (8,180) (11,843) Bad debis customers – (48) 658 (48) Extraordinary bonus (25722) – (5,682) 3,294 Confngency expenses (122,612) (118,992) (78,430) (60,972) Fixed indirect costs, low producton level – (20,151) – (20,151) Adjustment severance indemntes (89,310) – (8,334) 13,356 Other expenses (27.486) (35,945) (6,582) (20,308) Total (4,305,710)| (1748250) (879,764) (808,362)
(1) Study expenses include exploration expenses (see note 7 letter f), pre-investment studies and research and technological innovation expenses.
c) Law No. 13196
Law No. 13196 – Under this law, the return in foreign currency of sales abroad of the Corporation’s actual income from its copper production, including by-products, is taxed at
10%.
On January 27, 2017, Law No. 20989, article 3, establishes changes in the application of Law No. 13196 as of January 1, 2018, through which the Corporation will deposit annually, no later than December 15 of each year, the funds established in article 1 in that law.
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23.
24.
On September 26, 2019, Law No. 21174 was published, which repeals Law No. 13196 and establishes that the 10% tax to the tax benefit provided by the Corporation will subsist for a period of nine years, decreasing from the tenth year 2.5% per year until reaching 0% at the beginning of the thirteenth year. The validity of this law is as of January 1, 2020, maintaining the payment annually at a date no later than December 15 of each year
On March 23, 2020, the Ministry of Finance issued Ordinary Letter No. 843, which modifies the payment method of the funds related to Law No. 13196, in order to address funds to meet national needs generated by the COVID-19 crisis. Said Official Letter establishes the payment of funds owed to the Treasury for the application of Law No. 13196, equivalent to ThUS$240,168 (contribution for December 2019, January and February 2020), before March 31, 2020. Subsequently and from the month of April 2020, the Corporation should carry out the monthly transfer of the corresponding resources according to their recordkeeping, within a period not exceeding the last day of the month following its booking.
Finance costs
Finance costs for the nine and three-month periods ended September 30, 2022 and 2021 are detailed in the following table:
1-1-2022 | 1-1-2021 | 7-1-2022 | 7-1-2021 Item 9-30-2022 | 9-30-2021 | 9-30-2022 | 9-30-2021 ThUS$ ThUS$ ThUS$ ThUS$ Bond interest (314,022)| (366,385)| (101,234)| (118,400) Bank loan interest (6,717) (11,243) (1,072) 99 Restatement of severance indemnity provision (10,283) (2,921) (2,785) (1,594) Restatement of other non-current provisions (41,479) (23,877) (13,219) (8,765) Other (51,958)| – (44,363) (20,690)| (15,622) Total (424,459)| (448,789)| (139,000)| (144,282)
Operating segments
In section |! “Significant Accounting Policies”, it has been indicated that, for the purposes of IFRS 8, “Operating Segments”, these are determined according to the Divisions that comprise Codelco. In addition, the Parent Company’s revenues and expenses are distributed among the defined segments.
The mining deposits in operation, where the Corporation conducts its extractive and processing activities are managed by the following Divisions: Chuquicamata, Radomiro Tomic, Ministro Hales, Gabriela Mistral, Salvador, Andina and El Teniente. In addition, the smelting and refining activities are managed at the Ventanas Division. All these Divisions have a separate operational management, which reports to the Chief Executive Officer, through the North and South-Central Vice-President of Operations, respectively. The information on each Division and their corresponding mining deposits is as follows:
86 (Y)
CODELCO ce : , ¡Y Corporación Nacional del Cobre de Chile a
Chuquicamata
Types of mine sites: Open pit mines and underground mines
Operating: since 1915
Location: Calama, II Region de Antofagasta. Chile
Products: electro refined and electrowon cathodes and copper concentrate
Radomiro Tomic
Types of mine sites: Open pit mines
Operating: since 1997
Location: Calama, II Region de Antofagasta. Chile
Products: electrowon copper cathodes and copper concentrate
Ministro Hales
Types of mine sites: Open pit mines
Operating: since 2014
Location: Calama, II Region de Antofagasta. Chile.
Products: Calcined copper, copper concentrates
Gabriela Mistral
Types of mine sites: Open pit mines
Operating: since 2008
Location: Calama, II Region de Antofagasta. Chile Products: Electrolytic (electro-obtained) cathodes
Salvador
Type of mines: Underground and open pit mines
Operating: since 1926
Location: Salvador, Ill Region de Atacama. Chile.
Products: Electro refined and electrolytic (electro-obtained) copper cathodes and copper concentrate.
Andina
Type of mines: Underground and open pit mines Operating: since 1970
Location: Los Andes, V Region de Valparaíso. Chile.
Product: Copper concentrate
El Teniente
Type of mines: Underground mine
Operating: since 1905.
Location: Rancagua, VI Region del Libertador General Bernardo O’Higgins. Chile.
Products: copper concentrate and copper anodes.
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CODELCO
a) Allocation of Head Office revenue and expenses
Revenue and expenses controlled by the Head Office are allocated to the Divisions based on following criteria.
The main items are assigned based on the following criteria:
Revenue and Cost of Sales of Head Office commercial transactions e The allocation to the Divisions is made in proportion to the ordinary income of each of them.
Ofher income by function e Otherincome by function, associated and identified with each Division, is directly allocated.
e Recognition of realized profits and other income by way of subsidiaries are allocated in proportion to the revenues of each Division.
e The remaining other income is allocated in proportion to the aggregate of balances of other income and finance income of each Division.
Distribution costs e Expenses associated and identified with each Division are directly allocated.
e Distribution costs of subsidiaries are allocated in proportion to the revenues of each Division.
Administrative expenses e Expenses associated and identified with each Division are directly allocated.
e Administrative expenses recorded in cost centers associated with the sales function and administrative expenses of subsidiaries are allocated in proportion to the revenues of each Division.
e Administrative expenses recorded in cost centers associated with the supply function are allocated in proportion to inventory balances in warehouse in each Division.
e The remaining administrative expenses are allocated in proportion to operating cash outflows of each Division.
Other expenses, by function e Other expenses associated and identified with each Division are directly allocated.
e Expenses for pre-investment studies and other expenses by function of subsidiaries are allocated in proportion to the revenues of each Division.
Other Gains e Other gains associated and identified with each Division are directly allocated.
e Other gains of subsidiaries are allocated in proportion to the revenues of each Division
Finance Income e Finance income associated and identified with each Division is directly allocated.
e Finance income of subsidiaries is allocated in proportion to the revenues of each Division.
e The remaining finance income is allocated in relation to the operating cash outflows of each Division.
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b)
Finance Costs e Finance costs associated and identified with each Division are directly allocated.
e Finance costs of subsidiaries are allocated in proportion to the revenues of each Division
Share in profit (loss) of associates and joint ventures accounted for using the equity method e The share in the profits or losses of associates and joint ventures identified with each particular Division is allocated on a straight-line basis.
Foreign exchange differences e Foreign exchange differences identifiable with each Division are directly allocated.
e Foreign exchange difference of subsidiaries is allocated in proportion to the revenues of each Division.
e The remaining foreign exchange differences are allocated in relation to operating cash outflows of each Division
Contribution to the Chilean Treasury under Law No. 13196 e The amount of the contribution is allocated and accounted for in proportion to the invoiced and recorded amounts for copper and sub-product exports of each Division, that are subject to the surcharge.
Tax income benefit (expense) e Income tax benefit (expense) Corporate income tax under D.L. 2398 and specific mining tax are allocated based on the income before income taxes of each Division, considering for this purpose the income and expenses allocation criteria of the Head Office and subsidiaries mentioned above.
e Other tax expenses are allocated in proportion to the corporate income tax, specific mining tax and tax under D.L. 2398 of each Division
Transactions between segments
Transactions between segments mainly related to products processing services (or tolling services), are recognized as revenue for the segment rendering the tolling services and as the cost of sales for the segment that receives the service. Such recognition is made in the period in which these services are rendered, as well as ¡ts elimination in the consolidated corporate financial statements.
Additionally, the reallocation of the profit and loss assumed by Ventanas Division, associated with the corporate mineral processing contract between Codelco and Enami, in which a distribution is applied based on the revenue of each division is included as a transaction between segments.
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CODELCO
c) Cash flows by segments
The operating segments defined by the Corporation, maintains a cash management function which refers mainly to operational activities that need to be covered periodically with funds constituted in each of these segments and whose amounts are not significant in relation to corporate balances of cash and cash equivalents.
Conversely, activities such as obtaining financing, investment and payment of relevant financial obligations are mainly based at the Head Office.
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CODELCO from 1-1-2022 to 9-30-2022 Segments Chuquicamata [Radomiro Tomic| Salvador Andina El Teniente Ventanas G. Mistral M. Hales Total segments Other DR a ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Revenue from sales ofown copper 2,789,120 1,667,626 437,540 949,234 2,411,961 7,560 712,570 736,802 9,712,413 1 9,712,414 Revenue from sales ofthird-party copper 2,091 – 15,042 – – 24,883 – 42,016 1,012,606 1,054,622 Revenue from sales of molybdenum 310,836 36,254 11,212 53,884 154,955 – – 567,141 20,391 587,532 Revenue from sales of other products 143,882 – 64,350 4,798 117,168 152,597 3,764 37,847 524,406 1,665 526,071 Revenue from future market 456 1,143 762 281 (5,419) 437 1,059 412 (869) 14 (855) Revenue between segments 43,593 – 8,064 899 – 77,089 – 129,645 (129,645) – Revenue 3,289,978 1,705,023 536,970 1,009,096 2,678,665 262,566 717,393 775,061 10,974,752 905,032 11,879,784 Costofsales ofown copper (2,250,293) (1,165,135) (522,936) (643,684)] – (1,148,566) (8,544) (590,295) (436,928) – (6,766,381) 7,390 (6,758,991) Costofsales ofthird-party copper (2,933) – (21,379) – – (27,567) – (51,879)| (1,005,899) (1,057,778) Costof sales of molybdenum (60,462) (16,745) (4,041) (23,262) (29,528) – – (134,038) (2,954) (136,992) Costof sales ofother products (138,878) – (49,485) (614) (46,223) (142,675) (4,008) (3,091) (884,974) (1,457) (886,431) Costofsales beween segments (64,399) 386 (12,244) 7.195 6.421 (81,117) (1,318) 15,431 (129,645) 129,645 – [Cost of sales (2,516,965)| (1,181,494) (610,085) (660,365)| (1,217,896) (259,903) (595,621) (424,588)| (7,466,917) (873,275)| (8,340,192) [Gross profit (loss) 773,013 523,529 (73,115)| 348,731 1,460,769 2,663 121,772 350,473 3,507,835 31,757 3,539,592 [Other income, by function 5,836 574 3,298 4,252 5,398 3,507 965 737 24,567 14,909 39,476 Distibution cosís (3,841) – (736) (252) (1,208) – – (1,316) (7,353) (3,000) (10,353) Administrative expenses (31,489) (32,284) (13,410) (18,796) (64,664) (7,792) (21,127) (18,252) (207,814) (166,820) (874,634) Other expenses, by funcion (116,111) (15,747) (49,176) (17,094) (32,714) (25,726) (5,184) (12,083) (273,835) (97,320) (871,155) Law No. 13196 (295,368) (142,806) (47,524) (103,192) (205,112) (11,543) (70,975) (58,035) (934,555) – (934,555) [Other gains (losses) – – – – – – – – – 22,415 22,415 Finance income 170 116 85 (162) 782 71 14 (109) 967 28,633 29,600 Financial cosis (172,989) (25,204) (6,787) (57,318) (110,092) (4,776) (12,871) (28,194) (418,231) (6,228) (424,459) Impairmentloss under IFRS 9 – – – – – – – – – (1,182)! (1,182) [Share in the profit (loss) ofassociates and joint ventures accounted for 470 75 (63) 1,132 52.259 53,391 using the equity method Exchange gains (losses) in foreign currencies 33,351 10,844 5,500 32,070 27,578 9,280 (906)| 7,739 125,456 4,272 129,728 Profit (loss) before tax 192,572 319,022 (181,395) 188,954 1,080,684 (34,316) 11,688 240,960 1,818,169 (120,305)| 1,697,864 Income tax expense. (126,435) (213,332) 124,367 (125,923) (724,280) 24,776 (7,344) (161,103)| (1,209,274) 2,586 (1,206,688) Profit (loss) 66,137 105,690 (57,028)| 63,031 356,404 (9,540)| 4,344 79,857 608,895 (117,719)| 491,176
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Corporación Nacional del Cobre de Chile
CODELCO from 1-1-2021 to 9-30-2021 Segments Chuquicamata R. Tomic Salvador Andina El Teniente Ventanas G. Mistral M. Hales – | Total segments Other PO a ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Revenue from sales ofown copper 3,532,726 2,029,920 779,115 1,147,710 2,937,528 67,660 660,431 1,315,502 12,470,592 12,470,592 Revenue from sales of third-party copper 2,565 – – – – 37,312 – 39,877 1,304,635 1,344,512 Revenue from sales of molybdenum 270,603 34,325 9,392 41,431 166,282 – 522,033 9,708 531,741 Revenue from sales ofother products 173,901 – 75,986 3,069 90,602 139,921 51,660 535,139 1,891 537,030 Revenue from future market (4,008) (5,452) (202) (516) (2,687) 356 (2,344) (843) (15,696) (15,696) Revenue between segments 33,478 – 36,332 1,294 – 76,012 – 147,116 (147,116) – Revenue 4,009,265 2,058,793 900,623 1,192,988 3,191,725 321,261 658,087 1,366,319 13,699,061 1,169,118 14,868,179 [Costof sales ofown copper (2,441,494) (831,174) (696,252) (612,716) (1,272,434) (69,967) (390,723) (525,177) (6,939,937) 10,155 (6,929,782) Costof sales ofhird-party copper (1,953) – – – – (34,607) – – (86,560) (1,299,961) (1,336,521) Costof sales ofmolybdenum (67,680) (14,351) (3,824) (20,120) (31,527) – – (137,502) (10,419) (147,921) Costof sales ofolher products (422,014) – (87,631) (500) (39,806) (148,904) – (7,949) O) (1,596) (408,397) [Costof sales between segments (82,991) 13,375 (40,817) 5,100 19,460 (89,884) (721) 29,362 (147,116) 147,116 – [Cost of sales (2,716,129) (832,150) (828,524) (628,236) (1,324,307) (343,362) (391,444) (503,764)| (7,667,916) – (1,154,705)| (8,822,621) [Gross profit (loss) 1,293,136 1,126,643 72,099 564,752 1,867,418 (22,101) 266,643 862,555 6,031,145 14,413 6,045,558 [Other income, by function 8,673 743 4,664 5,635 10,557 (236)| 3,129 403 33,568 49,769 83,337 Distribution costs (2,427) (83) (418) (155) (715) – – (988) (4,756) (2,673) (7.429) Administrative expenses (19,964) (20,474) (14,169) (15,722) (58,280) (5,744) (18,018) (14,706) (167,077) (154,935) (822,012) ¡Other expenses, by function (97,689) (44,595) (23,914) (153,000) (67,100) (2,382) (12,382) (9,001) (410,063) (194,398) (604,461) Law No. 13196 (852,387) (180,374) (79,893) (119,582) (241,165) (17,958) (65,504) (86,926) (1,143,789) – (1,143,789) [Other gains (losses) – – – – – – – – – 24,032 24,032 Finance income 24 (1) 63 39 719 94 11 (85) 864 9,222 10,086 Financial costs (173,088) (26,088) (12,227) (43,478) (131,740) (4,975) (10,676) (30,596) (432,868) (15,921) (448,789) Impairmentloss under IFRS 9 – – – – – – – – – (9) (9) [Share in the profit (loss) ofassociates and joint ventures accounted for 594 (82) 6,392 6.904 298,703 305,607 using the equity method Exchange gains (losses) in foreign currencies 69,150 24,436 17,073 34,927 84,827 13,368 15,237 18,169 277,187 (22,255) 254,932 Profit (loss) before tax 725,428 880,237 (36,128)! 273,334 1,470,913 (39,934) 178,440 738,825 4,191,115 5,948 4,197,063 Income tax expenses (482,771) (589,984) 27,537 (180,348) (980,754) 29,379 (19,506) (497,422)| (2,793,869) 103,709 (2,690,160) Profit (loss) 242,657 290,253 (8,591) 92,986 490,159 (10,555) 58,934 241,403 1,397,246 109,657 1,506,903
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Corporación Nacional del Cobre de Chile
CODELCO
The assets and liabilities related to each operating segment, including the Corporation’s corporate center (Head Office) as of September 30, 2022 and December 31, 2021, are detailed in the following tables:
9-30-2022 Category Chuquicamata [Radomiro Tomic| Salvador Andina El Teniente Ventanas G. Mistral M. Hales Other Total Consolidated ThUs$ Thus$ ThuS$ Thus$ Thus$ ThUS$ ThUS$ ThUuS$ ThUS$ ThuS$ [Current assets 1,293,909] 782,069] 464,521 290,855] 804,644] 47,040] 340,344] 340,885| 2,144,935] 6,509,202 INon-current assets 9,410,981 2,060,590] 1,591,979] 5,407,553] 8,432,380] 194,492 996,467| 3,308,204| 4,501,256] 35,903,902 [Currentliabilies 485,077| 230,426] 156,680] 192,354| 426,990] 71,354 123,971 128,406] 858,817| 2,674,075 Non-current liabilites 529,294] 298,407] 313,973| 1,001,605] 745,388| 67,958| 127,061 139,672] 24,740,897| 27,964,255
12-31-2021 Category Chuquicamata [Radomiro Tomic| Salvador Andina El Teniente Ventanas G. Mistral M. Hales Other Total Consolidated ThUS$ ThUS$ ThUS$ Thus$ Thus$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ [Current assets 1,657,948| 1,009,317| 510,147 392,996| 1,219,506] 66,487 386,309] 482,934| 2,076,265] 7,801,909 INon-current assets 9,251,627| 2,085,913] 1,317,660] 5,404,441 8,112,876] 214,228| 1,040,031 3,285,526| 4,543,224] 35,255,526 [Currentliabilies 962,071 230,440] 204,120] 232,538| 538,455] 95,733] 110,090] 146,358] 1,689,072] 3,938,877 Non-current liabilites 574,123| 295,922] 345,003| 1,048,434] 839,281 88,088] 147,495] 153,782] 24,051,529] 27,543,657
Revenues segregated by geographic area are as follows:
1-1-2022 1-1-2021 7-1-2022 7-1-2021
Revenue per geographical areas 9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUS$ ThUS$ Total revenue from domestic customers 1,824,216 2,314,749 447,791 821,230 [Total revenue from foreign customers 10,055,568 | 12,553,430 2,741,053 4,032,030 Total 11,879,784 14,868,179 3,188,844 4,853,260
1-1-2022 1-1-2021 7-1-2022 7-1-2021
Revenue per geographical areas 9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUS$ ThUS$ China 2,266,492 2,968,317 617,531 898,447 Restof Asia 2,462,072 2,495,172 699,900 883,247 Europe 3,636,583 4,583,295 996,109 1,423,167 America 2,848,644 3,933,033 729,663 1,352,542 Other 665,993 888,362 145,641 295,857 Total 11,879,784 | 14,868,179 3,188,844 4,853,260
During the nine and three-month periods ended September 30, 2022 and 2021, there is no revenue from ordinary activities from transactions with a single customer representing 10 percent or more of the Corporation’s revenue from ordinary activities.
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Corporación Nacional del Cobre de Chile
25.
26.
27.
Exchange difference
Exchange differences for the nine and three-month periods ended September 30, 2022 and 2021 are as follows:
Profit (loss) from foreign exchange 1-1-2022 1-1-2021 7-1-2022 7-1-2021 differences recognized in income 9-30-2022 9-30-2021 9-30-2022 9-30-2021 ThUS$ ThUS$ ThUs$ ThUuS$ Profit from foreign exchange differences 207,054 420,845 (12,533) 338,293 Loss from foreign exchange differences (77,326) (165,913) 17,270 (118,747) Total exchange differences 129,728 254,932 4,737 219,546
Statement of cash flows
The following table shows the items that comprise other collections and payments from operating activities in the Statement of Cash Flows:
1-1-2022 1-1-2021
Other collections from operating activities 9-30-2022 | 9-30-2021 ThUS$ ThUS$ VAT Refund 1,112,199 957,744 Sales hedge 5,316 17,856 VAT and Othe 606,616 562,533 Total 1,724,131 | 1,538,133
1-1-2022 1-1-2021
Other payments from operating activities 9-30-2022 | 9-30-2021 ThUS$ ThUS$ Contribution to Chilean treasury Law N*13.196 (1,004,907)| (1,154,575) VAT and other similar taxes paid (1,252,564) | (1,168,460) Total (2,257,471)| (2,323,035)
No capital contributions were received during the nine-month period ended September 30, 2022 and 2021.
Risk management
Corporación Nacional del Cobre de Chile has created instances within its organization that seek to generate strategies to minimize the financial risks to which it may be exposed.
The risks to which Codelco is exposed and a brief description of the management procedures that are carried out in each case, are described below.
94 (Y)
CODELCO ce : , ¡Y Corporación Nacional del Cobre de Chile a
a. Financial risks ” Exchange rate risk:
According to IFRS 7, exchange rate risk is understood to be the risk that arises from financial instruments that are denominated in foreign currencies, that is, a currency other than the Corporation’s functional currency (US dollar).
Codelco’s activities that generate this exposure correspond to funding in UF, accounts payable and receivable and provisions in Chilean pesos, other foreign currencies used in its business operations and obligations with employees.
Most transactions in currencies other than US$ are denominated in Chilean pesos. Also, there is another portion in Euro, which corresponds mainly to a long-term loan issued through the international market, which exchange rate risk is mitigated with hedging instruments (Swap).
Taking into consideration the financial assets and liabilities as of September 30, 2022 as the base, a fluctuation (positive or negative) of 10 Chilean pesos against the U.S. dollar (keeping the other variables constant), could affect profits before taxes by US$ 27 million in profit or loss, respectively. This result is obtained by identifying the main items (including assets and financial liabilities) denominated in foreign currencies in order to measure the impact on profit or loss that a variation of +- 10 Chilean pesos would have in terms of US$, with respect to the closing exchange rate at the end of the reporting period.
* Interest rate risk
This risk arises from interest rate fluctuations in Codelco’s investment and financing activities.
This movement can affect future cash flows or the market value of fixed rate financial instruments.
These rate variations refer to U.S. dollar variations, mostly with respect to the LIBOR rate. To manage this risk, Codelco maintains an adequate combination of fixed and variable rate debt, which is complemented by the possibility of using interest-rate derivatives to meet the strategic guidelines defined by Codelco’s Vice-Presidency of Administration and Finance
Itis estimated that, based on net debt at September 30, 2022, a one percentage point change in the interest rates of credit financial liabilities subject to variable interest rates would result in a change in annual interest expense of approximately US$ 7 million, before taxes. This estimation is made by identifying the liabilities assigned variable interest, accrued at the end of the financial statements, which may vary with a change of one percentage point in variable interest rates
The concentration of obligations that Codelco maintains at fixed and variable rates at
September 30, 2022, corresponds to a total of ThUS$ 15,762,347 and ThUS$ 976,918, respectively.
95 ce : , ¡Y Corporación Nacional del Cobre de Chile a
b. Market risk.
+ Commodity price risk:
As a result of its commercial operations and activities, the Corporation’s income is mainly exposed to the volatility of copper prices and certain sub-products such as gold and silver.
Copper and molybdenum sales contracts generally establish provisional sales prices at the time of shipment of such products, while the final price will be considered based on a monthly average price determined by the market for future periods. At the reporting date, sales of provisionally priced products are adjusted to fair value and the effect is recorded in the results of operations for the period. Forward prices at the period-end are used for copper sales, while period-end average prices are used for molybdenum concentrate sales due to the absence of an assets futures market. (See Note 2.r) “Income from Activities Ordinary Procedures from Contracts with Customers of section II Main Accounting Policies).
As of September 30, 2022, if the future price of copper fluctuates by + – 5% (with the other variables constant), the result would be US$241 million before taxes as a result of setting the mark to market of sales revenue to provisional prices in effect as of September 30, 2022 (MTMF 598). For the estimate indicated, all of those physical sales contracts were valued according to the monthly average immediately following the close of the financial statements, and proceeds to be estimated regarding what the final settlement price would be if there is a difference of + – 5% with respect to the future price known to date for this period
In order to protect cash flow and adjust, where necessary, its sales contracts to its trade policy, the Corporation holds operations in futures markets. At the end of the reporting period, these contracts are adjusted to fair value, recording this effect, at the settlement date of the hedging transactions as part of net product sales.
The Corporation has not entered into any hedging transactions with the specific purpose of hedging the price risk caused by fluctuations in prices of production inputs.
c. Liquidity risk
The Corporation ensures that it has sufficient resources, such as pre-approved credit lines (including refinancing), in order to meet short-term requirements, after considering the necessary working capital for its operations and any other commitments it has.
In this sense, the Corporation maintains resources at its disposal sufficient to meet its obligations, whether in cash, liquid financial instruments or credit facilities.
In addition, the Finance Department constantly monitors the Corporation’s cash flow projections based on short- and long-term projections and available financing alternatives. In addition, the Corporation estimates that it has enough headroom to increase the level of borrowing for the normal requirements of its operations and investments established in ¡ts development plan.
96
2 . s ( )) Corporación Nacional del Cobre de Chile a
In this context, according to current existing commitments with creditors, the cash requirements to cover financial liabilities classified by maturity and presented in the statement of financial position are detailed as follows:
Maturity of financial liabilities as of 9-30-2022 Less than | Between one Over
1 year five years years
ThUS$ ThUS$ ThUS$ Loans from financial entities 6,885 373,956 596,077 Bonds 368,403 2,638,595 | 12,755,349 Derivatives 4,848 184,509 9,779 Other financial liabilities – 62,383 – Total 380,136 3,259,443 | 13,361,205
d. Credit risk
This risk comprises the possibility that a third party does not fulfill its contractual obligations, thereby causing a loss for the Corporation.
Given the Corporation’s sales policy, principally with cash and advance payments and bank letters of credit, the uncollectible of client debt balances is minimal. This is complemented by the familiarity the Corporation has with its clients and the length of time it has operated with them. Therefore, the credit risk of these transactions is not significant.
The indications with respect to the payment conditions to the Corporation are detailed in every sales contract and the negotiation management is under the charge of the Commercial Vice- Presidency.
In general, the Corporation’s other accounts receivable have a high credit quality according to the Corporation’s evaluations, based on each debtor’s solvency analysis and payment history.
The maximum exposure to credit risk as of September 30, 2022 is represented by the financial asset items presented in the Corporation’s Statement of Financial Position.
The Corporation’s accounts receivable does not include customers with balances that could be classified as a significant concentration of debt and would represent a material exposure for Codelco. This exposure is distributed among many clients and other counterparties.
In the customer items, the provisions, which are not significant, are included based on the review of the outstanding balances and characteristics of the clients, destined to cover eventual insolvencies.
Explanatory note 2 “Trade and other receivables” shows past due and not provisioned balances.
The Corporation estimates that unimpaired amounts overdue over 30 days are recoverable based on clients’ historical payment behavior and their existing credit ratings.
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Corporación Nacional del Cobre de Chile
28.
As of September 30, 2021, and 2021, there are no receivable balances that have been renegotiated.
Codelco works with major banks, which have high national and international ratings, and continually assesses them; therefore, the risk that could affect the availability of the Corporation’s funds and financial instruments is not significant.
Also, in some cases, to minimize credit risk, the Corporation has contracted credit insurance policies through which it transfers to third parties the commercial risk associated with some aspects of its business.
During the nine-month periods ended September 30, 2022 and 2021, no guarantees have been executed to ensure the collection of third-party debt.
Personnel loans mainly relate to mortgage loans, according to programs included in union agreements, which are paid for through payroll discounts.
The Corporation is also subject to other risks, such as supply chain risk.
Derivatives contracts.
The Corporation has entered transactions to hedge cash flows, to minimize the risk of foreign exchange rate variations and sales price variations, detailed as follows:
a. Exchange rate hedge The Corporation maintains an exposure associated with its foreign exchange hedging operations, the balance of which corresponds to a net deferred tax loss recognized in equity amounting to ThUS$3,108 as of September 30, 2022.
The following table shows details of the fair value and other information of the financial hedges contracted by the Corporation:
September 30, 2022
Type of Pana , Hedged item Bank derivative | Maturity | CU”eNC | odgeditem | Obligation | Fairvalue Asset | Amortized y Hedging | hedged item cost contract , instrument ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Bono UF Veto. 2025 [Credit Suisse (USA) Swap | 04-01-2025 | US$ 246,170 | – 208,519 28,566 | 249874 | – (221,308) Bono EUR Vcto. 2024 [Santander (Chile) Swap | 07-09-2024 | US$ 293.628 | 409650| (112331) 204630| (406,961) Bono EUR Vcto. 2024 [BNP Paribas (USA) Swap | 07-09-2024 | US$ 97.162 | 136402| (37359)| 98096| (135455) Bono UF Veto. 2026 [UP Morgan London Branch (England) | – Swap – | 08-24-2026 | US$ 356.767 | 406212 | (48819) 347,785| (396,504) Bono AUD Vcto. 2039 [Santander (Chile) Swap – | 07-22-2039 | US$ 44.976 49,266 (7.805) 30874 | (47679) Bono HKD Vcto. 2034 [HSBC Bank PLC (England) Swap | 11-07-2034 | US$ 63,695 63,792 (1974) 60179 | (62153) [Total 1,02998 | 1273541] -(170,722)| 1.090.438 | (1,270,160)
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CODELCO
( ))
Corporación Nacional del Cobre de Chile
CODELCO
December 31, 2021
Financial
Type of pal , : Hedged item Bank derivative | Maturity | CUTenC| uoggeditem | bligation | Fairvalue Asset | Amortized y Hedging | hedgeditem cost contract ; instrument ThUS$ | ThuS$ ThUS$ ThUS$ ThUS$ Bond UF Mal. 2025 [Credit Suisse (USA) Swap | 04-01-2025 | US$ 253,162 | – 208519 33,174 | – 275,382 | – (242,08) Bond EUR Mat. 2024 – [Santander (Chile) Swap | 07-09-2024 | US$ 339.405 | 409650] (77620) 367024| (444,544) Bond EUR Mat. 2024 [BNP Paribas (USA) Swap | 07-09-2024 | US$ 113004 | 409680 (25774)| 12198 | (147,973) Bond UF Mat. 2026 UP Morgan London Branch (England) | Swap | 08-24-2026 | US$ 366.901 | 406212] (68670) 381,758| (450428) Bond AUD Mat. 2032. [Santander (Chile) Swap | 07-22-2039 | US$ 50,736 49,266 (4:539)| 59373 | (63912) Bond HKD Mat. 2034 [HSBC Bank PLC (England) Swap | 14-07-2034 | US$ 64,105 63,792 (375| T3708| (16.084) Total 1.187.313 | 1,547,419] – (145:804)| 1,279,445 | -(1.425,249)|
As of September 30, 2022, the Corporation has cash collateral balances amounting to ThUS$ 14,000.
The current methodology for valuing currency swaps uses the bootstrapping technique based on mid-swap rates to construct (zero) curves in functional currencies other than the functional currency and USD, respectively, based on market information.
The notional amounts held by the Corporation for financial derivatives are detailed below:
Notional amount of contracts with final maturity
September 30, 2022 Currency Less than 90 Over 90 days | Total current | 1to 3 years | 3to5years | Over 5 years Total non- days current ThUS$ Thuss ThUus$ ThUuS$ ThUS$ ThUS$ Thus$ [Currency derivatives US$ 8,138, 48,857] 56,995| 829,643 428,148 151,007] 1,408,798
Notional amount of contracts with final maturity
Less than 90 Over 90 days | Total current | 1to3 years | 3to5years | Over 5 years Total non-
December 31, 2021 Currency days current ThUS$ Thus$ ThUuS$ ThUuS$ ThUS$. ThUS$ Thuss [Currency derivatives US$ 13,156| 48,151 61,307] 941,941 656,931 152,775] 1,751,647
b. Cash flows hedging contracts and commercial policy adjustment
The Corporation trades in the copper, gold and silver derivative markets and records its results upon termination. These results are added to or deducted from sales revenues. As of September 30, 2022, these operations generated a lower net realized result of TRUS$
85.
b.1. Commercial flexibility operations of copper contracts
Its objective is to adjust the price of sales to the Corporation’s sales policy, which is defined according to the London Metal Exchange. As of September 30, 2022, the Corporation has copper derivative transactions associated with 264.250 metric tons of fine copper. These hedging transactions are performed as part of the Corporation’s commercial policy.
The current contracts as of September 30, 2022, present a positive balance of ThUS$ 20,592 and their final result will only be known at their maturity, offsetting the hedging transactions with revenue from the sale of the hedged products.
Operations completed between January 1 and September 30, 2022, generated a net negative effect in results of ThUS$ 459, corresponding to values for physical sales
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Corporación Nacional del Cobre de Chile
CODELCO contracts for a negative amount of ThUS$ 1,228 and values for physical purchase contracts for a positive amount of ThUS$ 769.
b.2. Trade operations of current gold and silver contracts.
As of September 30, 2022, the Corporation has derivative contracts for gold at MOZT
8,262.
The contracts in force as of September 30, 2022, present a positive exposure of ThUS$111, the final result of which can only be known at the expiration of these operations, after the compensation between the hedging operations and the income from the sale of the protected products. These hedging operations expire up to December, 2022.
The operations completed between January 1 and September 30, 2022, generated a positive effect on results of ThUS$ 374, corresponding to values per physical sales contracts.
b.3. Cash flow hedging operations backed by future production
The Corporation has no outstanding transactions as of September 30, 2022, arising from these operations, which protect future cash flows by locking in price levels for the sale of part of its production
The following tables set forth the maturities of metal hedging activities, as referred to in point b above: ¡September 30, 2022 Maturity date ThUS$ 2022 2023 2024 2025 2026 Upcoming Total Flex com cobre (asset) 9,581 13,004 2,219 – – – 24,804| Flex com cobre (liability) – (4,212) – – – – (4,212) Flex com GoldSilver 111 – – – – – 111 Price setting – – – Metal options – – – – – – – [Total 9,692 8,792 2,219 – – – 20,703] December 31, 2021 Maturity date ThUS$ 2022 2023 2024 2025 2026 Upcoming Total
Flex com cobre (asset) 61 – – – – – 61 Flex com cobre (liabilty) (22,056) (7,268) (863) – – – (29,687) Flex com GoldSilver (393) – – – – – (393) Price setting – – – – Metal options – – – – – – – Total (22,388) (7,268) (863) – – – (20,019) ¡September 30, 2022 Maturity date
All figures in thousands of metric tonsounces 2022 2023 2024 2025 2026 Upcoming Total [Copper Futures [MT] 62.025 180.225 22.000 – – – 264.250] GoldSilver Futures [ThOZ] 8.260 – – 8.260| ¡Copper price setting [MT] – – [Copper options [MT]
December 31, 2021 Maturity date
All figures in thousands of metric tonsounces 2022 2023 2024 2025 2026 Upcoming Total [Copper Futures [MT] 268.43 7290 4.50 – – 345.83] GoldSilver Futures [ThOZ] 15.98 – – 15.98 ¡Copper price setting [MT] – – [Copper options [MT]
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29. Contingencies and restrictions
a) Lawsuits and contingencies
There are various lawsuits and legal actions initiated by or against the Corporation, which derive from its operations and the industry in which it operates. In general, these are civil, tax, labor and mining litigations, all related to the Corporation’s activities.
In the opinion of Management and its legal advisors, the lawsuits where the Corporation is being sued and could have negative results do not represent significant loss contingencies or cash flows. Codelco defends ¡ts rights and makes use of all the corresponding legal and procedural instances and resources.
The most relevant lawsuits filed by Codelco relate to the following matters:
– Tax Proceedings: There is a tax proceeding for liquidation No.141 of tax year 2015 and Exempt Resolution No. 89 of 2016 issued by the Internal Revenue Service (Sl), for which the Corporation presented the corresponding appeals, which were received and resolved in favor of the Tax and Customs Courts, a resolution that was appealed by the SIl.
– Labor lawsuits: Labor proceedings brought by the workers against the Corporation, regard to occupational diseases, labor accidents and other matters.
– Mining proceedings and others arising from the operation: The Corporation has been participating, and will probably continue to participate, as plaintiff and defendant in given court proceedings involving its mining operation and activities, through which it seeks to exercise certain actions or set up certain defenses in relation to given mining concessions that have been established or are in the process of being established, as well as also with regard to its other activities. These proceedings currently do not involve any given amount and do not have any essential effect on Codelco’s development.
Some other procedures pending final judgment are the simultaneous claim for arbitration between Codelco, Santa Elvira S.A., Mining Services Group S.A. and Sociedad de Servicios para la Minería Limitada (collectively “Santa Elvira).
At the date of issuance of these financial statements, the Codelco faces various lawsuits and legal actions against it for a total of approximately US$94,162 million corresponding to 981 cases. According to the estimate made by the legal advisors of the Corporation, 798 causes, which represent 81.35% of the universe, have associated probable loss results amounting to ThUS$60,428 (additionally, with the same probable outcome, there are 7 causes for ThUS$47 from subsidiaries). There are also 151 cases, representing 15.39% for an amount of ThUS$33,715, for which it is less likely than not, that the ruling will be against the Corporation.
For the remaining 32 cases, representing 3.26% for an amount of ThUS$ 19, the Corporation’s legal advisors consider an unfavorable result remote.
– Lawsuit under administrative law: On August 2, 2017, a Nullity in Public Law claim was filed in the 25th Civil Court of Santiago against Audit Report No. 900 of 2016, issued by the General Comptrollership of the Republic on May 10, 2017.
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Once the discussion and evidence stage concluded, the Santiago Civil Court, on September 11, 2020, delivered its judgment in which it dismissed the annulment action filed by the Corporation, condemning it to the respective costs of said lawsuit.
On October 27, 2020, the Corporation filed appeals and cassation in the form of the sentence of the 25th Civil Court of Santiago, which dismissed the Public Law nullity action filed by the Codelco against Report No. 900 of 2016 of the Comptroller General of the Republic.
For litigation with a probable unfavorable outcome for the Corporation, the necessary provisions have been recognized as provisions for legal proceedings.
b) Other commitments.
i. On May 31, 2005, Codelco, through its subsidiary Codelco International Ltd. signed an agreement with Minmetals to form a company, CuPIC, in which both companies have an equal equity interest. In addition, the terms of a 15-year sales contract for cathodes to the associated company were agreed, as well as a purchase contract from Minmetals to the latter for the same term and equal monthly shipments until completing the total amount of 836,250 metric tons. Each shipment shall be paid for by the buyer at a price formed by a fixed re- adjustable component plus a variable component, which depends on current copper prices at the time of shipment.
During the first quarter of 2006 and on the basis of the negotiated financial terms, financing contracts were formalized with the China Development Bank allowing CuPIC to make the US$550 million advance payment to Codelco in March 2006.
With regard to financial obligations incurred by the associate CuPIC with the China Development Bank, Codelco Chile and Codelco International Ltd, must meet certain commitments, mainly relating to the delivery of financial information. In addition, Codelco Chile must maintain 51% ownership of Codelco International Limited.
According to the Sponsor Agreement, dated March 8, 2006, the Codelco International Ltd.
subsidiary gave its participation in CUPIC as a guarantee to the China Development Bank.
Subsequently, on March 14, 2012, CuPIC paid offits debt to the abovementioned bank. As of December 31, 2017 Codelco, does not hold any indirect guarantee regarding its participation in this associated company.
On December 17, 2015, the Company’s management presented a restructuring for the Supply Contract, which implies the removal of its share in CUPIC.
On April 7, 2016, the Corporation formalized the removal of its share in CUPIC, of which Codelco retained 50% ownership through the subsidiary Codelco International. Until that date, Codelco shared the ownership of the Company in the same proportion with the company Album Enterprises Limited (a subsidiary of Minmetals).
In order to realize the above-mentioned term of the shareholding, Codelco signed a set of agreements which formalized primarily the following issues:
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Copper sales contract modifications from Codelco to CUPIC signed in 2006, which establishes the reduction of half of the outstanding tonnage to deliver to this company and in which Codelco pays to CUPIC the amount of ThUS$99,330.
Reduction of share capital in CuPIC, equivalent to the 50% of the Codelco International shares in said company and by which CuPIC repays to Codelco the amount of ThUS$99,330.
Waiver of Codelco to any dividends associated with the profits generated by CuPIC from January 1, 2016 and the date of signing the agreement.
Additionally, the cessation of dividends reception as a consequence of the removal of the Codelco share in the ownership of CuPIC since 2016, led to a reduction of the net profit estimated by Codelco until the end of the contract signed with that company.
At the close of the first semester of 2021, the Corporation delivered the last shipment associated with this sales contract.
ii. Regarding the financing agreement signed on August 23, 2012, between the subsidiary, Gacrux Inversiones SpA and Mitsui 8 Co. Ltd. for the acquisition of the 24.5% stake in Anglo American Sur S.A. which was subsequently amended on October 31, 2012, a pledge is included over the shares that the subsidiary has on Acrux Inversiones SpA (shared participation with Mitsui and minority shareholder in Anglo American Sur S.A.), in order to ensure compliance with the obligations that the financial agreement contemplates.
This pledge extends to the right to collect and receive from Acrux dividends which have been agreed in the corresponding meetings of shareholders of the company and any other distributions paid or payable to Gacrux respect of the pledged shares.
On December 22, 2017 according to archive No. 12326 2017, it was established that, Gacrux, the Creditor and the Guarantee Agent, the latter representing the Guaranteed Parties, modified, by virtue of the Merger, the Contract of Pledge and the Modified Pledge Agreement as to the pledge on transferable securities and the commercial pledge, as well as the restrictions and prohibitions established in the Pledge Contract and in the Modified Pledge Contract, making it subject to , by virtue of the Merger, two thousand thirteen million two hundred and forty-five thousand four hundred and seventy-three shares pledge issued by Becrux, owned by Gacrux, hereinafter the “Pledged Becrux Shares.
On May 20, 2021, as a result of the prepayment of the obligations indicated above (see note
12), the pledges indicated in the preceding paragraph were raised.
iii. Law No. 19993 dated December 17, 2004, authorized the purchase of the Refinery and Smelter Las Ventanas assets from ENAMI, establishing that the Corporation must ensure that the smelting and refining capacity required is maintained, without any restriction and limitation, for treating the products of the small and medium mining sector sent by ENAMI, under the form of toll production or another form agreed upon by the parties.
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The Corporation has complied with these conditions as of September 30, 2022 and 2021.
v. On January 20, 2010, the Corporation signed two energy supply contracts with Colbún
S.A., which includes energy and power sales and purchases for a total of 510 MW of power.
The contract provides a discount for that unconsumed energy from Codelco’s SIC divisions with respect to the amount of contracted power. The discount is equivalent to the value of the sale of that energy on the spot market.
The contracted power for supplying these Divisions is comprised by two contracts:
+ Contract No.1 for 176 MW, current until December 2029.
” Contract No.2 for 334 MW, current until December 2044. This contract is based on energy production from Colbún’s Santa María thermal power station, which is currently in operation.
This plant is coal-fired, and therefore the electric energy tariff rate applied for the energy supplied to Codelco is linked to the price of coal.
Both of these contracts comply with Codelco’s long-term energy and power requirements from the SIC of approximately 510 MW.
Through these contracts, which operate through take or pay, the Corporation agrees to pay for the contracted energy and Colbún undertakes to reimburse at market price the energy not consumed by Codelco
These contracts have maturity dates in 2029 and 2044, vi. On November 6, 2009, Codelco signed the following long-term electric energy supply contracts with ELECTROANDINA S.A. (associate until January 2011), which matured in August 2017.
For the electric power supply of the Chuquicamata’s work center, there are three contracts: Engie for a 15-year term from January 2010, that is maturing in December 2024, for 200 MW capacity, and another contract for a 200 MW capacity which was signed in January 2018 and will be effective as of January 2025 with maturity in December 2035.
CTA effective from 2012 for 80 MW capacity, maturity in 2032.
vii. On August 26, 2011, Codelco signed two energy supply contracts with AESGener. The first one for the Minister Hales division for a 99 MW capacity and the second contract for the Radomiro Tomic work center, for a maximum capacity of 145 MW. Both contracts will mature in 2028.
viii. On November 11, 2011, Law No. 20551 was published in the Official Journal, which regulates the tasks and closure of mining facilities. Additionally, on November 22, 2012, the Supreme Decree No. 41 of the Minister of Mining, which approves the Regulations of this Law, was published in the Official Gazette.
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This law requires the Corporation, among other requirements, to provide financial guarantees to the State to ensure the implementation of closure plans. It also establishes the obligation to make contributions to a fund which aims to cover the costs of post-closure activities.
The Corporation, in accordance with the regulations, delivered in 2014 to the National Geology and Mining Service (SERNAGEOMIN) the mine closure plans for each of the eight divisions of Codelco. These closure plans were developed under the transitional regime of the Law, specified for mining companies affected by the general application procedure, which are those with extraction capacity > 10,000 tonsmonth, and that at the date of entry into force of the Law were in operation, and with a closure plan previously approved under the Mining Safety Regulation D.S. No. 132.
All these transitional closure plans were approved in 2015 in accordance with the provisions established in the Law.
The law also established the obligation to update these closure plans, under the conditions of the general regime of the law, which incorporates new and greater requirements for the closure plans, five years after its entry into force, ¡.e. in 2020 in the case of Codelco. This calendar was brought forward to 2019 due to operational particularities for the Chuquicamata and Ventanas Divisions, and postponed to 2021 by SERNAGEOMIN, due to the COVID19 pandemic for the entire industry, and therefore for all other divisions.
In compliance with this new schedule, Codelco approved in 2021 the updated closure plans for the El Teniente, Radomiro Tomic, Ministro Hales and Gabriela Mistral Divisions, and as of December 31, 2021, the approval of the updated plans for the Salvador and Andina Divisions is in process. The Corporation has provided the corresponding guarantees committed in all the approved closure plans, in accordance with the latest updates in force.
As of September 30, 2022, the Corporation has agreed guarantees for an annual amount of
U.F. 57,858,407 to comply with the aforementioned Law No. 20551. The following table details the main given guarantees:
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Transmitter Mine site Amount Currency | Date of issuance | Maturity date | Rate of issuance | ThUS$ Liberty Radomiro Tomic 5,730,481 UF 11-12-2021 11-12-2022 0.15 204,445 Liberty Ministro Hales 3,866,697 UF 11-15-2021 11-15-2022 0.15 137,951 Banco de Chile Chuquicamata 149,405 UF 11-27-2021 11-27-2022 0.27 5,330 HDI Chuquicamata 2,000,000 UF 11-26-2021 11-27-2022 0.25 71,353 Liberty Chuquicamata 3,550,000 UF 11-27-2021 11-27-2022 0.20 126,652 Banco de Chile Teniente 1,352,992 UF 12-02-2021 12-02-2022 0.27 48,270 Mapfre Teniente 2,550,000 UF 12-02-2021 12-02-2022 0.17 90,976 Banco ltau Teniente 730,000 UF 12-03-2021 12-02-2022 0.20 26,044 Banco Santander Teniente 5,000,000 UF 12-02-2021 12-02-2022 0.20 178,384 Banco Santander Teniente 250,000 UF 12-02-2021 12-02-2022 0.20 8,919 Banco Estado Teniente 3,169,500 UF 12-02-2021 12-02-2022 0.21 113,077 ‘AVLA Teniente 1,000,000 UF 12-02-2021 12-02-2022 0.25 35,677 Banco Bci Teniente 2,619,000 UF 12-02-2021 12-02-2022 0.25 93,437 ¡Aspor Gabriela Mistral 2,200,000 UF 12-15-2021 12-15-2022 0.15 78,489 Mapfre Gabriela Mistral 763,837 UF 12-15-2021 12-15-2022 0.17 27,251 Banco ltau Salvador 1,300,000 UF 02-10-2022 02-18-2023 0.15 46,380 Mapfre Salvador 3,937,232 UF 02-18-2022 02-18-2023 0.17 140,468 Banco BCI Andina 2,000,000 UF 03-15-2022 05-03-2023 0.25 71,353 Banco de Chile Andina 2,380,000 UF 03-15-2022 05-03-2023 0.25 84,911 Banco Estado Andina 2,774,997 UF 03-16-2022 05-03-2023 0.30 99,003 Banco Scotiabank Andina 1,800,000 UF 03-17-2022 05-03-2023 0.19 64,218 Mapfre Andina 750,000 UF 03-17-2022 05-03-2023 0.20 26,758 Chubb Andina 2,675,000 UF 05-03-2022 05-03-2023 0.20 95,435 Banco Estado Andina 1,557,094 UF 05-03-2022 05-03-2023 0.21 55,552 Banco Santander Andina 2,600,000 UF 05-02-2022 05-03-2023 0.20 92,760 Banco Estado Ventanas 1,152,172 UF 10-07-2021 10-07-2022 0.14 41,106 Total 57,858,407 2,064,199 ix. On August 24, 2012, Codelco through its subsidiary Inversiones Mineras Nueva Acrux SpA (Nueva Acrux) (whose minority shareholder is Mitsui), signed a contract with Anglo American Sur S.A. Under this contract, Codelco agreed to sell a portion of its annual copper production to the mentioned subsidiary, who in turn agrees to purchase such production.
Such annual portion is determined by the share of Codelco’s indirect subsidiary, Inversiones Mineras Becrux SpA (also shared ownership with Mitsui), maintained for the shares of Anglo- American Sur S.A.
In turn, the subsidiary Nueva Acrux agrees to sell to Mitsui, the products purchased under the agreement described in the preceding paragraphs.
The contract expiration will occur when the shareholders agreement of Anglo-American Sur
S.A. ends or other events related to the completion of mining activities of the company take place.
On June 11, 2019, Codelco and Anglo American Sur S.A. signed an agreement that ensures and optimizes the operation of their respective copper mines, Andina and Los Bronces, respectively. This agreement is similar to others that the same parties have signed during the last 40 years and that favor the independent, safe and sustainable operation of these neighboring mines.
X. On June 17, 2022, Codelco’s Board of Directors agreed to move forward with preparations to cease operation of the Ventanas Smelter, subject to parliament amending Law No. 19993
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CODELCO within a limited period of time, a decision that applies exclusively to the smelter and not to the refinery or other operations of the Ventanas Division. This measure will require the amendment and approval by the Executive and the Legislature of Law No. 19993, which obliges the Corporation to smelt the minerals of Empresa Nacional de Minería (ENAMI) at the Ventanas Smelter.
As of September 30, the bill to amend the aforementioned law is advancing in the National Congress in its various legislative stages.
In the event that Law No. 19993 is modified, Codelco will be able to prepare and submit to Sernageomin a new closure plan for the Ventanas Smelter and move forward:
a) Initiate proceedings before Sernageomin to obtain a permit for the temporary stoppage of the smelter.
b) Obtain environmental and sectoral permits from the relevant authorities for the definitive closure of the smelter.
c) Proceed with the dismantling of the plant, reuse of infrastructure, remediation, reclamation of areas and post-closure monitoring.
The interim consolidated financial statements do not include the accounting effects that could arise from an eventual early termination of the Ventanas Smelter’s operations.
Notwithstanding the fact that once the Law is modified, Codelco will move forward with a new closure plan, it is estimated that bringing forward to 2028 the start of the smelter closure activities included in the current plan (which currently considers an execution date of 2083), would increase the liability for mine closure by US$37 million that would be charged to profit or loss. In addition, Codelco should evaluate the recoverable amount of the Ventanas smelter assets in accordance with International Accounting Standard No. 36, in order to determine whether such amount is lower than the asset’s carrying value. As of September 30, 2022, the book value of the smelter’s assets totals US$30 million.
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30. Guarantees
The Corporation as a result of ¡ts activities has received and given guarantees.
The following tables list the main guarantees given to financial institutions:
Direct Guarantees provided to Financial Institutions and other ss 9-30-2022 12-31-2021 Creditor of the guarantee Type of guarantee Currency] Maturity [Quantity] TAUS$ THUS$
Road management [Construction project UF 08-Apr-24 1 4 4 Road management [Construction project UF 21-Jan-22 1 – 28 Road management Project of exploitation UF 01-Aug-22 1 4 Road management Project of exploitation UF 13-May-22 1 – – ¡General Directorate of Maritime Territory and Merchant Marine [Maritime concession CLP [01-Mar-22 1 1,099 1,249 ¡General Directorate of Maritime Territory and Merchant Marine [Maritime concession CLP [01-Mar-23 1 213 – ¡General Directorate of Maritime Territory and Merchant Marine [Maritime concession CLP. |24-Mar-24 2 – – Ministry of National Assets Project of exploitation CLP |25-Feb-22| 22 132 154 Ministry of National Assets Project of exploitation CLP |25-Feb-23| 22 – – Ministry of National Assets Project of exploitation UF 31-Mar-22 1 7 2 Ministry of National Assets Project of exploitation UF 13-May-23 1 35 7 Ministry of National Assets Project of exploitation UF 09-Jun-22 5 – 35 Ministry of Public Works [Construction project UF 31-Dec-21 1 – 161 Ministry of Public Works [Construction project UF 29-Jul-22 1 711 38 Ministry of Public Works [Construction project UF 31-Dec-23 1 487 732 Ministry of Public Works [Construction project UF 02-Oct-23 1 21,102 501 Ministry of Public Works [Construction project UF 31-Dec-22 1 3,019 21,702 Ministry of Public Works [Construction project UF 03-Feb-23 1 37 – ¡Sernageomin Environment UF 18-Feb-22 2 -| 168,240 ¡Sernageomin Environment UF 13-May-22 1 -| 170,909 ¡Sernageomin Environment UF 12-Nov-22 1 204,445 210,252 ¡Sernageomin Environment UF 15-Nov-22 1 137,951 141,869 ¡Sernageomin Environment UF 27-Nov-22 3 203,335 209,112 ¡Sernageomin Environment UF 02-Dec-22 8 594,784 611,678 ¡Sernageomin Environment UF 15-Dec-22 2 105,740 108,743 ¡Sernageomin Environment UF 07-Oct-22 1 41,106 42,273 ¡Sernageomin Environment UF 18-Feb-23 2 186,848 – ¡Sernageomin Environment UF [03-May-23 8 589,990 – ¡Abogado Procurador Fiscal Carlos Felix Judicial agreementand settement| CLP [|15-Mar-22 1 – 19,309 ¡Abogado Procurador Fiscal Carlos Felix Judicial agreementand settement| CLP |15-Mar-23 1 16,986 – ¡Abogado Procurador Fiscal Carlos Felix Judicial agreement and settement UF 15-Mar-22 1 – 1,101 ¡Abogado Procurador Fiscal Carlos Felix Judicial agreement and settement UF 15-Mar-23 1 1,070 – [Consorcio Aeropuerto Calama Parking UF 31-Mar-22 1 – 3 [Consorcio Aeropuerto Calama Parking UF 30-Sep-22 1 3 – Engie Energia Chile S.A. Water Supply Project CLP. [31-Ago-23 1 209 237 Engie Energia Chile S.A. Water Supply Project CLP. |31-Oct-23 1 204 232 ¡General Treasury of the Republic Maritime concession CLP |21-Oct-22 1 43 49 [Overall total 2,109,564 | 1,708,620
As for the documents received as collateral, they cover mainly obligations of suppliers and contractors related to the various development projects. Below are given the amounts received as collateral, grouped according to the Operating Divisions that have received these amounts:
Guarantees received from third parties Division 9-30-2022 12-31-2021 ThUS$ ThUS$ Andina 60 135 Chuquicamata 7 7 Casa Matriz 991,038 914,399 El Teniente – 427 Total 991,105 914,968
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31. Balance in foreign currency
a) Assets by Currency
9-30-2022 ¡Assets national and foreign currency US Dollars Euros Other Nonindexed UF. TOTAL currencies Ch$ Current assets Cash and cash equivalents 1,555,867 7,797 5,319 42,398 – 1,611,381 Other financial assets, current 51,817 – – 29 – 51,846 Other non-financial assets, current 3,723 346 14 24,349 3 28,435 Trade and other receivable, current 1,542,518 155,862 261 377,826 – 2,076,467 ¡Accounts receivable from related entities, current 13,441 – – – – 13,441 Inventories, current 2,566,252 – – – – 2,566,252 Current tax assets 159,424 83 – 1,873 – 161,380 Total current assets 5,893,042 164,088 5,594 446,475 3 6,509,202 Non-current assets Investments accounted for using equity method 3,534,431 – – – – 3,534,431 Property, plant and equipment 31,097,787 – 5 3,452 – 31,101,244 Deferred tax assets 78,560 – – 11,966 – 90,526 Other assets 798,206 – 1,466 326,848 51,181 1,177,701 [Total non-current assets 35,508,984 – 1,471 342,266 51,181 35,903,902 [Total assets [41,402,026 164,088 7,065 788,741 51,184 42,413,104]
12-31-2021 ¡Assets national and foreign currency US Dollars Euros Other Nonindexed UF. TOTAL currencies Ch$ Current assets Cash and cash equivalents 1,175,963 6,218 11,399 90,038 – 1,283,618 Other financial assets, current 320,339 – – 1 – 320,340 Other non-financial assets, current 21,619 395 113 1,866 4 23,997 Trade and other receivable, current 3,580,436 185,429 788 427,697 – 4,194,350 ¡Accounts receivable from related entities, current 156,711 – – – – 156,711 Inventories, current 1,811,455 – – – – 1,811,455 Current tax assets 6,646 98 – 4,694 – 11,438 Total current assets 7,073,169 192,140 12,300 524,296 4 7,801,909 Non-current assets Investments accounted for using equity method 3,546,011 – – – – 3,546,011 Property, plant and equipment 30,444,722 – 578 4,593 – 30,449,893 Deferred tax assets 78,667 – 2,455 13,473 – 94,595 Other assets 770,365 – 5,859 332,345 56458 1,165,027 [Total non-current assets 34,839,765 – 8,892 350,411 56,458 35,255,526 [Total assets [41,912,934 192,140 21,192 874,707 56462 43,057,435]
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b) Liability by type of currency:
9-30-2022
National and foreign currency liabilities US Dollars Euros Other Nomindexed A TOTAL currencies Ch$ Current liabilities Other financial liabilities, current 384,976 (22) 79 – (4,897) 380,136 Lease liabilities, current 53,704 – 685 53,869 8,132 116,390 Trade and other payables, current 789,203 11,564 1,931 378,589 129 1,181,416 Accounts payable to related entities, current 83,839 – – 742 – 84,581 Other short-term provisions 506,175 89 – 8,428 18 514,710 Current tax liabilities 13,055 – 114 1,330 – 14,499 Provisions for employee benefits, current 1,751 – 42 344,528 – 346,321 Other non-financial liabilities, current 23,290 – 28 12,695 9 36,022 Total current liabilities 1,855,993 11,631 2,879 800,181 3,391 2,674,075 Non-current liabilities Other financial liabilities, non-current 16,338,868 22,280 (956) – 260,456 16,620,648 Lease liabilities, non-current 92,910 – 1,281 139,251 25,899 259,341 Non-current payables 758 – – 270 – 1,028 Other long-term provisions 950,045 – 338 62,745 1,146,250 2,159,378 Deferred tax liabilities 7,966,106 – 16 12,047 – 7,978,169 Employee benefit provision, non-current 11,962 – – 634,272 297,219 943,453 Total non-financial liabilities, non-current 2,012 – – 226 – 2,238 Total non-current liabilities 25,362,661 22,280 679 848,811 1,729,824 27,964,255 [Total liabilities [ 27,218,654 33,911 3,558 1,648,992 1,733,215 [ 30,638,330
12-31-2021
National and foreign currency liabilities US Dollars Euros Other Nomindexed A TOTAL currencies Ch$ Current liabilities Other financial liabilities, current 605,223 (24) 13 – (9) 605,203 Lease liabilities, current 36,712 – 700 65,487 9,205 112,104 Trade and other payables, current 1,122,226 4,110 3,092 367,872 129 1,497,429 Accounts payable to related entities, current 221,344 – – – – 221,344 Other short-term provisions 732,501 784 – 8,742 – 742,027 Current tax liabilities 303,616 – 164 4,596 – 308,376 Provisions for employee benefits, current 2,223 – 804 416,296 – 419,323 Other non-financial liabilities, current 11,443 – 144 21,475 9 33,071 Total current liabilities 3,035,288 4,870 4,917 884,468 9,334 3,938,877 Non-current liabilities Other financial liabilities, non-current 16,636,544 (2,592) (1,008) – 270,696 16,903,640 Lease liabilities, non-current 90,458 – 1,046 115,356 33,163 240,023 Non-current payables 759 – – 306 – 1,065 Other long-term provisions 1,396,911 – – 43,491 1,017,183 2,457,585 Deferred tax liabilities 6,990,740 – 20 13,763 – 7,004,523 Employee benefit provision, non-current 11,002 – – 923,540 – 934,542 Total non-financial liabilities, non-current 2,035 – – 244 – 2,279 Total non-current liabilities 25,114,721 (2,592) 58 1,096,700 1,321,042 27,543,657 [Total liabilities [28,150,009 2,278 4,975 1,981,168 1,330,376] 31,482,534 |
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32.
33.
Sanctions
As of September 30, 2022 and 2021, neither Codelco Chile or its Directors and Managers have been sanctioned by the CMF or any other administrative authorities.
The environment
Each of Codelco’s operations is subject to national, regional and local regulations related to protection of the environment and natural resources, including standards relating to water, air, noise and disposal and transportation of dangerous residues, among others. Chile has introduced environmental regulations that have obligated companies, including Codelco, to carry out programs to reduce, control or eliminate relevant environmental impacts. Codelco has executed and shall continue to execute a series of environmental projects to comply with these regulations.
Pursuant to the Letter of Values approved in 2010, Codelco is governed by a series of internal policies and regulations that frame ¡ts commitment to the environment, among which ¡is the Corporate Sustainable Development Policy (2021).
The environmental management systems of the divisions, structure their efforts in order to comply with the commitments assumed by the corporation’s environmental policies, incorporating elements of planning, operating, verifying and reviewing activities. As of September 30, 2022, Codelco is implementing a strategic change process in all divisions to manage the aspects and risks associated with environmental matters, under a corporate management system issued by Head Office, seeking to obtain the ISO 14001: 2015 certification.
To comply with the Circular No. 1901 of 2008 of the CMF, the details of the Corporation’s main expenditures related to the environment during the periods from January 1 to September 30, 2022 and 2021, respectively, and the projected future expenses are stated below.
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Corporación Nacional del Cobre de Chile
CODELCO Disbursements 9-30-2022 9-30-2021 Future committed Company Project name Projectstatus | TRUSS | La e | HemofAssetDestination Expenditure | TRUSS | TRUSS | Estimated dato [Chuquicamata Codelco Chile [Acid plants In progress 1574 | Expendiure Operating expenditure 10631 | 202 Codelco Chile. [Solid waste In progress 873 | Expendiure Operating expenditure 957 1543 | 2022 Codelco Chile – [Talings In progress 51.705 | Expendiure Operating expenditure 43.267 | 2022 Codelco Chile – [Waterreaiment plant In progress 32.274 | Expendiure Operating expenditure 18,139 | 202 Codelco Chile – [Environmental monitoring In progress 974 | Expendiure Operating expenditure 1,145 1209 | 2022 Codelco Chile. [Normalizaton drainage system il hole In progress 36| Asset Property plant and equipment 3 3135) 2023 Codelco Chile. [Normalizaion handing feeding powder transport Completed | Asset Property plant and equipment 7510 -| 202 Codelco Chile. [Constucion tickened tlings Talabre In progress 4802| – Asset Property plant and equipment 10,468 | 202 Codelco Chile. [Standardizaton TKS Hazardous Substances Feed DS 43 In progress 4787] – Asset Property plant and equipment 44 tos] 2028 Codelco Chile [Constucion Xsage Talabre tanque In progress 6128] – Asset Property plant and equipment | 5537m| 2026 [Total Chuquicamata Division 103,253 92,164| – 560859 ¡Salvador Codelco Chile. [mproved integraton of he gas process In progress 8473] – Asset Property plant and equipment 2.025 4462| 2022 Codelco Chile – [Talings In progress 4,184 | Expendiure Operating expenditure 3,393 | 2022 Codelco Chile [Acid plants In progress 43.288 | Expenditre Operating expenditure 43,507 | 202 Codelco Chile. [Solid waste In progress 796 | Expenditure Operating expenditure 1,187 | 202 Codelco Chile – [Waterreaiment plant In progress 693 | Expenditure Operating expenditure 557 | 2022 Codelco Chile. [Bellreplacement Completed Asset Property plant and equipment 312 -| 202 Codelco Chile. [DRPA Emergency Completed Asset Property plant and equipment 2920 -| 202 Codelco Chile. [Compliance DS 43 storage dangerous subsiances Completed | Asset Property plant and equipment 692 -| 202 Codelco Chile. [Riles and Wastewater Standard In progress 160| – Asset Property plant and equipment – 203| 2022 [Total Salvador Division 57,294 54,593 4,565 Andina Codelco Chile [Constucion canal outine DL east Completed Asset Property plant and equipment 2018 -| 202 Codelco Chile [Valve and works raing Completed | Asset Property plant and equipment 1,129 -| 202 Codelco Chile. [Solid waste In progress 2079 | Expendiure Operating expenditure 1,586 | 20% Codelco Chile – [Watertreaiment plant In progress 3699 | Expendiure Operating expenditure 3509 | 202 Codelco Chile – [Talings In progress 69.047 | Expenditre Operating expenditure 62,708 | 202 Codelco Chile [Acid drainage In progress 28,378 | Expendiure Operating expenditure 25.082 | 202 Codelco Chile. [Environmental monitoring In progress 811 | Expendiure Operating expenditure 669 | 202 Codelco Chile [Susiinabliy and extemal matters management In progress 1.680 | Expendiure Operating expenditure 1,662 | 202 Codelco Chile. [DLN conditioning works Completed >| Asset Property plant and equipment 3606 -| 202 Codelco Chile [Excavaion operaton improvement In progress H9| Asset Property plant and equipment st 1762 | 2023 Codelco Chile. [Water dispateh tunnel modifican In progress TOT| Asset Property plant and equipment 2466 | 2022 Codelco Chile. [mplementaton of he calehmentsystem for raf ove In progress 5408| – Asset Property plant and equipment 1,082 37m| 202 Codelco Chile. [Dam Ovejeria: longitudinal drainage stage 8 In progress 7715] – Asset Property plant and equipment 19,887 | 202 Codelco Chile. [North extended ballast deposit In progress 5564 | – Asset Property plant and equipment 27,065 | 293841 | 2025 Codelco Chile [Standard Instuments Tranque Los Leones In progress 289| – Asset Property plant and equipment – 3745| 2023 Codelco Chile. [Constucion ofspil containmentchamber In progress 1361| – Asset Property plant and equipment – | 2022 Codelco Chile [Replacementof transformers into ol In progress 19| Asset Property plant and equipment – 413] 2023 [Total Andina Division 176,166 153,070 | 303,538 [Subtotal ERE 299,827 | – 878062
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Corporación Nacional del Cobre de Chile
CODELCO Disbursements 9-30-2022 9-30-2021 Future committed Company Project name Projectstatus | ThUS$ Assels Asset Expenditure ltem THUS$ | ThUS$ | Estimated date El Teniente Codelco Chile [Constucton of7hh phase Carén dam In progress 25986 | Assels Property, plantand equipment 34628] 102:356| 2023 Codelco Chile. [Constucton ofslag teaimentplant Completed Asset Propery,plantand equipment 2421 -| 2021 Codelco Chile – [Acid plants In progress 61.303 | Expendiure Operating expenditre 51,749 -| 2022 Codelco Chile – [Sold waste In progress 2,249 | Expenditure Operating expenditre 2268 -| 2022 Codelco Chile – [Water trealmentplant In progress 9,780 | Expenditure Operating expenditre 11,062 -| 2022 Codelco Chile – [Talings In progress 37,685 | Expendiure Operating expenditre 44,558 -| 2022 Codelco Chile [Well construction and hydrogeology modifcañon Coihue-Cauquenes In progress 1203 | – Asset Propery, plantand equipment 1,763 1565] 2023 Codelco Chile [Carenreseroirsiage 8 and 9 In progress 9020| – Asset Properk,plantand equipment 3809] 381842 | 2027 Codelco Chile. [Constucton of Complementary Water Works Tranque Barahona 2 In progress 2689| – Asset Properk,plantand equipment 32.215| 2023 Codelco Chile [Restorañon Slaughierhouse Drive In progress 3729| – Asset Property, plantand equipment 24253 | 2023 Codelco Chile [Flow CEMS Acquisiton In progress T| ase Properk,plantand equipment – 780| 2023 [Total El Teniente Division 153671 148,538 | – 543,011 ¡Gabriela Mistral Codelco Chile [Environmental monitoring In progress 1| Expendiure Operating expenditre 15 2022 Codelco Chile [Sold waste In progress 1395| Expendiure Operating expenditre 2095 2022 Codelco Chile – [Environmental consultancy Completed 3| Expenditure Operating expenditre 30 – 20m Codelco Chile [Garbage dump extension phase VII In progress 868| – Asset Propery, plantand equipment 1249| 14301] 2023 [Total Gabriela Mistral Division 9,567 3389| 14391 [Ventanas Codelco Chile – [Acid plants In progress 19.449 | Expendiure Operating expenditre 18980 -| 2022 Codelco Chile [Sold waste In progress 802| Expendiure Operating expenditre 1.537 -| 2022 Codelco Chile [Environmental monitoring In progress 920| Expendiure Operating expenditre 1.019 -| 2022 Codelco Chile – [Water trealmentplant In progress 4,736 | Expenditure Operating expenditre 4,2% -| 2022 Codelco Chile [mproved gas abatementollcion In progress 1M0| Asset Property, plantand equipment 333 -| 2022 Codelco Chile [Crical Var monitoring implementaton Completed | Asset Property, plantand equipment 493 -| 2021 Codelco Chile [Standardizaion of he handing ofhazardous substances In progress 1451| – Asset Properk,plantand equipment 1,46 195) – 2022 Codelco Chile [Standardizaion of CEMS Chimney PPAL and PAS In progress 361| Asset Properk,plantand equipment – -| 2022 [Total Ventanas Division 27.859 28,504 1,195 ¡Radomiro Tomic Codelco Chile [Sold waste In progress TIT | Expendiure Operating expenditre ro -| 2022 Codelco Chile [Environmental monitoring In progress 142 | Expenditure Operating expenditre n -| 2022 Codelco Chile – [Water tealmentplant In progress 1,172 | Expendiure Operating expenditre 541 -| 2022 Codelco Chile [Preliminary works water supply Completed -| Asset Propery, plantand equipment 4516 -| 2021 Codelco Chile [Constucton ofcommuniy works In progress 606| Asset Properk,plantand equipment 38271 | 2025 [Total Radomiro Tomic Division 2,787 5808 | 38271 Ministro Hales Codelco Chile [Sold waste In progress 780| Expendiure Operating expenditre 1.916 -| 2022 Codelco Chile – [Water trealmentplant In progress 137 | Expenditure Operating expenditre 144 -| 2022 Codelco Chile [mplementaton of pit aquier monitoring Completed | Asset Propery, plantand equipment 390 -| 2021 Codelco Chile… [Sica shed extension and dome control room Completed | Asset Properk,plantand equipment 6 -| 2021 [Total Ministro Hales Division 917 2505 .
Ecometales Limited Ecometales Limited [Smeling powers leaching plant In progress 861| Expendiure Operating expenditre 1.013 -| 2021 Ecometales Limited [Smeling powders leaching plant In progress 45| Expenditure Operating expenditre 7 4 202 [Subsidiary Ecometales Limited 906 1,020 24 [Subtotal 195,707 189,814 | 596,892 [Total [533,020] [469,641 | 1,474,954 |
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Corporación Nacional del Cobre de Chile
34. Subsequent Events
On October 18, 2022, the Chamber of Deputies approved in its first constitutional procedure, the bill that will allow the products of small-scale mining of Empresa Nacional de Minería (Enami) to be treated in facilities other than the Ventanas Division.
Management of the Corporation is not aware of other significant events of a financial nature or of any other nature that could affect these financial statements, occurring between October 1, 2022 and the date of issue of these consolidated financial statements as October 27, 2022.
André Sougarret Larroquete Alejandro Rivera Stambuk Chief Executive Officer Chief Financial Officer Juan Ogas Cabrera Cristóbal Parrao Cartagena Accounting Manager Accounting Director
114 (Y)
CODELCO
CORPORACION NACIONAL DEL COBRE DE CHILE
Consolidated financial statements As of and for the years ended December 31, 2020 and 2019 and independent auditors report m Deloitte. os
Auditores y Consultores Limitada Rosario Norte 407
Rut: 80.276.200-3
Las Condes, Santiago
Chile
Fono: (56) 227 297 000
Fax: (56) 223 749 177 deloittechileOdeloitte.com
INDEPENDENT AUDITORS REPORT wunw.deloitte.cl
To the Chairman and Board of Directors of Corporación Nacional del Cobre de Chile
We have audited the accompanying consolidated financial statements of Corporación Nacional del Cobre de Chile and its subsidiaries (the Company), which comprise the consolidated statements of financial position as of December 31, 2020 and 2019 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended and the related notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). This responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the statutory financial statements of the associates Anglo American Sur
S.A. and Sociedad Contractual Minera El Abra, whose investments represent, as of December 31, 2020, an asset of ThUS$1,207,110 and a share in profit of ThUS$33,517. The financial statements were audited by other auditors, whose reports have been provided to us, and our opinion as to the amounts included in the consolidation is bases solely on the reports of those other auditors. We performed our audits in accordance with auditing standards generally accepted in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit includes performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation and fair presentation of the entity’s consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes assessing the appropriateness of the accounting policies used and the reasonableness of the significant estimates made by the Company’s Management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Deloitte? se refiere a Deloitte Touche Tohmatsu Limited una compañía privada limitada por garantía, de Reino Unido, y a su red de firmas miembro, cada una de las cuales es una entidad legal separada e independiente. Por favor, vea en www.deloitte.comcacercade la descripción detallada de la estructura legal de Deloitte Touche Tohmatsu Limited y sus firmas miembro.
Deloitte Touche Tohmatsu Limited es una compañía privada limitada por garantía constituida en Inglaterra 8: Gales bajo el número 07271800, y su domicilio registrado: Hill House, 1 Little New Street, London, EC4A 3TR, Reino Unido.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Corporación Nacional del Cobre de Chile and its subsidiaries as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).
Other matter – Translation into English
The accompanying consolidated financial statements have been translated into English solely for the convenience of English language readers.
Dala
February 25, 2021 Santiago, Chile
O
CODELCO
CODELCO – CHILE
Consolidated financial statements as of and for the years ended December 31, 2020 and 2019 (Translation into English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
TABLE OF CONTENTS CONSOLIDATED FINANCIAL STATEMENTS (Translation into English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION………omcomoomosoomosasiesiasisiscsissssa 5 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION………omcomoomosoomosasiesiasisiscsissssa 6 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — BY FUNCTION………..umw.osw.::0. 7 CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)………..cwcomcoooomososcoos 8 CONSOLIDATED STATEMENTS OF CASH FLOWS – DIRECT METHOD …..cccocccoccioncioscioscioninosanoscirscioicoses 9
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
L GENERAL INFORMATION…………….www.
1. Corporate Information ………………. 11
2. Basis of Presentation of the Consol ll. SIGNIFICANT ACCOUNTING POLICIES
1. Significant Judgments and Key Estimates …
2. Significant accounting policies
3. New standards and interpretations adopted by the Corporation
4. New accounting pronouncements lll… EXPLANATORY NOTES ………..
1. Cash and cash equivalents…. 41
2. Trade and other receivables…………… 41
3. Balance and transactions with related parties .. 43
4. Inventori8S ….ooononcccononcnnncnnnnannn caos 48
5. Income taxes and deferred taxes…. 49
6. Current and non-current tax assets and liabilities. 51
7. Property, Plant and Equipment ………. 52
8. LeasesS cnoccoccononcnnnoncnnncorncnconaronannos 55
9. Investments accounted for using the equity method. 57
10. SubsidiariesS …….ococonnmmmmmmmmmms$m. 62
11. Current and non-current financial assets 63
12. Other financial liabilities …………………… 64
13. Fair Value of financial assets and liabilities . 75
14. Fair value hierarchy………occonoomommmo. 75
15. Trade and other payables .. 76
16. Other provisions ……. 77
17. Employee benefits 78
18. Equity ………. 81
19. Revenue……. 83
20. Expenses by nature… 84
21. Assetimpairment…..occononncnnnnno.. 84
22. Other income and expenses by function
23. Finance COSÉS …oonocconocionancncnnononnnos
24. Operating segments…………..
25. Foreign exchange differences
26. Statement of cash flows …………….
27. Financial risk management, objectiv
28.
29.
30.
31.
32.
33.
34.
Derivatives contracts Contingencies and restrictions.
GUArantees coccccnnanonaninininass Balances in foreign currency Sanctions Environmental Expenditures Subsequent events …
CORPORACION NACIONAL DEL COBRE DE CHILE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of December 31, 2020 and 2019 (In thousands of US dollars – TRUS$) (Translation into English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
Notes 12312020 12312019 No Assets Current Assets Cash and cash equivalents 1 2,107,493 1,303,105 Other current financial assets 11 283,890 172,951 Other current non-financial assets 32,634 20,969 Trade and other currentreceivables 2 3,249,317 2,588,268 Accounts receivable from related parties, current 3 98,397 20,874 Inventories 4 1,912,067 1,921,135 Current tax assets 6 74,324 22,719 [Total current assets 7,758,122 6,050,021 Non-current assets Other non-current financial assets 11 133,751 91,800 Other non-currentnon-financial assets 2,517 4,561 Non-currentreceivables 2 93,986 98,544 Accounts receivable from related parties, non-current 3 224 15,594 Non-current inventories 4 585,105 585,681 Investments accounted for using equity method 9 3,418,958 3,483,523 Intangible assets other than goodwill 45,895 47,837 Property, plantand equipment 7 29,551,905 29,268,012 Investment property 981 981 Rightofuse assets 8 461,040 432,152 Non-current tax assets 6 111,994 222,169 Deferred tax assets 5 45,908 43,736 Total non-current assets 34,452,264 34,294,590 Total Assets 42,210,386 40,344,611
The accompanying notes are an integral part of these consolidated financial statements.
CORPORACION NACIONAL DEL COBRE DE CHILE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of December 31, 2020 and 2019 (In thousands of US dollars – TRUS$) (Translation into English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
Notes 12312020 12312019 No Liabilities and Equity Liabilities Current liabilities Other current financial liabiliies 12 529,946 1,250,590 Current lease liabilities 8 145,404 127,761 Trade and other current payables 15 1,498,285 1,420,915 Accounts payable to related parties, current 3 198,924 137,234 Other current provisions 16 562,027 502,172 Current tax liabilities 6 8,445 13,857 Current provisions for employee benefits 17 460,778 435,565 Other current non-financial liabilities 36,098 34,863 [Total current liabilities 3,439,907 3,922,957 | Non-current liabilities Other non-current financial liabilities 12 17,735,200 16,233,113 Non-current lease liabilities 8 339,604 305,110 Non-current payables 460 8,346 Other non-current provisions 16 2,294,507 2,090,487 Deferred tax liabilites 5 5,527,795 4,860,881 Non-current provisions for employee benefits 17 1,243,940 1,283,357 Other non-currentnon-fnancial liabilities 2,482 5,693 Total non-current liabilities 27,143,988 24,786,987 Total liabilities 30,583,895 28,709,944 Equity Issued capital 5,619,423 5,619,423 Accumulated deficit (194,696) (196,260) Other reserves 18.b 5,276,822 5,291,747 [Equity attributable to owners of the parent 10,701,549 10,714,910 | Non-controlling interests 18.b 924,942 919,757 Total equity 11,626,491 11,634,667 [Total liabilities and equity 42,210,386 40,344,611 |
The accompanying notes are an integral part of these consolidated financial statements.
CORPORACION NACIONAL DEL COBRE DE CHILE CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) – BY FUNCTION For the years ended December 31, 2020 and 2019 (In thousands of US dollars – TRUS$) (Translation into English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
Notes 112020 112019 No 12312020 12312019
Revenue 19 14,173,168 12,524,931 Costof sales (10,565,179) (10,051,441) [Gross profit 3,607,989 2,473,490 Other Income, by function 22a 97,321 360,690 Distribution costs (9,463) (17,069) Administrative expenses (397,045) (409,234) Other expenses 22.b (1,456,821) (1,747,838) Other gains 30,425 22,672 [Income from operating activities 1,872,406 682,711 Finance income 40,213 36,871 Finance costs 23 (742,464) (479,307) Provision established (reversed), net, in accordance with IFRS 9 (206) 378 Share of profit of associates and joint ventures accounted for using 9 39,436 13,203 equity method
Foreign exchange diference 25 (165,501) 153,917 [Income for the years before tax 1,043,884 407,773 Income tax expense 5 (787,003) (393,245) [Net income for the years 256,881 14,528 Netincome attributable to owners of parent 242,993 6,637 Netincome attributable to non-controlling interests 18.b 13,888 7,891 [Net income for the years 256,881 14,528
The accompanying notes are an integral part of these consolidated financial statements.
CORPORACION NACIONAL DEL COBRE DE CHILE CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) CONTINUED For the years ended December 31, 2020 and 2019 (In thousands of US dollars – TRUS$) (Translation into English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
Notes 112020 112019 N* 12312020 12312019 [Net income for the years 256,881 14,528 Components of other comprehensive income that will not be reclassified to profit or loss, before tax:
Gains (loss) on remeasurement of defined benefit plans, before tax 17 359 (100,957) Share of other comprehensive (loss) income of associates and joint ventures accounted for using the equity method that will not be (4,043) 2,363 reclassifed to profit or loss before tax
Other comprehensive loss that will not be reclassified to profit (3,684) (98,594) or loss before tax
Components of other comprehensive income that will be reclassified to profit or loss, before tax:
Gains on exchange difference on translation, before tax 3,733 191
Losses on cash flow hedges, before tax (47,194) (80,111) Share of other comprehensive income (loss) of associates and joint ventures accounted for using equity method that will be reclassified to – (3,275) profit or loss, before tax
Other comprehensive loss that will be reclassified to profit or (43,461) (83,195) loss before tax Other comprehensive loss, before tax (47,145) (181,789) Income tax effect on components of other comprehensive income that will be reclassified profit or loss
Income tax effect relating to benefit plans in other comprehensive income 5 (145) 69,667
Income tax effect on components of other comprehensive income that will be reclassified to profit or loss
Income tax efiecton cash flow hedges in other comprehensive income 5 30,676 52,072 Total other comprehensive loss (16,614) (60,050) Total Comprehensive income (loss) 240,267 (45,522)
Comprehensive income (loss) attributable to:
Comprehensive income (loss) attributable to owners of the parent 227,516 (53,413) Comprehensive income attributable to non-controlling interests 18.b 12,751 7,891 [Total comprehensive income (loss) 240,267 (45,522)
The accompanying notes are an integral part of these consolidated financial statements.
CORPORACION NACIONAL DEL COBRE DE CHILE CONSOLIDATED STATEMENTS OF CASH FLOWS – DIRECT METHOD For the years ended December 31, 2020 and 2019 (In thousands of US dollars – TRUS$) (Translation into English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
Notes 112020 112019 N* 12312020 12312019 Cash flows provided by (used in) operating activities: Receipts from sales of goods and rendering of services 13,642,629 12,553,666 Other cash payments for operating activities 26 1,860,971 1,827,264 Payments to suppliers for goods and services (7,866,515) (7,917,563) Payments to and on behalf of employees (1,475,278) (1,800,223) Other cash payments for operating activities 26 (2,377,017) (2,237,355) Dividends received 22,715 87,434 Income taxes paid (28,817) (81,762) [Cash fows provided by operating acivites 3,778,688 2,431,461 | Cash flows provided by (used in) investing activities: Other payments to acquire equity or debt insttuments of other entities (176) (240) Proceeds for the sale of interests in joint ventures and associates 9 – 193,480 Purchase of property, plantand equipment (2,383,003) (4,102,073) Interestreceived 37,095 33,874 Other cash (outlows) (81,644) (5,078) [Cash fows (used in) investing actvites (2,427,728) (3,880,037)| Cash flows provided by (used in) financing activities: Proceeds from borrowings and bonds long term 3,996,000 3,918,199 Proceeds from borrowings short term – 465,000 Total proceeds from borrowings and bonds 3,996,000 4,383,199 Repayment of borrowings and bonds (3,248,184) (2,234,446) Payments of lease liabiliies (132,263) (148,181) Dividends paid (239,076) – Interest paid (753,099) (656,705) Other cash (outlows) infows (161,273) 197,555 Cash flows (used in) provided by financing activities (537,895) 1,541,422 Increase in cash and cash equivalents before effects ofexchange difierence 813,065 92,846 Efiectofexchange rate changes on cash and cash equivalents (8,677) (18,866) Increase in cash and cash equivalents 804,388 73,980 Cash and cash equivalents at beginning of year 1 1,303,105 1,229,125 Cash and cash equivalents atend ofyear 1 2,107,493 1,303,105
The accompanying notes are an integral part of these consolidated financial statements.
CORPORACION NACIONAL DEL COBRE DE CHILE
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2020 and 2019 (In thousands of US dollars – TRUS$) (Translation into English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
Reserve of Reserve on remeasurement of Oher Total other Equity Non-controlling December 31,2020 exchange | Reserveofcash | defined beneit | canos reserves alributable to interesis Issued capital difierences on flow hedges plans Accumulated owners ofthe Total Equiy translation reserves deficit parent Y Note 17 Note 18 Note 18 Initial balance as of 112020 5,619,423 (6,672)! 19,506 (305,770) 5,584,683 5,291,747 (196,260) 10,714,910 919,757 11,634,667 Changes in equity: Netincome: 242,993 242,993 13,888 256,881 Other comprehensive income (loss) 3,733 (16,518) 214 (2,906) (15,477) (15,477) (1,137) (16,614) Comprehensive income 227,516 12,751 240,267 Dividends (239,076) (239,076) (239,076) Capital contributions – – – – – – – – – – Increase (decrease) through transfers and other changes – – – – 552 552 (2,353) (1,801) (7,566) (9,367) Total changes in equity . 3,733 (16,518) 214 (2,354) (14,925) 1,564 (13,361) 5,185 (8,176) Final balance as of 12312020 5,619,423 (2,939)| 2,988 (305,556) 5,582,329 5,276,822 (194,696) 10,701,549 924,942 11,626,491 Reserve of Reserve on remeasurement of Other Total other Equiy Non-controlling December 31,2019 exchange Reserve ofcash defined beneft miscellaneous reserves atribulabl to interests Issued capital difference on fow hedges Accumulated owners ofthe translation plans reserves deficit parent Total Equiy Note 17 Note 18 Note 18 Initial balance as of 112019 5,219,423 (6,863) 47,792 (274,480) 5,587,710 5,354,159 (198,917) 10,374,665 969,204 11,343,869 Changes in equity: Netincome 6,637 6,637 7,891 14,528 Other comprehensive income (loss) 191 (28,039) (31,290) (912) (60,050) (60,050) – (60,050) Comprehensive income (loss) (53,413) 7,891 (45,522) Dividends – – – Capital contributions 400,000 – – – – – 400,000 – 400,000 Decrease through transfers and other changes – – (247)| – (2,115) (2,362) (3,980) (6,342) (57,338) (63,680) Total changes in equity 400,000 191 (28,286) (31,290) (3,027) (62,412) 2,657 340,245 (49,447) 290,798 Final balance as of 12312019 5,619,423 (6,672) 19,506 (305,770) 5,584,683 5,291,747 (196,260) 10,714,910 919,757 11,634,667
The accompanying notes are an integral part of these consolidated financial statements.
10
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
1.
GENERAL INFORMATION Corporate Information
Corporación Nacional del Cobre de Chile (hereinafter referred to as Codelco or the Corporation), is, in Management’s opinion, the largest copper producer in the world. Codelco’s most important product is refined copper, primarily in the form of cathodes. The Corporation also produces copper concentrates, blister and anode copper and by-products such as molybdenum, anode slime and sulfuric acid.
The Corporation trades its products based on a policy aimed to sell refined copper to manufacturers or producers of semi-manufactured products.
These products contribute to diverse fields of community development, particularly those intended to improve areas such as public health, energy efficiency, and sustainable development, among others.
The Corporation is registered under Securities Registry No. 785 of the Chilean Commission for the Financial Market (the CMF) and is subject to its supervision. According to Article No. 10 of Law No. 20392 (related to the new Corporate Governance of Codelco), such supervision shall be on the same terms as publicly traded companies, notwithstanding the provisions in Decree Law (D.L.) No.1349 of 1976, which created the Comisión Chilena del Cobre (Chilean Copper Commission).
Codelco’s head office is located in Santiago, Chile, at 1270 Huérfanos Street, telephone number (56-2)
26903000.
Codelco was incorporated through D.L. No. 1350 of 1976, which is the statutory decree applicable to the Corporation. In accordance with the statutory decree, Codelco is a governmment-owned mining, industrial and commercial company, which is a separate legal entity with its own equity. Codelco Chile currently carries out its mining business through its Chuquicamata, Radomiro Tomic, Ministro Hales, Gabriela Mistral, Salvador, Andina, El Teniente and Ventanas divisions.
The Corporation also carries out similar activities in other mining deposits in association with third parties.
In accordance with letter e) of Article 10 of Law No. 20392, Codelco is governed by its organic standards set forth in Decree Law No. 1350 (D.L. No. 1350) and that of its by-laws, and in matters not covered by them and, insofar as they are compatible and do not contradict the provisions of such standards, by the rules that govern publicly traded companies and the common laws as applicable to them.
In accordance with D.L. No. 1350 Section IV related to the Company’s Exchange and Budget Regulations.
Codelco’s financial activities are conducted following an annual budgeting program that is composed of an Operations Budget, an Investment Budget and a Debt Amortization Budget.
The tax system applicable to Codelco’s taxable income is in accordance with Article 26 of D. L. No.1350 which refers to Decree Law No. 824 on Income Tax of 1974 and Decree Law No. 2398 (Article 2) of 1978,
11
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
2.
as applicable. The Corporation’s taxable income is also subject to a Specific Mining Tax in accordance with Law No. 20026 of 2005.
According to Law No. 13196, the return on foreign currency of the Corporation’s foreign sales (real income), of its copper production, including its by-products, is taxed at 10% and method of payment and the duration of this obligation for Codelco, which are detailed in Note 111.22 letter c) of this report.
The subsidiaries whose financial statements are included in these consolidated financial statements correspond to companies located in Chile and abroad, which are detailed in Note 11.2.d.
The associates located in Chile and abroad, are detailed in the Explanatory Notes Section II! of Note 9.
Basis of Presentation of the Consolidated Financial Statements
The Corporation’s consolidated statements of financial position as of December 31, 2020 and 2019, and the consolidated statements of comprehensive income, changes in equity and of cash flows for the years ended December 31, 2020 and 2019, have been prepared in accordance with International Financial Reporting Standards (*IFRS) as issued by the International Accounting Standards Board (lASB).
These consolidated financial statements include all information and disclosures required in annual financial statements.
These consolidated financial statements have been prepared from accounting records maintained by the Corporation.
The consolidated financial statements of the Corporation are presented in thousands of United States dollar (*U.S. dollar).
Responsibility for the Information and Use of Estimates
The Board of Directors of the Corporation has been informed of the information included in these consolidated financial statements and expressly declared its responsibility for the consistent and reliable nature of the information included in such financial statements as of and for the year ended December 31, 2020, which financial statements fully comply with IFRS as issued by the IASB. These consolidated financial statements as of December 31, 2020 and for the year then ended were approved by the Board of Directors at a meeting held on February 25, 2021.
Accounting Principles
These consolidated financial statements reflect the financial position of Codelco and its subsidiaries as of December 31, 2020 and 2019, and the results of their operations, changes in equity and cash flows for the years ended December 31, 2020 and 2019, and their related notes, all prepared in accordance with IAS 1, “Presentation of Financial Statements, in consideration of the presentation instructions of the Commission for the Financial Markets, where not in conflict with IFRS.
12
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
For the convenience of the English readers, these consolidated financial statements and their accompanying notes have been translated from Spanish into English.
SIGNIFICANT ACCOUNTING POLICIES Significant Judgments and Key Estimates
In preparing these consolidated financial statements, the use of certain critical accounting estimates and assumptions that affect the amounts of assets and liabilities recognized as of the date of the financial statements and the amounts of revenue and expenses recognized during the reporting period is required.
Such preparation also requires the Corporation’s Management to exercise its judgment in the process of applying the Corporation’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are as follows:
a) Useful economic lives and residual values of property, plant and equipment – The useful lives and residual values of property, plant and equipment that are used for calculating depreciation are determined based on technical studies prepared by internal specialists. The technical studies consider specific factors related to the use of assets.
When there are indicators that could lead to changes in the estimates of the useful lives of such assets, these changes are made by using technical estimates to determine the impact of any change.
b) Ore reserves – The measurements of ore reserves are based on estimates of the ore resources that are legally and economically exploitable, and reflect the technical and environmental considerations of the Corporation regarding the amount of resources that could be exploited and sold at prices exceeding the total cost associated with the extraction and processing.
The Corporation applies judgment in determining the ore reserves, and as such, possible changes in these estimates might significantly impact the estimates of net revenues over time. In addition, these changes might lead to modifications in usage estimates, which might have an effect on depreciation and amortization expense, calculation of stripping cost adjustments, determination of impairment losses, expected future disbursements related to decommissioning and restoration obligations, long term defined benefits plans’ accounting and the accounting for financial derivative instruments.
The Corporation estimates ¡ts reserves and mineral resources based on the information certified by the Competent Persons internal and external of the Corporation, who are defined and regulated according to Law No. 20235. These estimates correspond to the application of the Certification Code of Ore Reserves, Resources and Exploration, issued by the Mining Committee which was instituted through the aforementioned law.
Notwithstanding the foregoing, the Corporation periodically reviews its estimation models, supported by experts who, in some divisions, also certify the reserves determined from these models.
13
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
e)
Impairment of non-financial assets – The Corporation reviews the carrying amount of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indicator exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss. In testing impairment, the assets are grouped into cash generating units (“CGUs) to which the assets belong, when individual asset testing is unable to be performed. . The recoverable amount of these CGUs is calculated as the present value of the expected future cash flows from such assets, considering a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of the assets is lower than their carrying amount, an impairment loss is recognized.
The Corporation defines the CGUs and also estimates the timing and cash flows that such CGUs will generate. Subsequent changes in the grouping of the CGU, or changes in the assumptions supporting the estimates of cash flows or the discount rate, may impact the carrying amounts of the corresponding assets.
Estimates of assumptions influencing the calculation of cash flows, such as the price of copper or treatment charges and refining charges, among others, are determined based on studies conducted by the Corporation using uniform criteria over different periods. Any changes to these criteria may impact the estimated recoverable amount of the assets.
The Corporation has assessed and defined that the CGUs are determined at the level of each of its current operating divisions (see Segment footnote).
Impairment testing also is performed at subsidiaries and associates.
d) Provisions for decommissioning and site restoration costs – The Corporation is obliged to incur decommissioning and site restoration costs when such site restoration or decommissioning is required due to a legal or constructive obligation. Costs are estimated on the basis of a formal closure plan and are reassessed annually or as of the date such obligations become known. The initial estimate of decommissioning and site restoration costs is recognized as property, plant and equipment in accordance with IAS 16, and simultaneously a liability in accordance with IAS 37, is recorded.
For these purposes, a defined list of mine sites, facilities and other equipment are studied under this process, considering the engineering level profile, the cubic meters of assets that will be subject to removal and restoration, weighted by a structure of market prices of goods and services, reflecting the best current knowledge related to carrying out such activities, as well as techniques and more efficient construction procedures to date. In the process of valuation of these activities, the assumptions of the exchange rate for tradable goods and services is made, as well as a discount rate, which considers the time value of money and the risks associated with the liabilities, which is determined based, where applicable, on the currency in which disbursements are expected to be made.
The liability amounts recognized at the end of each reporting date represent management’s best estimate of the present value of the future decommissioning and site restoration costs. Changes to estimated future costs that result from changes in the estimated timing or amount of the outflow of
14
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2) resources embodying economic benefits required to settle the obligation, or a change in the discount rate are added to, or deducted from, the cost of the related asset in the current period (as well as the associated liability). The amount deducted from the cost of the asset shall not exceed its carrying amount. If a decrease in the liability exceeds the carrying amount of the asset, the excess is recognized immediately in profit or loss.
If the adjustment results in an addition to the cost of the asset, Codelco considers whether this is an indicator that the new carrying amount of the asset may not be fully recoverable. Ifitis considered such an indicator, Codelco tests the asset for impairment by estimating its recoverable amount, and accounts for any impairment loss in accordance with IAS 36.
The decommissioning costs are initially recorded at the moment when a plant or other assets are installed. Such costs are capitalized as part of property, plant and equipment and discounted to their present value. These decommissioning costs are charged to net income over the life of the mine, through depreciation of the corresponding asset. Depreciation expense ¡is included in cost of sales, while the unwinding of the discount in the provision is included in finance costs.
e) Provisions for employee benefits – Provisions for employee benefits related to severance payments and health benefits for services rendered by the employees are determined based on actuarial calculations using the projected unit credit method, and are recognized in other comprehensive income or profit or loss (depending on the accounting standards applicable).on an accrual basis..
The Corporation uses assumptions to determine the best estimate of future obligations related to these benefits. Such estimates, as well as assumptions, are determined by management using the assistance of external actuaries. These assumptions include demographic assumptions, discount rate and expected salary increases and rotation levels, among other factors.
f) Accruals for open invoices – The Corporation uses information on future copper prices, through which it recognizes adjustments to its revenues and trade receivables, due to the conditions in provisional pricing arrangements. These adjustments are updated on a monthly basis, See Notes 2 r) Revenue from contracts with customers of Note 2 Significant accounting policies below.
g) Fair value of derivatives and other financial instruments – Management may use its judgment to choose an adequate and proper valuation method for financial instruments that are not quoted in an active market. In the case of derivative financial instruments, assumptions are based on observable market inputs, adjusted depending on factors specific to the instruments among others.
h) Lawsuits and contingencies – The Corporation assesses the probability of lawsuits and contingency losses on an ongoing basis according to estimates performed by its legal advisors. For cases in which management and the Corporation’s legal advisors believe that a loss is not probable of occurring or where probable, may not be estimated reliably, no provisions are recognized. When it is considered more likely than not that a loss is probable and it may be reliably estimated, a provision is recognized.
15
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
i) Application of IFRS 16 includes the following:
– Estimation of the lease term;
– Determine ¡fit is reasonably certain that an extension or termination option will be exercised;
– Determination of the appropriate rate to discount lease payments.
j) Revenue recognition -The Corporation determines appropriate revenue recognition for its contracts with customers by analyzing the type, terms and conditions of each contract or agreement with a customer.
As part of the analysis, the management must make judgments about whether an agreement or contract is legally enforceable, and whether the agreement includes separate performance obligations.
In addition, estimates are required in order to allocate the total price of the transaction to each performance obligation based on the stand-alone selling price of the promised goods or services underlying each performance obligation. (The Corporation applies the constraint on variable consideration as defined in IFRS 15, if applicable).
Although the abovementioned estimates have been made based on the best information available as of the date of issuance of these consolidated financial statements, itis possible that new developments could lead the Corporation to modify these estimates in the future. Such modifications, if applicable, would be adjusted prospectively, as required by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
16
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
2.
Significant accounting policies
a)
b)
d)
Period covered – The accompanying consolidated financial statements of Corporación Nacional del Cobre de Chile include the following statements:
– Consolidated statements of financial position as of December 31, 2020 and 2019.
– Consolidated statements of comprehensive income for the years ended December 31, 2020 and
2019.
– Consolidated statements of changes in equity for the years ended December 31, 2020 and 2019.
– Consolidated statements of cash flows for the years ended December 31, 2020 and 2019.
Basis of preparation – The consolidated financial statements of the Corporation as of December 31, 2020 and 2019, and for the years ended December 31, 2020 and 2019 have been prepared in accordance with the instructions from the Commission for the Financial Market which fully comply with IFRS as issued by the lASB.
The consolidated statement of financial position as of December 31, 2019, and the consolidated statement of income, the consolidated statement of changes in equity and consolidated statement of cash flows for year ended December 31, 2019, which are included for comparative purposes, have been prepared in accordance with IFRS issued by the lASB, on a basis consistent with the criteria used for the same year ended December 31, 2020, except for the adoption of the new IFRS standards and interpretations adopted by the Corporation as of and for the years ended December 31, 2020, which are disclosed in note 11.3.
These consolidated financial statements have been prepared based on the accounting records kept by the Corporation.
Functional Currency – The functional currency of Codelco is the U.S. dollar, which is the currency of the primary economic environment in which the Corporation operates and the currency in which it receives ¡ts revenues.
The functional currency of subsidiaries, associates and joint ventures, is the currency of the primary economic environment in which those entities operate and the currency in which they receive their revenues. For those subsidiaries and associates that are an extension of the operations of Codelco (entities that are not self-sustaining and whose main transactions are with Codelco); the functional currency is also the U.S. dollar.
The presentation currency of Codelco’s consolidated financial statements is the U.S. dollar.
Basis of consolidation – The consolidated financial statements incorporate the financial statements of the Corporation and its subsidiaries.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Corporation obtains control, and continue to be consolidated until the date such control ceases. Specifically, income
17
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2) and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement from the date the Corporation gains control until the date when the Corporation ceases to control the subsidiary.
The financial statements of the subsidiaries are prepared for the same reporting period as the Corporation, using consistent accounting policies.
All assets, liabilities, equity, income, expenses and cash flows related to transactions between consolidated companies are fully eliminated on consolidation. Non-controlling interests in equity and in the comprehensive income of the consolidated subsidiaries are presented, respectively, under the line items Total Equity: Non-controlling interests in the consolidated statement of financial position and Net income attributable to non-controlling interests and Comprehensive income attributable to non- controlling interests in the consolidated statement of comprehensive income.
18
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
The companies included in the consolidation are as follows:
12312020 12312019 Taxpayer 1D Number Company Country Currency % Ownership % Ownership Direct Indirect Total Total Foreign Chile Copper Limited England GBP 100.00 – 100.00 100.00 Foreign Codelco do Brasil Mineracao Brazil BRL 100.00 100.00 100.00 Foreign Codelco Group Inc. Unied Ses of ¡95 100.00 100.00 100.00 America Foreign Codelco International Limited Bermuda US$ 100.00 100.00 100.00 Foreign Codelco Kupferhandel GmbH Germany EUR 100.00 100.00 100.00 Foreign Codelco Metals Inc. Unied Ses of ¡95 100.00] – 100.00 100.00 America Foreign Codelco Services Limited England GBP – 100.00 100.00 100.00 Foreign Codelco Shanghai Company Limited China RMB 100.00 – 100.00 100.00 Foreign Codelco USA Inc Unied Ses of ¡95 100.00] – 100.00 100.00 America Foreign Codelco Canada Canada US$ 0.97 99.03 100.00 100.00 Foreign Ecometales Limited Channel [| ysg 100.00] – 100.00 100.00 Islands Foreign Exploraciones Mineras Andinas Ecuador EMSAEC S.A. Ecuador US$ 100.00 100.00 100.00 Foreign Cobrex Prospeccao Mineral Brazil BRL 51.00 51.00 51.00
78.860.780-6 Compañía Contractual Minera los Andes Chile US$ 99.97 0.03 100.00 100.00
81.767.200-0 Asociación Garantizadora de Pensiones Chile CLP 96.69 – 96.69 96.69
88.497.100-4 Clínica San Lorenzo Limitada Chile CLP 99.90 0.10 100.00 100.00
96.817.780-K Ejecutora Proyecto Hospital del Cobre Calama S.A. Chile US$ 99.99 0.01 100.00 100.00
96.819.040-7 Complejo Portuario Mejillones S.A. Chile US$ 99.99 0.01 100.00 100.00
96.991.180-9 Codelco Tec SpA Chile US$ 99.91 0.09 100.00 100.00
99.569.520-0 Exploraciones Mineras Andinas S.A. Chile US$ 99.90 0.10 100.00 100.00
99.573.600-4 Clínica Río Blanco S.A. Chile CLP 99.00 1.00 100.00 100.00
76.064.682-2 Centro de Especialidades Médicas Río Blanco Ltda. Chile CLP 99.00 1.00 100.00 100.00
77.773.260-9 Inversiones Copperfeld SpA Chile US$ 100.00 100.00 100.00
76.043.396-9 Innovaciones en Cobre S.A. Chile US$ 0.05 99.95 100.00 100.00
76.148.338-2 Sociedad de Procesamiento de Molibdeno Ltda. Chile US$ 99.95 0.05 100.00 100.00
76.173.357-5 Inversiones Gacrux SpA Chile US$ 100.00 – 100.00 100.00
76.231.838-5 Inversiones Mineras Nueva Acrux SpA Chile US$ 67.80 67.80 67.80
76.237.866-3 Inversiones Mineras Los Leones SpA Chile US$ 100.00 – 100.00 100.00
76.173.783-K Inversiones Mineras Becrux SpA Chile US$ 67.80 67.80 67.80
76.124.156-7 Centro de Especialidades Médicas San Lorenzo Ltda. Chile US$ 100.00 100.00 100.00
76.255.061-K Central Eléctrica Luz Minera SpA Chile US$ 100.00 – 100.00 100.00
70.905.700-6 Fusat Chile CLP – – – –
76.334.370-7 Isalud Isapre de Codelco Ltda. Chile CLP 59.26 40.73 99.99 99.99
78.394.040-K Centro de Servicios Médicos Porvenir Ltda. Chile CLP – 99.00 99.00 99.00
77.928.390-9 Inmobiliaria e Inversiones Rio Cipreces Ltda. Chile CLP 99.90 99.90 99.90
77.270.020-2 Prestaciones de Servicios de la Salud Intersalud Ltda. Chile CLP – 99.00 99.00 99.00
76.754.301-8 Salar de Maricunga SpA Chile CLP 100.00 100.00 100.00
On July 15, 2019, according to Bermuda Registration Certificate No. 28890, the merger between Codelco Technologies and Codelco International was reported, the latter being the absorbing company of Codelco Technologies, through which transaction it acquired 9.99 % of subsidiary Codelco Brasil Mineracao and 100% of Ecometales Limited.
On December 2, 2019, by public deed, a merger by incorporation was approved for the following subsidiaries, all ofthem providing health insurance: , Institución de Salud Previsional Chuquicamata Ltda., San Lorenzo Institución de Salud Previsional Ltda., Institución de Salud
Previsional Río Blanco Ltda., and Institución de Salud Previsional Fusat Ltda., being the latter the
19
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2) absorbing and surviving company. In addition, a modification to the statutes was approved in relation to a change in the company name, capital increase, and ownership of the share capital.
For the purposes of these consolidated financial statements, subsidiaries, associates, acquisitions and disposals are defined as follows: .
Subsidiaries – A subsidiary is an entity over which the Corporation has control. Control is exercised if, and only if, the following conditions are met: the Corporation has i) power to direct the relevant activities of the subsidiaries unilaterally; ¡i) exposure or rights to variable returns from these entities; and ¡i¡) the ability to use ¡its power to influence the amount of these returns.
The Corporation reassesses whether or not it controls a subsidiary if facts and circumstances indicate that there are changes to one or more of the elements of control listed above.
The consolidated financial statements include all assets, liabilities, revenues, expenses and cash flows of Codelco and its subsidiaries, after eliminating all inter-company balances and transactions.
The value of the participation of non-controlling shareholders in equity, net income and comprehensive income of subsidiaries are presented, respectively, in the headings “Non- controlling interests” of the consolidated statement of financial position; “Net income attributable to non-controlling interests; and Comprehensive income attributable to non-controlling interests in the statements of comprehensive income.
Associates – An associate is an entity over which Codelco has significant influence. Significant influence ¡is the power to participate in the financial and operating policy decisions of the associate but is not control or joint control over those policies.
Codelco’s interest ownership in associates is recognized in the consolidated financial statements under the equity method. Under this method, the initial investment is recognized at cost and adjusted thereafter to recognize changes in Codelco’s share of the comprehensive income of the associate, less any impairment losses or other changes to the investment in net assets of the associate.
Appropriate adjustments to the Codelco’s share of the associate’s profit or loss after acquisition are made in order to account for depreciation of the depreciable assets and related deferred tax balances based on their fair values at the acquisition date.
Acquisitions and Disposals – The results of businesses acquired are incorporated in the consolidated financial statements from the date when control is obtained; the results of businesses sold during the period are included in the consolidated financial statements up to the effective date of disposal. Gains or losses on disposal is the difference between the sale proceeds (net of expenses) and the carrying amount of the net assets attributable to the ownership interest that has been sold (and, where applicable, the associated cumulative translation adjustment).
20
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
If control is lost over a subsidiary, the retained ownership interest in the investment will be recognized at its fair value.
At the acquisition date of an investment in a subsidiary, associate or joint venture, any excess of the cost of the investment (consideration transferred) plus the amount of the non-controlling interest in the acquiree plus the fair value of any previously held equity interest in the acquiree, where applicable, over Codelco’s share of the net fair value of the identifiable assets and acquired liabilities is recognized as goodwill. Any excess of Codelco’s share of the net fair value of the identifiable assets and acquired liabilities over the consideration transferred, after reassessment, is recognized immediately in profit or loss in the period in which the investment is acquired.
e) Foreign currency transactions and reporting currency conversion- Transactions in currencies other than the Corporation’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, foreign currency transactions denominated in foreign currencies are converted at the rates prevailing at that date. Exchange differences on such transactions are recognized in profit or loss in the period in which they arise and are included in line item
Foreign exchange differences in the consolidated statement of comprehensive income.
At the end of each reporting period, assets and liabilities denominated in Unidades de Fomento (UF or inflation index-linked units of account) are translated into U.S. dollars at the closing exchange rates at that date (12312020: US$40.89; 12312019: US$37.81). The expenses and revenues in Chilean pesos have been expressed in dollars at the observed exchange rate, corresponding to the date of the accounting recording of each operation.
The financial statements of subsidiaries, associates and jointly controlled entities, whose functional currency is other than the presentation currency of Codelco, are translated as follows for purposes of consolidation:
Assets and liabilities are translated using the prevailing exchange rate on the closing date of the financial statements.
Income and expenses for each statement of comprehensive income are translated at average exchange rates for the period.
All resulting exchange differences are recognized in other comprehensive income and accumulated in equity under the heading Reserve on exchange differences on translation.
The exchange rates used in each reporting period were as follows:
Relation Closing exchange ratios 12312020 | 12312019
US$ CLP 0.00141 0.00134 US$ GBP 1.36036 1.31320 US$ BRL 0.19317 0.24910 US$ EUR 1.22835 1.12133 US$ AUD 0.76781 0.70018 US$ HKD 0.12900 0.12844
21
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
f) Offsetting balances and transactions – In general, assets and liabilities, income and expenses, are not offset in the financial statements, unless required or permitted by an IFRS or when offsetting reflects the substance of the transaction as well as when it ¡is the intention of the Corporation to settle a transaction net.
Income or expenses arising from transactions which, for contractual or legal reasons, permit the possibility of offsetting and which the Corporation intends to liquidate for their net value or realize the assets and settle the liabilities simultaneously, are stated net in the statement of comprehensive income.
g) Property, plant and equipment and depreciation – Items of property, plant and equipment are initially recognized at cost. Subsequent to initial recognition, they are measured at cost, less any accumulated depreciation and any accumulated impairment losses.
Extension, modernization or improvement costs that represent an increase in productivity, capacity or efficiency, or an increase in the useful life of the assets are capitalized as increasing the cost of the corresponding assets.
The assets included in property, plant and equipment are depreciated, as a general rule, using the units of production method, when the activity performed by the asset is directly attributable to the mine production process. All other assets included in property, plant and equipment are depreciated using the straight-line method.
The assets included in property, plant and equipment and certain intangibles (software) are depreciated over their economic useful lives, as described below:
Category Useful Life Land Not depreciated Land on mine site Units of production Buildings Straight-line over 20-50 years Buildings in underground mine levels Units of production level Vehicles Straight-line over 3-7 years Plant and equipment Units of production Smelters Units of production Refineries Units of production Mining rights Units of production Support equipment Units of production Intangibles – Software Straight-line over 8 years Open pit and underground mine development Units of production
Estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, and any change in estimates is recognized prospectively.
22
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
Additionally, depreciation methods and estimated useful lives of assets, especially plants, facilities and infrastructure may be revised at the end of each year or during the year according to changes in the structure of reserves of the Corporation and productive long-term plans updated as of that date.
This review may be made at any time ¡f the conditions of ore reserves change significantly as a result of new known information, confirmed and officially released by the Corporation.
Gains or losses on the sale of disposal of an asset are calculated as the difference between the net disposal proceeds received and the carrying amount of the asset, and are included in profit or loss when the asset is derecognized.
Construction in progress includes the amounts invested in the construction of property, plant and equipment and in mining development projects. Construction in progress is transferred to assets in operation once the testing period has ended and when they are ready for use; at that point, depreciation begins to be recognized.
Borrowing costs that are directly attributable to the acquisition or construction of assets that require a substantial period of time before they are ready for use or sale are capitalized as part of the cost of the corresponding items of property, plant and equipment.
The ore deposits owned by the Corporation are recorded in the accounting records at US$1.
Notwithstanding the above, those reserves and resources acquired as part of acquisition of entities accounted for as business combinations, are recognized at their fair value.
h) Intangible assets – The Corporation initially recognizes these assets at acquisition cost. Subsequent to initial recognition, intangible assets are amortized in a systematic way over their economic useful life, except for those assets with indefinite useful life, which are not amortized. Indefinitely-lived intangible assets are tested for impairment at least annually, and whenever there ¡is an indication that these assets may be impaired. Definitely-lived intangible assets are tested for impairment when an indicator of impairment has been identified. At the end of each reporting period, these assets are measured at their cost less any accumulated amortization (when applicable) and any accumulated impairment losses.
The main intangible assets are described as follows:
Research and Technological Development and Innovation Expenditures: The expenditures for the development of Technology and Innovation Projects are recognized as intangible assets at their cost and are considered to have indefinite useful lives.
Development expenses for technology and innovation projects are recognized as intangible assets at cost, if and only if, all of the following have been demonstrated: e The technical feasibility of completing the intangible asset so that it will available for use or sale;
+ The intention to complete the intangible asset is to use or sell it; e The ability to use or sell the intangible asset;
23
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2) e That the intangible asset will generate probable future economic benefits; e The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and e The ability to measure reliably the expenditure attributable to the intangible asset during its development.
Research expenses for technology and innovation projects are recognized in profit or loss when incurred.
i) Impairment of property, plant and equipment and intangible assets – The carrying amounts of property, plant and equipment and intangible assets with finite useful lives are reviewed to determine whether there is an indication that those assets have suffered an impairment loss. If any such indicator exists, the Corporation estimates the asset’s recoverable amount to determine the extent of the impairment loss which is then recorded.
For intangible assets with indefinite useful lives, their recoverable amounts are annually estimated at the end of each reporting period.
When an asset does not generate cash flows that are independent from other assets, Codelco determines the recoverable amount of the CGU to which the asset belongs.
The Corporation has defined each of its divisions as a cash generating unit.
Recoverable amount of an asset is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. On the other hand, the fair value less cost of disposal is usually determined for operational assets considering the Life of Mine (‘LOM), based on a model of discounted cash flows, while the assets not included in LOM as resources and potential resources to exploit are measured by using a market model of multiples for comparable transactions.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, an impairment loss is recognized immediately in profit or loss, reducing the carrying amount to its recoverable amount. Ifan impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior years.
The estimates of future cash flow for a CGU are based on future production forecasts, future prices of basic products and future production costs. Under lAS 36 Impairment of Assets, there are certain restrictions for future cash flows estimates related to future restructurings and future cost efficiencies.
When calculating value in use, it is also necessary to base the calculations on the spot exchange rate at the date of calculation.
24
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
j) Expenditures for exploration and evaluation of mineral resources, mine development and mining operations – The Corporation has defined an accounting policy for each of these expenditures.
Development expenses for deposits under exploitation whose purpose is to maintain production levels are recognized in profit or loss when incurred.
Exploration and evaluation costs such as: drillings of deposits, including expenses necessary to locate new mineralized areas and engineering studies to determine their potential for commercial exploitation are recognized in profit or loss, normally at the pre-feasibility stage.
Pre-operating and mine development expenses (normally after feasibility engineering is reached) incurred during the execution of a project and until its start-up are capitalized and amortized in relation to the future production of the mine. These costs include stripping of waste material, constructing the mine’s infrastructure and other works carried out prior to the production phase.
Finally, costs for defining of new areas or deposit areas in exploitation and of mining operations (PP3.E) are recognized in property, plant and equipment and are amortized through profit or loss over the period during which the benefits are obtained.
k) Stripping costs – Costs incurred in removing mine waste materials (overburden) in open pits that are in production, that provide access to mineral deposits, are recognized in property, plant and equipment, when the following criteria set out in IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine are met:
– – Itis probable that the future economic benefits associated with the stripping activity will flow to the entity.
– – Itis possible to identify the components of an ore body for which access has been improved as a result of the stripping activity.
– The costs relating to that stripping activity can be measured reliably.
The stripping costs are amortized based on the production units of production extracted from the ore body related to the specific stripping activity which generated this amount.
I) Income taxes and deferred taxes – Codelco and its Chilean subsidiaries recognize annually income taxes based on the net taxable income determined as per the standards established in the Income Tax Law and Article 2 of D.L. 2398, as well as, the specific tax on mining referred to in Law 20026 of 2005. Its foreign subsidiaries recognize income taxes according to the tax regulations in each country.
In addition, Codelco’s taxable income in each period is subject to the tax regime established in Article 26 of D.L. No. 1350, which states that tax payments will be made on March, June, September and December of each year, based on a provisional tax calculation.
Deferred taxes on temporary differences and other events that generate differences between the accounting and tax bases of assets and liabilities are recognized in accordance with IAS 12 Income taxes.
25
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
Deferred taxes are also recognized for undistributed profits of subsidiaries and associates, originated by withholding tax rates on remittances of dividends paid out by such companies to the Corporation.
m) Inventories – Inventories are measured at cost, when such does not exceed net realizable value. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale (i,e,, marketing, sales and distribution expenses). Costs of inventories are determined according to the following methods:
– Finished products and products in process: These inventories are measured at their average production cost determined using the absorption costing method, including labor, depreciation of fixed assets, amortization of intangibles and indirect costs of each period. Inventories of products in process are classified in current and non-current, according to the normal cycle of operation.
– Materials in warehouse: These inventories are measured at their acquisition cost. The Corporation estimates an allowance for obsolescence considering the turnover rate of slow-moving materials in the warehouse.
– Materials in transit: These inventories are measured at cost incurred at the end of reporting period.
Any difference as a result of an estimate of net realizable value of the inventories lower than it carrying amount is recognized in profit or loss.
n) Dividends – In accordance with Article 6 of D.L. 1350, the Corporation has a mandatory obligation to distribute its net income as presented in the financial statements. The payment obligation is recognized on an accrual basis.
o) Employee benefits – Codelco recognizes a provision for employee benefits when there is a present obligation (legal or constructive) as a result of services rendered by its employees.
The employment contracts stipulate, subject to compliance with certain conditions, the payment of an employee severance indemnity when an employment contract ends. In general, this corresponds to one monthly salary per year of service and considers the components of the final remuneration which are contractually defined as the basis for the indemnity. This employee benefit has been classified as a defined benefit plan.
Codelco has also agreed to post-employment medical care benefits for certain retirees, which are paid based on a fixed percentage covered by this agreement. This employee benefit has been classified as a defined benefit plan.
These plans continue to be unfunded as of December 31, 2020.
The employee severance indemnity and the post-employment medical plan obligations are determined using the projected unit credit method, with actuarial valuations being carried out at the end of each reporting period. The defined benefit plan obligations recognized in the statement of financial position
26
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2) represent the present value of the accrued obligations. Actuarial gains and losses are recognized immediately in other comprehensive income and will not be reclassified to profit or loss.
The Corporation’s management uses assumptions to determine the best estimate of these benefits.
The assumptions include an annual discount rate, expected increases in salaries and tumover rate, among other factors.
In accordance with ¡ts operating optimization programs to reduce costs and increase labor productivity by incorporating new current technologies andor better management practices, the Corporation has established employee retirement programs by amending certain employment contracts or collective union agreements to include benefits encouraging employees to early retire. Accordingly, these arrangements are accounted for as early retirement benefits and required accruals are established based on the accrued obligation at current value. In case of employee retirement programs which involve multi-year periods, the accrued obligations are updated using a discount rate determined based on financial instruments denominated in the same currency and similar maturities that will be used to pay the obligations.
p) Provisions for decommissioning and site restoration costs – The Corporation is obliged to incur decommissioning and site restoration costs when such site restoration or decommissioning is required due to a legal or constructive obligation. Costs are estimated on the basis of a formal closure plan and cost estimates are annually reviewed.
A provision is recognized for decommissioning and site restoration costs. The amount of the provision is the present value of the expenditures expected to be required to settle the obligation. The provision is initially recognized with a corresponding increase in the carrying amount of the related assets.
The provision for decommissioning and site restoration costs is accreted over time to reflect the unwinding of the discount with the accretion expense included in finance costs in the statement of income. The carrying amount of the related asset is depreciated over ¡ts useful life.
Changes in the measurement of the decommissioning and site restoration provision that result from changes in the estimated timing or amount of the outflow of resources embodying economic benefits required to settle the obligation, or a change in the discount rate, are added to, or deducted from, the cost of the related assets in the period when changes occurred. The amount deducted from the cost of the related assets cannot exceed it carrying amount. If a decrease in the liability exceeds the carrying amount of the asset, the excess is recognized immediately in profit or loss.
If the adjustment results in an addition to the cost of an asset, the Corporation considers whether this is an indication that the new carrying amount of the asset may not be fully recoverable. If such an indicator exists, the Corporation tests the asset for impairment by estimating its recoverable amount, and recognizes an impairment loss, if any.
The effects of the updating of the liability, due to the effect of the discount rate and or passage of time, is recorded as a financial expense.
27
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
q) Leases -The Corporation evaluates ¡its contracts at initial application to determine whether they contain a lease. The Corporation recognizes an right of use asset and a corresponding liability for lease with respect to all lease agreements in which Codelco is the lessee, except for short-term leases (defined as a lease with a lease term of 12 months or less) and leases of low-value assets. For these leases, the Corporation recognizes lease payments as an operating cost on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which the economic benefits of the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that have not been paid at the commencement date, discounted using the interest rate implicit in the lease. If this rate cannot be easily determined, the Corporation uses the incremental borrowing rate.
The incremental rate for loans used by Codelco is determined by estimating the interest rate that the Corporation would have to pay for borrowing the necessary funds to obtain an asset of an equivalent nature similar in value to the right-of-use asset of the respective lease, in a similar economic environment over a similar term.
Lease payments included in the measurement of the lease liability mainly include fixed payments, variable payments that depend on an index or a rate and the exercise price of a purchase option.
Variable payments that do not depend on an index or a rate are excluded.
The lease liability is subsequently measured as follows: the carrying amount increased to reflect the interest on the lease liability (using the effective rate method) and the carrying amount is reduced to reflect the lease payments made.
The Corporation revalues the lease liability as to the discount rate (and makes the corresponding adjustments to the asset for respective right of use) when:
– There is a change in the term of the lease or;
– There is a change in the assessment of an option to purchase the underlying asset or;
– There is a change in an index or rate which generates a change in cash flows.
The right-of-use assets include the amount of the initial measurement of the lease liability, the lease payments made before or until the start date less the lease incentives received and any initial direct costs incurred. The right to use assets are subsequently measured at cost less accumulated depreciation and accumulated losses due to impairment.
When the Corporation incurs a cost obligation to dismantle or remove a leased asset, restore the location in which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognized and measured in accordance with lAS 37. Costs are included in the corresponding right of use asset, unless those costs are incurred to produce inventories.
The right-of-use assets are depreciated during the shorter period between the term of the lease and the useful life of the underlying asset. If a lease transfers the ownership of the underlying asset or the
28
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2) cost of the right of use asset reflects that the Corporation expects to exercise ¡ts option to purchase, the right-of-use asset is depreciated over the useful life of the underlying asset. Depreciation is made from the start date of the lease.
The Corporation applies IAS 36 to determine ifa right of use asset is impaired and recognizes any impairment loss identified, as described in the accounting policy for Property, plant and equipment.
As of the date of consolidated financial statements June 2020, the right-of-use assets and the lease liability are represented in specific items for such concepts within the consolidated statements of financial position, therefore the comparative balances as of December 31, 2019 have been reclassified from the headings “Property, plant and equipment” and “Other financial liabilities” to their respective specific headings.
r) Revenue from Contracts with Customers – Revenue is recognized in an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers.
Sale of mineral goods and or by-products: Contracts with customers for the sale of mineral goods and or by-products include the performance obligation for the delivery of the physical goods and the associated transportation service, at the place agreed with the customers. The Corporation recognizes revenue from the sale of goods when the performance obligation is satisfied according to the shipment or dispatch of the products, in accordance with the agreed conditions, such revenue being subject to variations related to the content and or sale price at the date of its liquidation. Notwithstanding the foregoing, there are some contracts where the performance obligation is satisfied when there is receipt of the product (FOB ship point) instead of the buyer’s corresponding destination, thus recognizing revenue at the time of said transfer. When services of transport of goods are provided, the Corporation recognizes revenue when the service obligation is satisfied.
Sales that have discounts associated with volume subject to compliance with goals are recognized net, estimating the probability that the volume target will be reached.
Sales contracts include a provisional price at the shipment date. The final price is generally based on the London Metals Exchange (“LME”) price. Revenue from sales of copper is measured using estimates of the future spread of metal prices on the LME andor the spot price at the date of shipment, with subsequent adjustments made upon final pricing recognized as revenue. The terms of sales contracts with customers contain provisional pricing arrangements whereby the selling price for metal concentrate is based on prevailing spot prices on a specified future date after shipment to the customer (the quotation period). Consequently, the final price is set at the dates indicated in the contracts. Adjustments to provisional sale prices occur based on movements in quoted market prices on the LME up to the date of final pricing. The period between provisional invoicing and final pricing is typically between one and nine months. Changes in fair value over the quotation period and until final pricing are estimated by reference to forward market prices for applicable metals.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
In terms of hedge accounting established by IFRS 9, the Corporation has opted to continue applying the hedge accounting requirements of lAS 39 instead of the requirements of the new standard. Therefore, there were no generated effects either at the level of account balances or at the level of disclosures.
As indicated in the note related to hedging policies in the market of metal derivatives, the Corporation enters into operations in the market of metal derivatives. Gains and losses from those which are fair value hedges contracts are recognized as revenues.
– – Rendering of services: Additionally, the Corporation recognizes revenue for rendering services, which are mainly related to the processing of minerals bought from third parties. Revenue from rendering of services is recognized when the amounts can be measured reliably and when the services have been provided.
s) Derivative contracts – Codelco uses derivative financial instruments to reduce the risk of fluctuations in sales prices of its products and of exchange rates.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently measured to their fair value at the end of each reporting period.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated in equity under the item “Cash flow hedge reserve. The gain or loss relating to the ineffective portion is immediately recognized in profit or loss and included in the Finance cost or Finance income line items. Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the effect for the fluctuation in the recognized hedged item.
A hedge relationship is considered highly effective when changes in fair value or in cash flows of the underlying item directly attributable to the hedged risk are offset by changes in fair value or cash flows of the hedging instrument, with an effectiveness ranging from 80% to 125%. Changes in fair value accumulated in other comprehensive income are subsequently reclassified from equity to profit or loss in the same period or periods during which the hedged item affects profit or loss. Upon discontinuation of hedge accounting and depending on the circumstances, the cumulative gain or loss on the hedging instrument remains in equity until the hedged transaction occurs or, if the hedged transaction is not expected to occur, the amount accumulated in other comprehensive income is reclassified to profit or loss.
The total fair value of hedging derivatives is classified as non-current financial asset or liability, if the remaining maturity of the hedged item is greater than 12 months, and as current financial asset or liability, if the remaining maturity of the hedged item is less than 12 months.
The derivative contracts held by the Corporation have been entered into to apply the risk hedging policies and are accounted for as indicated below:
30
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
– – Hedging policies for exchange rate risk: The Corporation enters into exchange rate derivatives to hedge exchange rate variations between the U.S. dollar and the currencies of transactions the Corporation undertakes. In accordance with the policies established by the Board of Directors, these hedge transactions are only entered into when there are recognized assets or liabilities, forecasts of highly probable transactions or firm commitments. The Corporation does not enter into derivative transactions for non-hedging purposes.
– – Hedging policies for metal market prices risk: In accordance with the policies established by the Board of Directors, the Corporation entered into derivative contracts to reduce the inherent risks in the fluctuations of metal prices.
The hedging policies seek to cover expected cash flows from the sale of products by fixing the sale prices for a portion of future production. When the sales agreements are fulfilled and the derivative contracts are settled, the results from sales and derivative transactions are offset in profit or loss in revenue.
Hedging transactions carried out by the Corporation in the metal derivatives market are not undertaken for speculative purposes.
– Embedded derivatives: The Corporation has established a procedure that allows for evaluation of the existence of embedded derivatives in financial and non-financial contracts. Where there is an embedded derivative, and the host contract is not a financial instrument and the characteristics and risks of the embedded derivative are not closely related to the host contract, the derivative ¡is required to be recognized separately.
t) Financial information by segment – The Corporation has defined its Divisions as its operating segments in accordance with the requirements of IFRS 8, Operating Segments. The mining deposits in operation, where the Corporation conducts its extractive and processing activities are managed by the following Divisions: Chuquicamata, Radomiro Tomic, Ministro Hales, Gabriela Mistral, Salvador, Andina and El Teniente, In addition, the smelting and refining activities are managed at the Ventanas Division.
All these Divisions have a separate operational management, which reports to the Chief Executive Officer, through the North and South Central Vice-President of Operations, respectively. Income and expenses of the Head Office are allocated to the defined operating segments.
u)Presentation of Financial Statements – The Corporation presents (i) its statements of financial position classified as “current and non-current, (ii) profit or loss and other comprehensive income in one statement and the classification of expenses within profit or loss by function, and (iii) its statement of cash flows using the direct method.
v) Current and non-current financial assets – The Corporation determines the classification of its financial assets at the time of initial recognition. The classification depends on the business model in which the investments are managed and the contractual characteristics of their cash flows.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
The Corporation’s financial assets are classified into the following categories:
Fair value through profit or loss:
Initial recognition: This category includes those financial assets not qualifying under the categories of Fair Value through Other Comprehensive Income or Amortized Cost. These instruments are initially recognized at fair value.
Subsequent recognition: Their subsequent recognition is at fair value, recording in the consolidated statement of comprehensive income, in the line Other gains (losses) any changes in fair value.
Amortized cost:
Initial recognition: This category includes those instruments with respect to which the objective of the business model of the Corporation is to hold the financial instrument to collect contractual cash flows and such cash flows consist of solely of payments of principal and interest. This category includes certain Trade and other current receivables, and the personnel loans included in other non- current financial assets.
Subsequent recognition: These instruments are subsequently measured at amortized cost using the effective interest method. The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any impairment allowance.
Interest income is recognized in profit or loss and is calculated by applying the effective interest rate to the gross carrying amount of a financial asset. For financial assets measured at amortized cost that are not part of a designated hedging relationship, exchange differences are recognized in profit or loss in the Foreign exchange difference line item.
At fair value through other comprehensive income:
Initial measurement: Financial assets that meet the criteria “Solely payments of principal and interest” (SPPI) are classified in this category and must be maintained within a business model both to collect the cash flows and to sell the financial assets. These instruments are initially recognized at fair value.
Subsequent recognition: Their subsequent valuation is at fair value. Interest income calculated using the effective interest rate method, foreign exchange gains and losses and impairment are recognized in income. Other net gains and losses are recognized in other comprehensive income.
On derecognition, the gains and losses accumulated in other comprehensive income for debt instruments are reclassified to income. Codelco did not irrevocably choose to designate any equity financial instruments (assets) at fair value with effect on other comprehensive income.
32
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
w) Financial liabilities – Financial liabilities are initially recognized at fair value net of transaction costs.
Subsequent to their initial recognition, the valuation of the financial liabilities will depend on their classification, within which the following categories are distinguished:
Financial liabilities at fair value through profit or loss: This category includes financial liabilities defined as held for trading.
Changes in fair value associated with own credit risk are recorded in other comprehensive income unless doing so creates an accounting mismatch.
Financial liabilities at amortized cost: This category includes all financial liabilities other than those measured at fair value through profit or loss.
The Corporation includes in this category bonds, obligations and other current payables.
These financial liabilities are measured using the effective interest rate method, recognizing interest expense based on the effective rate.
The effective interest rate method is a method of calculating the amortized 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, to the net carrying amount on initial recognition.
Trade and other current payables are financial liabilities that do not explicitly accrue interest and are recognized at their nominal value, which approximates its fair value.
Financial liabilities are derecognized when the liabilities are paid or expire.
x) Impairment of financial assets – The Corporation measures the loss allowance at an amount equal to lifetime expected credit losses for certain of its trade receivables. For these, it uses the simplified approach as required under IFRS 9. The Corporation considers a trade receivable to be in default at 90 days.
The provision matrix is based on an entity’s historical credit loss experience over the expected life of such trade receivables and is adjusted for forward-looking estimates taking into account the most relevant macroeconomic factors that affect bad debts.
Other accounts receivable and other financial assets are reviewed using reasonable and sustainable information that is available without cost or disproportionate effort in accordance with IFRS 9 to determine the credit risk of the respective financial assets.
The Corporation writes off accounts receivable when all efforts to collect have been exhausted.
33
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
y) Cash and cash equivalents and statement of cash flows prepared using the direct method – The statement of cash flows reflects changes in cash and cash equivalents that took place during the period, determined under the direct method. For the purposes of preparing the statement of cash flows, the Corporation has defined the following:
– Cash flows: inflows and outflows of cash or cash equivalents, which are defined as highly liquid investments maturing in less than three months with a low risk of changes in value.
– – Operating activities are the principal revenue-producing activities of the Corporation and other activities that are not investing or financing activities.
– Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.
– – Financing activities are activities that result in changes in the size and composition of net equity and borrowings of the Corporation.
Bank overdrafts are classified as external resources in current liabilities.
z) Law No. 13196 – Law No. 13196 requires the payment of a 10% special export tax on receivables of the sales proceeds that Codelco receives and transfers to Chile from the export of copper and related by- products produced by Codelco. The Chilean Central Bank deducts 10% of the amounts that Codelco transferred to its Chilean bank account. The amount recognized for this concept is presented in the statement of income within the line item Other expenses. (Note 111.22 letter c)).
aa) Cost of sales – Cost of sales is determined according to the absorption costing method, including the direct and indirect costs, depreciation, amortization and any other expenses directly attributable to the production process.
ab) Classification of current and non-current balances – In the consolidated statement of financial position, the balances are classified according to their maturities, that is, as current for those with a maturity equal to or less than twelve months and as non-current for those with a greater maturity. Where there are obligations whose maturity is less than twelve months, but whose long-term refinancing is insured upon a decision by the Corporation whose intention is to refinance, through credit agreements available unconditionally with long-term maturity, these could be classified as non-current liabilities.
ac) Non-current assets or groups of assets for disposition classified as held for sale – The Corporation classifies as non-current assets or groups of assets for disposal, classified as held for sale, properties, plants and equipment, investments in associates and groups subject to expropriation (group of assets that are going to be disposed of together with their directly related liabilities), for which, at the closing date of the financial statements, their sale has been committed to or steps have been initiated and it is estimated that it will be carried out within the twelve months following said date. These assets or groups subject to disposal are valued at book value or the estimated sale value minus the costs necessary for sale, whichever is less, and are no longer amortized from the moment they are classified as non-current assets
34
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2) held for sale. Non-current assets or groups of assets for disposal classified as held for sale and the components of the groups subject to disposal classified as held for sale are presented in the consolidated statement of financial position on a line for each of the following concepts: “Non-current assets or groups of assets for disposition classified as held for sale” andor Non-current liabilities or groups of liabilities for disposition classified as held for sale.
New standards and interpretations adopted by the Corporation
The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those applied in the preparation of the Corporation’s annual consolidated financial statements for the year ended December 31, 2019, except for the adoption of new standards, interpretations and amendments, effective from January 1, 2020, which are:
a) Definition of a Business (Amendments to IFRS 3)
The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
Additional guidance is provided that helps to determine whether a substantive process has been acquired.
The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets.
The application of these amendments has not had any material impact on the Corporation’s consolidated financial statements.
b) Definition of Material (Amendments to IAS 1 and IAS 28)
The amendments are intended to make the definition of material in lAS 1 easier to understand and are not intended to alter the underlying concept of materiality in IFRS Standards. The concept of obscuring’ material information with immaterial information has been included as part of the new definition.
The threshold for materiality influencing users has been changed from could influence to could reasonably be expected to influence.
The definition of material in lAS 8 has been replaced by a reference to the definition of material in IAS
1. In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of material or refer to the term ‘material’ to ensure consistency.
35
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
The application of these amendments has not had any material impact on the Corporation’s consolidated financial statements.
c) Revised Conceptual Framework for Financial Reporting
On March 29, 2018, the lASB published ¡ts revised Conceptual Framework for Financial Reporting (the Framework). The Conceptual Framework is not a standard and none of the concepts override those in any standard or any requirements in a standard. The main purpose of the Framework is to guide the lASB when it develops International Financial Reporting Standards. The Framework can also be helpful for preparers of financial statements when there are no specific or similar standards that address a particular issue. The new Framework has an introduction, eight chapters and a glossary.
Five of the chapters are new or have been revised substantially.
The new Framework: e Introduces a new asset definition that focuses on rights and a new liability definition that is likely to be broader than the definition it replaces but does not change the distinction between a liability and an equity instrument.
e Removes from the asset and liability definitions references to the expected flow of economic benefits-this lowers the hurdle for identifying the existence of an asset or liability and puts more emphasis on reflecting uncertainty in measurement.
e Discusses historical cost and current value measures and provides some guidance on how the ¡ASB would go about selecting a measurement basis for a particular asset or liability.
e States that the primary measure of financial performance is profit or loss, and that only in exceptional circumstances will the lASB use other comprehensive income and only for income or expenses that arise from a change in the current value of an asset or liability.
e Discusses uncertainty, derecognition, unit of account, the reporting entity and combined financial statements.
In addition, the lASB published a separate document Updating References to the Conceptual Framework which contains consequential amendments to affected Standards so that they refer to the new Framework.
The application of these changes has not had any material impact on the Corporation’s consolidated financial statements.
d) Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
The amendments deal with issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative interest rate and address the implications for specific hedge accounting requirements in IFRS 9 Financial Instruments and lAS 39 Financial Instruments: Recognition and Measurement, which require forward-looking analysis. (IAS 39 is amended as well as IFRS 9 because entities have an accounting policy choice when first applying IFRS 9, which allows them to continue to apply the hedge accounting requirements of lAS 39). There
36
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2) are also amendments to IFRS 7 Financial Instruments: Disclosures regarding additional disclosures around uncertainty arising from the interest rate benchmark reform.
The changes in Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7): (i) modify specific hedge accounting requirements so that entities would apply those hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform; (il) are mandatory for all hedging relationships that are directly affected by the interest rate benchmark reform; (iii) are not intended to provide relief from any other consequences arising from interest rate benchmark reform (if a hedging relationship no longer meets the requirements for hedge accounting for reasons other than those specified by the amendments, discontinuation of hedge accounting ¡is required); and (iv) require specific disclosures about the extent to which the entities’ hedging relationships are affected by the amendments.
The application of these amendments had no material impact on the consolidated financial statements of the Corporation, however it could affect the accounting of future transactions or agreements.
e) COVID 19-related Rent Concessions (amendments to IFRS 16)
The COVID-19 pandemic has led to some lessors providing relief to lessees by deferring or relieving them of amounts that would otherwise be payable. In some cases, this is through negotiation between the parties, but can be as a consequence of a government encouraging or requiring that the relief be provided. Such relief is taking place in many jurisdictions in which entities that apply IFRSs operate.
When there is a change in lease payments, the accounting consequences will depend on whether that change meets the definition of a lease modification, which IFRS 16 defines as a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease (for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term).
It incorporates some clarifications regarding contract modifications in the context of the COVID-19 pandemic.
1. Provides an exemption to lessees, to assess whether the lease concession related to COVID-19 is a modification of the lease;
2. Allows lessees to apply the exemption to account for a lease concession related to COVID-19 as if itwere not a modification to the lease;
3. Requires lessees who apply the exemption to disclose that fact; and
4. Requires lessees to apply said exemption retrospectively under lAS 8, but does not require restatement of figures from previous periods.
The application of these amendments has not had any material impact on the Corporation’s consolidated financial statements.
37
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
f) Reclassifications:
The Company has made immaterial reclassifications to ¡ts statement of financial position as of
December 31, 2019:
Reclassification in TRUS$ 12312019 Reclassification 12312019
New Presentation Non-current asset Property, Plant and equipment 29,700,164 (432,152) 29,268,012 Right-ofuse assets – 432,152 432,152 Current liabilities Other current financial liabilites 1,378,351 (127,761) 1,250,590 Current lease liabilities 127,761 127,761 Non-current liabilities Other non-current financial liabilites 16,538,223 (305,110) 16,233,113 Non-current lease liabilities 305,110 305,110
Certain changes to disclosure in certain notes have also been made which have been deemed immaterial by Management.
4. New accounting pronouncements
a) The following new standards, amendments and interpretations had been issued by the lASB, but their application is not yet mandatory:
New IFRS Date of mandatory application Summary Establishes the principles for the IFRS 17, Insurance Contracts Annual periods beginning on or after | recognition, measurement, January 1, 2023 presentation and disclosure of insurance contracts, reinsurance contracts and investment contracts with discretional participating features and supersedes IFRS 4 Insurance contracís.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
Amendments to IFRS
Date of mandatory application
Summary
Classification of Liabilities as
Current or (Amendments to lAS 1)
Non-Current
Annual periods beginning on or after January 1, 2023
The amendments aim to promote coherence in applying itsrequirements by helping companies to determine whether, in the statement of financial position, debts and other liabilities with an uncertain settlement date must be classified as current (maturing or potentially maturing in one year or less) or not current.
It is important to note that this amendment must be applied retrospectively and early application is permitted.
Reference to the Conceptual
Framework IFRS 3) (Amendments to
Annual periods beginning on or after January 1, 2022.
Reference to Conceptual Framework 2018 instead of 1989. Additionally, for transactions within the scope of lAS 37 or IFRIC 21, an acquirer will apply IAS 37 or IFRIC 1 (instead of Conceptual Framework) to identify liabilities assumed in a business combination.
Finally, a statement is added so that an acquirer does not recognize contingent assets acquired in a business combination.
Property, Plant and Equipment
– Proceeds before Intended Use (Amendments to IAS 16)
Annual periods beginning on or after January 1, 2022.
The income and costs from the sale of items produced while the asset is taken to the location and necessary condition of operation foreseen by the administration, are recognized in results.
Onerous Contracts – Costs of
Fulfilling a (Amendments to lAS 37)
Contract
Annual periods beginning on or after January 1, 2022.
It is specified that the cost of fulfilling a contract includes “costs that are directly related to the contract”, which are those that either may be incremental costs of fulfilling that contract or an allocation of other costs that are directly related to fulfill the contracts.
39
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
Reform to the Reference Interest Rate (IBOR) – Phase 2 (amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS
16)
Annual periods beginning on or after January 1, 2021.
It introduces a practical guide to address the modifications proposed in the IBOR reform, indicating, among others, that hedge accounting is not discontinued due to the mere appearance of the reform in question.
Annual Improvements to IFRS Standards 2018-2020 (amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41)
Annual periods beginning on or after January 1, 2022.
IFRS 1 First-time Adoption of IFRS: Allows an affillate to apply paragraph D16 (a) to measure cumulative translation differences using the amounts reported by its parent, based on the date of transition to IFRS of its parent.
IFRS 9 Financial Instruments: clarifies what fees are included when applying the 10 percent test in paragraph B3.3.6.
IFRS 16 Leases: removes from Illustrative Example 13, the illustration of the reimbursement of improvements to the leased asset made by the lessor.
¡AS 41 Agriculture: removes the requirement in paragraph 22 to exclude tax cash flows when measuring the fair value of a biological asset using the present value technique.
The Administration is evaluating the impact of the adoption of these new regulations and modifications.
40
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2) lll. EXPLANATORY NOTES
1. Cash and cash equivalents
The detail of cash and cash equivalents as of December 31, 2020 and 2019, is as follows: ltem 12312020 | 12312019 ThUS$ ThUs$
Cash on hand 196 261 Bank balances 440,756 262,336 Time deposits 1,652,271 972,125 Mutual Funds – Money Market 14,270 2,158 Repurchase agreements – 66,225 Total cash and cash equivalents 2,107,493 1,303,105
Interest on time deposits is recognized on an accrual basis using the contractual interest rate of each of these instruments.
The Corporation does not hold any significant amounts of cash and cash equivalents that have a restriction on use.
Cash and cash equivalents meet the low credit risk exemption under IFRS 9.
2. Trade and other receivables
a) Accruals for open sales invoices
The Corporation adjusts its revenues and trade receivable balances, based on future copper prices through the recognition of an accrual for open sales invoices.
When future price of copper is lower than the provisional invoicing price, the accrual is presented in the statement of financial position as follows:
– For those customers that have due balances with the Corporation the accrual is presented as a deduction from the line item trade and other current receivables.
– For those customers that do not have due balances with the Corporation the accrual is presented in the line item trade and other current payables.
When the future copper price is higher than the provisional invoicing price, the accrual is added to the line item trade and other current receivables.
According to the foregoing, as of December 31, 2020, there is a positive provision in the trade debtors and other accounts receivable of ThUS$381,883 for not finalized sales invoices (ThUS$98,045 of positive provision as of December 31, 2019).
41
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
b) Trade and other receivables
The following table sets forth trade and other receivables balances, with their corresponding allowances for doubtful accounts:
Current Non-Current Items 12312020 | 12312019 | 12312020 | 12312019 ThUS$ ThUS$ ThUS$ ThUS$ Trade receivables (1) 2,569,861 1,934,245 431 438 Allowance for doubtful accounts (3) (9,353) (7,530) – – Subtotal trade receivables, net 2,560,508 1,926,715 431 438 Other receivables (2) 696,435 668,218 93,555 98,106 Allowance for doubtful accounts (3) (7,626) (6,665) – – Subtotal other receivables, net 688,809 661,553 93,555 98,106 Total 3,249,317 2,588,268 93,986 98,544
(1) Trade receivables correspond to the sales of copper and its by-products, those that in general are sold in cash or through bank transfers.
(2) Other receivables mainly consist of the following items:
+ VAT creditand other refundable taxes of ThUS$167,982 and ThUS$179,486 as of December 31, 2020 and 2019, respectively.
” Corporation’s employee short-term loans and mortgage loans, both monthly deducted from the employee’s salaries. Mortgage loans granted to the Corporation’s employees for ThUS$38,676 are secured with collateral.
+ Reimbursement receivables from insurance companies.
+ Advance payments to suppliers and contractors.
+ Accounts receivable for tolling services (Ventanas Smelter).
(3) The Corporation recognizes an allowance for doubtful accounts based on its expected credit loss model.
The reconciliation of changes in the allowance for doubtful accounts for the years ended December 31, 2020 and 2019, were as follows: ltems 12312020 | 12312019 ThUS$ ThUS$ Opening balance 14,195 42,657 Net Increases 3,168 1,709 Write-offsapplications (384) (30,171) Total movements 2,784 (28,462) Closing balance 16,979 14,195
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
3.
As of December 31, 2020 and 2019, the balance of past due but not impaired trade receivables, is as follows:
Maturity 12312020 | 12312019 ThUS$ ThUS$ Less than 90 days 8,370 9,510 Between 90 days and 1 year 15,876 1,211 More than 1 year 8,876 9,530 Total trade receivables past-due but not impaired 33,122 20,251
Balance and transactions with related parties
a)
Transactions with related persons
In accordance with Law on New Corporate Governance, the members of Codelco’s Board are, in terms of transactions with related persons, subject to the provisions of Title XVI of Law on Corporations, which sets the requirements regarding transactions with related parties in publicly traded companies and their subsidiaries.
Notwithstanding the foregoing, pursuant to the provisions of the final paragraph of Article 147 b) of Title XVI, which contains exceptions to the approval process for transactions with related parties, the Corporation has established a general policy over customary transactions (which was communicated through a significant event notice to the CMF), that defines customary transactions as those carried out with its related parties in the normal course of business, which contributes to the social interest and are necessary to the normal development of Codelco’s activities.
Likewise, consistent with the referred to above standard, the Corporation has implemented as part of its internal regulatory framework, a specific policy dealing with business between related persons and companies with Codelco’s executives. Codelco’s Corporate Policy No.18 (CCP No. 18), the latest version currently in force, was approved by the Chief Executive Officer and the Board of Directors.
Accordingly, Codelco without the authorization required in CCP No. 18 and of the Board of Directors, as required by Law or by the Corporation by-laws, shall not enter into any contracts or agreements involving one or more Directors, its Chief Executive Officer, the members of Division’s Managing Committees, Vice-presidents, Legal Counsel, General Auditor, Division Chief Executive Officers, Advisors of Senior Management, employees who must make recommendations andor have the authority to award tenders, assignments of purchases andor contracting goods and services, and employees in management positions (up to fourth hierarchical level in the organization), including their spouses, children and other relatives up to second degree of relation, with a direct interest, represented by third parties or on behalf of another person. Likewise, CCP No. 18 requires administrators of Corporation’s contracts to declare all related persons and disqualify himselfherself if any related persons are involved within the field of hisher job responsibilities.
43
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
This prohibition also includes the companies in which such administrators are involved through ownership or management, either directly or through representation of other natural persons or legal entities, as well as those individuals who also have ownership or management in those companies.
The Board of Directors has been informed and approved certain transactions as defined in CCP No.
18.
The most significant transactions with related persons and the amounts involved are detailed in the following table:
112020 112019 Entity Taxpayer number | Country Nature of the Description ofthe | 12312020 | 12312019 relationship transaction Amount Amount
ThUS$ ThUS$ ‘ADM Planning Consultores Ltda 77.770.490-7 Chile |Employee’s relative Services 2,291 – Anglo American Sur S.A. 77.762.940-9 Chile | Associate Supplies 5 16
B.Bosch S.A. 84.716.400-K Chile |Employee’s relative Supplies 5,071 Centro de Capacitación y Recreación Radomiro Tomic. 75.985.550-7 Chile [Other related Services – 62 Clariant (Chile) Ltda. 80.853.400-2 Chile |Employee’s relative Supplies 38,873 – Ecometales Limited agencia en Chile. 59.087.530-9 Chile |Subsidiary Services 148 43,495 Flsmidth S.A. 89.664.200-6 Chile |Employee’s relative Supplies 4,537 5,812 Fundación de Salud El Teniente. 70.905.700-6 Chile |Subsidiary Services 22,040 – Fundacion Educacional de Chuquicamata. 72.747.300-9 Chile |Founder member donor Services – 134 Fundación Orquesta Sinfónica Infantil de los Andes. 65.018.784-9 Chile |Founder member donor Services 100 270 Highservice ingeniería y construcción ltda. 76.378.396-0 Chile |Employee’s relative Services 13,984 11,803 Industrial Support Company Ltda 77.276.280-1 Chile |Employee’s relative Services – 76,389 Industrial y Comercial Artimatemb Ltda. 76.108.720-7 Chile |Employee’s relative Services – 20 Ingeniería de Protección SpA 89.722.200-0 Chile |Employee’s relative Supplies 7 – Institución de Salud Previsional Chuquicamata Ltda. 79.566.720-2 Chile |Subsidiary Services – 3,257 Komatsu Chile S.A. 96.843.130-7 Chile |Employee’s relative Services and supplies 878 20,446 Linde Gas Chile S.A. 90.100.000-K Chile |Employee’s relative Supplies 25 147 Manufacturas AC Ltda 77.439.350-1 Chile |Employee’s relative Supplies 13 – Marsol S.A. 91.443.000-3 Chile |Employee’s relative Supplies – 101 MI Robotc Solutions S.A. 76.869.100-2 Chile |Employee’s relative Supplies 13 – Prestaciones de Servicios de la Salud Intersalud Ltda. 77.270.020-2 Chile |Subsidiary Services 596 – S y S Ingenieros Consultores S.A. 84.146.100-2 Chile |Employee’s relative Services – 43 Servicios de Ingeniería IMA S.A. 76.523.610-K Chile |Employee’s relative Services 25 – Soc. de Prod. y Serv. Solava Ltda 78.663.520-9 Chile |Employee’s relative Supplies 57 Sociedad Contractual Minera El Abra. 96.701.340-4 Chile | Associate Supplies 73 Sodimac S.A. 96.792.430-K Chile |Employee’s relative Supplies – 1,644 Sonda S.A. 83.628.100-4 Chile |Employee’s relative Services 132 221 Suez Medioambiente Chile S.A. 77.441.870-9 Chile |Employee’s relative Supplies 4,261 57
b) Key Management of the Corporation
In accordance with the policy established by the Board of Directors and its related regulations, the transactions with the Directors, the Chief Executive Officer, Vice Presidents, Corporate Auditor, the members of the Divisional Management Committees and Divisional General Managers shall be approved by the Board of Directors.
During the years ended December 31, 2020 and 2019, the members of the Board of Directors have received the following amounts as per diems, salaries and fees:
44
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
112020 112019 Name Taxpayer number Country Nature of the Description of | 12312020 | 12312019 relationship the transaction Amount Amount
ThUS$ ThUS$ Blas Tomic Errázuriz 5.390.891-8 Chile [Director Directors’s fees 94 115 Ghassan Dayoub Pseli 14.695.762-5 Chile [Director Directors’s fees 75 92 Ghassan Dayoub Pseli 14.695.762-5 Chile [Director Payroll 107 122 Hernán de Solminihac Tampier 6.263.304-2 Chile [Director Directors’s fees 75 92 Ignacio Briones Rojas 12.232.813-9 Chile [Director Directors’s fees – 78 Isidoro Palma Penco 4.754.025-9 Chile [Director Directors’s fees 75 92 Juan Benavides Feliú 5.633.221-9 Chile [Chairman ofthe board [Directors’s fees 113 138 Juan Morales Jaramillo 5.078.923-3 Chile [Director Directors’s fees 75 92 Paul Schiodtz Obilinovich 7.170.719-9 Chile [Director Directors’s fees 75 92 Raimundo Espinoza Concha 6.512.182-4 Chile [Director Directors’s fees 27 92 Raimundo Espinoza Concha 6.512.182-4 Chile [Director Payroll 13 36 Rodrigo Cerda Norambuena 12.454.621-4 Chile [Director Directors’s fees 72 –
The Ministry of Finance through Supreme Decree No. 261, dated February 27, 2020, established the compensation for the Corporation’s Directors. The compensation to Board of Director members, is as follows:
a. The Directors of Codelco will receive a fixed monthly compensation of Ch$4,126,340 (four million one hundred and twenty-six thousand, three hundred and forty Chilean pesos) for meeting attendance. The payment of the monthly compensation requires at least one meeting attendance each month.
b. The Chairman of the Board will receive a fixed monthly compensation of Ch$8,252,678 (eight million two hundred and fifty-two thousand, six hundred and seventy-eight Chilean pesos).
c. Each member of the Directors” Committee, whether the one referred to in Article 50 bis) of Law No. 18046 or another established by the Corporation by-laws, will receive a fixed additional monthly compensation of Ch$1,375,445 for meeting attendance, regardless of the number of committees of which they are members. In addition, the Chairman of the Directors’ Committee will receive a fixed monthly compensation of Ch$2,750,893 for meeting attendance.
By means of Ordinary Official Letter N ? 1611 of July 8, 2020, it is reported that due to the current situation that the country is going through, and in line with what was requested by Codelco and what was reported by the Director of the Budget, it has been considered conducive to decrease by 20% the amount of directors’ remuneration, exceptionally, for the period between July and
December 2020, both included.
d. The compensation established in the legal text is effective for a period of two years, as from March
1, 2020, and will not be adjusted during said period.
45
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
On the other hand, the short-term benefits tokey management of the Corporation expensed during the years ended December 31, 2020 and 2019, were ThUS$10,682 and ThUS$11,442, respectively.
The methodology to determine the remuneration of key management was approved by the Board of Directors at a meeting held on January 29, 2003.
During the years ended December 31, 2020 and 2019, severance indemnities were expensed to key management of the Corporation for ThUS$1,188 and ThUS$1,619, respectively.
There were no payments to key management for other non-current benefits during the years ended December 31, 2020 and 2019.
There are no share-based payment plans granted to Directors or key management personnel of the Corporation.
c) Transactions with companies in which Codelco has ownership interest
The Corporation undertakes commercial and financial transactions that are necessary for ¡ts activities with its subsidiaries, associates and joint ventures (related parties). The financial transactions correspond mainly to loans granted (mercantile current accounts).
Commercial transactions with related companies mainly consist of purchasessales of products or rendering of services carried out under market conditions and prices, which do not bear any interest or indexation.
As of the date of these financial statements, the Corporation has not recognized any allowance for doubtful accounts with respect to receivable balances from its related companies.
The detail of accounts receivable and payable between the Corporation and its related parties as of
December 31, 2020 and 2019, is as follows:
Accounts receivable from related companies:
Taxpayer Nature of the | Indexation Current Non-current number Name Country relationship | currency 12312020 | 12312019 | 12312020 | 12312019 ThUS$ ThUS$ ThUS$ ThUS$
77.762.940-9 [Anglo American Sur S.A. Chile Associate US$ 91,039 16,677 – –
76.063.022-5 [Inca de Oro S.A. Chile Associate US$ 544 438 –
76.255.054-7 [Planta Recuperadora de Metales SpA | Chile Associate US$ 6,031 1,677 15,370
96.701.340-4 |Sociedad Contractual Minera El Abra Chile Associate US$ 776 2,077 – –
96.801.450-1 [Agua de la Falda S.A. Chile Associate US$ 6 5 224 224
76.781.030-K_|Kairos Mining S.A. Chile Associate CLP 1 – – – Totals 98,397 20,874 224 15,594
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
d)
Accounts payable to related companies:
Taxpayer Nature of the | Indexation Current Non-current number Name Country relationship | currency 12312020 | 12312019 | 12312020 | 12312019 ThUS$ ThUS$ ThUS$ ThUS$
77.762.940-9 [Anglo American Sur S.A. Chile Associate US$ 171,341 108,243
96.701.340-4 |Sociedad Contractual Minera El Abra Chile Associate US$ 25,963 26,608
76.255.054-7 [Planta Recuperadora de Metales SpA | Chile Associate US$ – 430
76.781.030-K_|Kairos Mining S.A. Chile Associate CLP 1,620 1,953 Totals 198,924 137,234
The following table sets forth the transactions carried out between the Corporation and its related companies and their corresponding effects in profit or loss for the years ended December 31, 2020 and
2019: 112020 112019 12312020 12312019 Taxpayer ás Nature of the Index. ; Effects on net ; Effects on net Entity , Country Amount | income (charges) | Amount [income (charges) number transaction Currency 5 , I credits credits ThUS$ ThUS$ ThUS$ ThUS$
96.801.450-1 [Agua de la Falda S.A. Sales of services Chile CLP 1 1 3 3
96.801.450-1 [Agua de la Falda S.A. Contribution Chile USD 176 – 190
77.762.940-9 [Anglo American Sur S.A. Dividends received Chile USD 22,715 84,372
77.762.940-9 [Anglo American Sur S.A. Dividends receivable Chile USD 77,416 – – –
77.762.940-9 [Anglo American Sur S.A. Sales ofgoods Chile USD 49,873 49,873 25,044 25,044
77.762.940-9 [Anglo American Sur S.A. Sales of services Chile CLP 16,003 16,003 8,661 8,661
77.762.940-9 [Anglo American Sur S.A. Purchase of products Chile USD 689,082 (689,082)| 643,832 (643,832)
76.063.022-5 |Inca de Oro S.A. Sales of services Chile CLP 74 – 198 16
77.781.030-K |Kairos Mining Services Chile CLP 10,933 (10,933) 21,050 (21,050)
77.781.030-K |Kairos Mining Sales of services Chile CLP 2 2 1 1
76.255.054-7 [Planta Recuperadora de Metales SpA | Interestloans Chile USD 1,032 1,032 1,029 1,029
76.255.054-7 |Planta Recuperadora de Metales SpA [Services Chile USD 23,363 (23,363) 23,656 (23,656)
76.255.054-7 |Planta Recuperadora de Metales SpA |Sales of services Chile CLP 6,944 6,944 8,087 8,087
76.255.054-7 [Planta Recuperadora de Metales SpA [Sales ofgoods Chile USD 73 73 65 65
76.255.054-7 [Planta Recuperadora de Metales SpA [Loan recovery Chile USD 10,689 5,966 –
96.701.340-4 |Soc. Contractual Minera El Abra Dividends received Chile USD – 3,062 –
96.701.340-4 |Soc. Contractual Minera El Abra Buy Shares Chile USD – – 4,000 4,000
96.701.340-4 |Soc. Contractual Minera El Abra Purchase of products Chile USD 242,204 (242,204)| 242,900 (242,900)
96.701.340-4 |Soc. Contractual Minera El Abra Sales ofgoods Chile USD 17,216 17,216 39,046 39,046
96.701.340-4 |Soc. Contractual Minera El Abra Other sales Chile USD 1,537 1,537 1,493 1,493
96.701.340-4 |Soc. Contractual Minera El Abra Perceived commissions Chile USD 96 96 100 100
96.701.340-4 |Soc. Contractual Minera El Abra other purchases Chile USD 71 (71) 39 (39)
Additional information
The current account receivable from Planta Recuperadora de Metales SpA. corresponds to the loan agreement granted to build its plant, which was signed on July 7, 2014.
The purchasesales of products transactions with Anglo American Sur S.A., are regular business activity transactions to buysell copper and other products. On the other hand, there are certain transactions related to the contract entered into with the subsidiary Inversiones Mineras Nueva Acrux SpA (whose non-controlling shareholder is Mitsui) and Anglo American Sur S.A., under which the latter agreed to sell a portion of its annual copper output to said subsidiary.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
4. Inventories
The detail of inventories as of December 31, 2020 and 2019, is as follows:
Current Non-current Items 12312020 | 12312019 | 12312020 | 12312019 ThUS$ ThUS$ ThUS$ ThUS$
Finished products 108,544 210,309 –
Subtotal finished products, net 108,544 210,309 – – Products in process 1,225,529 1,150,060 585,105 585,681 Subtotal products in process, net 1,225,529 1,150,060 585,105 585,681 Material in warehouse and other 749,941 723,264 – – Obsolescence allowance adjustment (171,947) (162,498)
Subtotal material in warehouse and other, net 577,994 560,766 – – Total Inventories 1,912,067 1,921,135 585,105 585,681
The amount of inventories of finished goods transferred to cost of sales for the years ended December 31, 2020 and 2019 was ThUS$10,531,406 and ThUS$10,007,106, respectively.
For the years ended December 31, 2020 and 2019, the Corporation has not reclassified inventories to Property, Plant and Equipment.
The reconciliation of changes in the allowance for obsolescence ¡s detailed below: : 12312020 | 12312019 Changes in Allowance for Obsolescence ThUS$ ThUS$ Opening Balance (162,498) (96,805) Period provision (9,449) (65,693) Closing Balance (171,947) (162,498)
During the years ended December 31, 2020 and 2019, the Corporation recognized write-off of damaged inventories of ThUS$8,553 and ThUS$35,136, respectively.
As of December 31, 2020, the inventory provision to reduce inventory to its net realizable value was ThUS$27,213, a reversal of provision for the period of January – December of 2020 of ThUS$10,931 was recorded (a charge for provision for the corresponding period of 2019 was recorded at ThUS$6,255). As of December 31, 2019, the inventory provision to reduce inventory to its net realizable provision was ThUS$38,144.
As of December 31, 2020 and 2019, there are no unrealized gains or losses recognized on the intercompany sales of inventories of finished products.
As of December 31, 2020 and 2019, there are no inventories pledged as security for liabilities.
48
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
5. Income taxes and deferred taxes
a) Composition of income tax expense:
b) Deferred tax assets and liabilities:
112020 112019 Items 12312020 | 12312019
ThUS$ ThUS$ Eftect of Deferred Taxes (707,793) (384,160) Current income tax (71,761) (7,484) Adjustments to current tax from the prior period (13,052) – Other 5,603 (1,601) Total tax expense (787,003) (393,245)
The following table details deferred tax assets and liabilities:
Deferred tax assets 12312020 | 12312019 ThUS$ ThUS$ Provisions 1,494,649 1,556,662 Tax loss carryforwards 757,681 613,340 Right ofuse assets 18,510 4,808 Other 15,231 2,906 Total deferred tax assets 2,286,071 2,177,716 bes 12312020 | 12312019 Deferred tax liabilities ThUS$ ThUSS Accelerated depreciation for tax purposes 5,828,454 5,198,975 Property, plant and equipment variations 1,483,351 1,386,874 Tax on mining actvity 288,470 235,931 Fair value of mining properties acquired 108,518 108,518 Undistributed profits of subsidiaries 35,468 34,998 Hedging derivatives – future contracts 14,971 14,889 Post-employment beneft obligations 8,726 14,676 Total deferred tax liabilities 7,767,958 6,994,861
The following tables sets forth the deferred taxes as presented in the statement of financial position:
Deferred taxes 12312020 | 12312019
ThUS$ ThUS$ Non-current assets 45,908 43,736 Non-current liabilities 5,527,795 4,860,881
Net 5,481,887 4,817,145
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
c) The effects of deferred taxes recorded in other comprehensive income are as follows:
Deferred taxes on components of other comprehensive 12312020 | 12312019 income (credit) charge ThUS$ ThUS$ Cash flow hedge 30,676 52,072 Defined Benefit Plans (145) 69,667 Total deferred tax effect on components of other 30,531 121,739 comprehensive income
d) The following table sets forth the reconciliation of the effective tax rate: 12312020 Taxable Base At the Tax rate
Reconciliation of tax rate
25.0% 40.0% 5% 25.0% 40.0% 5% Total
ThUs$ ThUS$ ThUS$ ThUS$ | ThUS$ | ThUS$ | ThUuS$ Tax efect on the income (loss) before taxes 1,030,488 1,030,488 1,030,488 (257,622) (412,195) (51,524) (721,341) Tax efiecton the income (loss) before taxes of subsidiaries 13,396 13,396 13,396 (3,349) (5,358) (670) (9,377) Tax efect consolidated profit (loss) before taxes 1,043,884 1,043,884 1,043,884 (260,971) (417,553) (52,194) (730,718) Permanent differences: First category income tax (25%) (62,749) 15,687 15,687 Specific tax for state-owned entities Art 2 D.L. 2398 (40%) (27,092) 10,837 10,837 Specific tax on mining activities 1,395,122 (69,756) (69,756) Single Tax Art 21 Inc. N*1 – Diferences tax prevous years (13,053) TOTAL TAX EXPENSE (245,284) (406,716) (121,950) (787,003)
12312019 Reconciliation of tax rate Taxable Base At the Tax rate
25.0% 40.0% 5% 25.0% | 40.0% 5% Total
ThUS$ ThUS$ ThUS$ ThUS$ | ThUS$ | ThUS$ | ThUuS$ Tax efect on the income (loss) before taxes 404,692 404,692 404,692 (101,173) (161,877) (20,235) (283,285) Tax eflecton the income (loss) before taxes of subsidiaries 3,081 3,081 3,081 (770) (1,232) (154) (2,156) Tax efect consolidated profit (loss) before taxes 407,773 407,773 407,773 (101,943) (163,109) (20,389) (285,441) Permanent differences: First category income tax (25%) 86,549 (21,637) (21,637) Specific tax for state-owned enties Art 2 D.L. 2398 (40%) 60,799 (24,320) (24,320) Specific tax on mining activities 1,136,260 (56,813) (56,813) Single Tax Art 21 Inc. N*1 (3,417) Others (1,617) TOTAL TAX EXPENSE (123,580) (187,429) (77,202) (393,245)
Pursuant to Article 2 of the Decree Law 2398, Codelco is subject to an additional tax rate of 40% on income before taxes and dividends received in accordance with the law.
For the calculation of deferred taxes, the Corporation has applied a General Tax Regime, with first-rate tax rates for the 2020 and 2019 business years of 25%. As a state company, the Corporation ¡is classified as those companies of article 14 letter G of the Income Tax Law, incorporated in the Tax Reform Law No. 21,210 of February 24, 2020, maintaining the General Regime of Taxation. Meanwhile, the national subsidiaries and associates, by default, have applied the Partially Integrated Taxation
50
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2) system with a rate of 27% for both years. Foreign subsidiaries and associates have applied the tax rates in force in their respective countries.
In relation to the specific tax on mining activities the tax rate applicable is 5% under Law No. 20469.
The Corporation, until 2019, as a Taxpayer of first category, ¡is liable to the single Tax of 40%, contained in the first paragraph of Article 21 of the Income Tax Law No. 824, in numbers ¡), ii) and iii) , the disbursements incurred in said numerals. As of 2020, with the modification introduced by the second article letter No.11 d) of the tax reform Law No. 21210, exempts the Corporation from the Single Tax of the current article 21 of the Income Tax Law.
Based on the evolution of the business model and ¡ts projections, the Corporation’s management estimates that its future profit projections will allow these recorded tax loss carryforwards to be recovered. Tax loss carryforwards do not expire in Chile.
6. Current and non-current tax assets and liabilities
The current tax balance is presented net of monthly provisional payments as an asset or liability in Current Taxes, as the case may be, determined as indicated in section II. Main accounting policies, 2.1):
Current Tax Assets 12312020 | 12312019
ThUS$ ThUS$ Taxes to be recovered 74,324 22,719 Total Current Tax Assets 74,324 22,719
Current Tax Liabilities 12312020 | 12312019
ThUS$ ThUS$ Monthly Provisional Payment Provision 1,508 10,672 Provision Tax 6,937 3,185 Total Current Tax Liabilities 8,445 13,857
12312020 | 12312019 Items
ThUS$ ThUS$ Non-Current Tax Assets 111,994 222,169 Total Non-Current Tax Assets 111,994 222,169
The non-current balance of recoverable taxes corresponds to the accumulated differences for provisional tax payments that resulted in Codelco’s favor in the income tax returns of previous periods, attributable to income tax balances payable from periods following. The Corporation does not expect this tax to be recovered in the current period, until the reversal of the carry-over tax loss, which as of December 31, 2020 amounts to ThUS$1,094,945,
51
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the consolidated financial statements originally issued in Spanish – see Note 1.2)
7. Property, Plant and Equipment
a) The items of property, plant and equipment as of December 31, 2020 and 2019, are as follows: : 12312020 | 12312019
Property, Plant and Equipment, gross ThUS$ ThUS$ Construction in progress 6,391,278 6,234,130 Land 124,271 117,972 Land on mine site 259,230 55,344 Buildings 6,212,776 5,963,605 Plantand equipment 19,809,559 19,217,547 Fixtures and fitings 47,507 58,631 Motor vehicles 2,075,364 2,080,124 Land improvements 6,818,024 6,504,063 Mining operations 9,322,060 8,751,368 Mine development 5,011,879 4,546,765 Other assets 1,162,812 1,164,163 Total Property, Plant and Equipment, gross 57,234,760 54,693,712 Property, Plant and Equipment, accumulated 12312020 12312019 depreciation ThUS$ ThUS$ Construction in progress – – Land – – Land on mine site 13,133 9,975 Buildings 3,335,090 3,152,227 Plant and equipment 11,212,105 10,618,524 Fixtures and fitings 42,305 47,431 Motor vehicles 1,545,627 1,480,020 Land improvements 3,723,860 3,482,960 Mining operations 6,271,794 5,253,285 Mine development 1,019,963 893,575 Other assets 518,978 487,703 Total Property, Plant and Equipment, accumulated 27,682,855 25,425,700 depreciation : 12312020 12312019 Property, Plant and Equipment, net ThUS$ ThUs$ Construction in progress 6,391,278 6,234,130 Land 124,271 117,972 Land on mine site 246,097 45,369 Buildings 2,877,686 2,811,378 Plantand equipment 8,597,454 8,599,023 Fixtures and fitings 5,202 11,200 Motor vehicles 529,737 600,104 Land improvements 3,094,164 3,021,103 Mining operations 3,050,266 3,498,083 Mine development 3,991,916 3,653,190 Other assets 643,834 676,460 Total Property, Plant and Equipment, net 29,551,905 29,268,012
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
b) Movement of Property, plant and equipment:
12312019
Movements Construction Land on a Plantand |, Fixed Motor Ground Mining – | Development | Other in progress | L8Md | minosite | BUlldings | cauiomen: [IMstallations and micos | improvements | operations | ofmines | assets Total Thus$ accessories Reconciliation of changes in properties, plant and equipment Propertes, plantand equipmentat he beginning of he year. Opening Balance 112020 6,234,130| 117,972 45,369] – 2811,378| – 8,599,023 11,200] 600,104 3,021,103| 3,498,083 3,653,190] 676,460| 29,268,012 Changes in property, plant and equipment Increases ohher han those from business, property, plant and equipment combinatons 2,159,748] – – – 13,610 61 2,057 5,216 362,492 (319) 15612| 2,558,477 Depreciaton, property, plant and equipment – (4,500)| – (182,679)| (599,050) (2.885)| – (100,746) (240,901)| (1,032,186) (112,711) | – (88,377)| (2,313,344) Increases (decreases) in transfers and other changes, properties, plant and equipment A eones by transfers ftom constuctons in process, properties, plantand (1.623,278)| 6,299 203,468] 210,424 545,733] 1 30,292 298,294, 48,266 280,180 321 W Increases (decreases) by other changes, propertes, plant and equipment (340,581) – 1,560 39,765 40,625 (8,671) (72) 10,741 173,611 171,576| – (9,896) 83,658 as by transfers and other changes, properties, plant and (1,963,859)| 6,299 205,028 250,189 586,358] (3,670) 30,220| 309,035| 221,877 451,756| – (9,575) 83,658| Dispositions and withdrawals of service, property, plant and equipment Retrements, property, plant and equipment (14,689) – – (1.202) (2,478) (4) (1.898) (289) – – (286)| – (20,846) Dispositions and withdrawals of service, property, plant and equipment (14,689) . . (1,202) (2,478) (4) (1.898) (289) .| . (286)| – (20,846) Increase (decrease) in properties, plant and equipment 157,148| 6,299 200,728 66,308 (1,569) (5.998)| (70,367) 73,061] (447,817) 338,726| (32,626) 283,893 Properties, plant and equipment at the end of the year. Closing balance 6,391,278| 124,271 246,097| 2,877,686| – 8,597,454 5202| 529,737 3,094,164] – 3,050,266] 3,991,916| 643,834| 29,551,905 Movements Construction Land on Ls Plantand | Fixed Motor Ground Mining – | Development | Other muss in progress | -294 | minesite | Buildings | cauipment non and vehicles | improvements | operations | ofmines assets Total Reconciliation of changes in properties, plant and equipment Propertes, plant and equipmentat he beginning ofhe year. Opening Balance 112019 8,808,652| 117,972 46.900] 2354,308| 5,768,793 14,929] 684,009 2,352,556] – 2,486,324 3,313,044| – 807,336| 26,754,998 Changes in property, plant and equipment Increases ohher han those from business, property, plantand equipment combinatons 3,602,113] – 1,750 14,525] 23 7,852 19,128 521,191 14,917| 4,181,499 Depreciaton, property, plant and equipment – – (1,010)| – (162,340)| (649,076) (8:563)] – (109,913) (215,641)| – (796,714) (87,933)| – (47,606)| (2,073,896) Impairmentlosses recognized in proftor loss for the period – – – – – – – – – – – – Increases (decreases) in transfers and other changes, properties, plant and equipment Inaoases (decrease) by transfers from constructions in process, propertes, plant and (6,173,762) L 64001] 3511030 6 17,702 A A 5.0401 04 – Increases (decreases) by other changes, propertes, plant and equipment 4,389 – (61m (2322m| (28,739) (94) 1,874 48,561 110,774 423,080] (95,338)] 440,625 O eerease) by transfers and other changes, properties, plant and (6,169,373) – (611) 623,370] 3,482,300 (88) 19,576 865,334] – 1,287,282 428,079| – (95,244) 440,625 Dispositions and withdrawals of service, property, plant and equipment Retrements, property, plant and equipment (7.262) – (5,795)| — (17,519) (1) (1,420) (274) (2.943)| – (35,214) Dispositions and withdrawals of service, property, plant and equipment (7.262) – – (5,795)| – (17,519) 0) (1,420) (274) – | (2983) – (35,214) Increase (decrease) in properties, plant and equipment (2,574,522) – (1.621) 456,985| 2,830,230 (3,720)| (83,905) 668,547| 1,011,759 340,146] (130,876)| 2,513,014 Properties, plant and equipment at the end of the year. Closing balance 6,234,130| 117,972 45,369| – 2,811,378| 8,599,023 11,200 600,104 3,021,103] – 3,498,083 3,653,190| – 676,460| 29,268,012
53
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
c)
The balance of construction in progress, is directly associated with the operating activities of the Corporation and relates to the acquisition of equipment for projects in construction and associated costs toward their completion.
The Corporation has signed insurance policies to cover the possible risks to which the various property, plant and equipment items are subject, as well as the possible claims that may arise for the period of its activities. Such policies sufficiently cover the risks to which they are subject in Management opinion.
Borrowing costs capitalized for the years ended December 31, 2020 and 2019 were ThUS$223,931 and ThUS$367,548, respectively. The annual capitalization average rate for the years ended December 31, 2020 and 2019 was 4.06% and 4.19%, respectively.
Expenses on exploration and drilling of deposits recognized in profit or loss and the cash outflows disbursed for the same concepts are presented in the following table:
112020 112019
Expenditure on exploration and drilling 423112020 | 12312019 reservoirs ThUS$ ThUS$ Recognized in profit 25,289 47,048 Cash outlows disbursed 33,299 47,551 The detail of “Other assets” under “Property, plant and equipment” is as follows: 12312020 | 12312019 Other assets, net ThuS$ ThUS$ Mining properties from the purchase of Anglo American Sur S.A. 402,000 402,000 Maintenances and other major repairs 191,918 217,079 Other assets – Calama Plan 46,164 54,174 Other 3,752 3,207 Total other assets, net 643,834 676,460
The Corporation currently has no ownership restrictions relating to assets belonging to Property, plant and equipment, except for leased assets whose legal title corresponds to the lessor.
Codelco has not pledged any items of property, plant and equipment as collateral to third parties in order to enable the realization of its normal business activities or as a commitment to support payment obligations.
As of December 31, 2019, property, plant and equipment assets did not show any indication of impairment or reversal of impairment recognized in prior years, therefore, no adjustments were made to the value of assets at that date.
The Corporation presents at December 31, 2019 a reclassification of property, plant and equipment to the item intangible assets other than goodwill which amounts to ThUS$2,090.
54
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
1) The expense for depreciation of the property, plant and equipment item for the years ended December 31, 2020 corresponds to ThUS$2,313,344.
m) In accordance with the provisions of section Il. Main accounting policies, 2 ¡), referring to impairment of property, plant and equipment and intangible assets, and as indicated in note 21 on impairment of assets, the Corporation as of December 31, 2020 recorded an impairment of the value of Assets of the Ventana’s Division for an amount of ThUS$24,053 before taxes. As of December 31, 2019, property, plant and equipment did not show signs of impairment or reversals of impairments recognized in previous years, therefore no adjustments were made to the value of the assets as of that date.
Leases
8.1 Right-of-use assets
As of December 31, 2020 and 2019, the breakdown of the right of use asset category is: ltems 12312020 | 12312019 ThUS$ ThUS$ Assets by right of use, gross 836,903 692,262 Assets by right of use, accumulated depreciation 375,863 260,110 Total Assets by right of use, net 461,040 432,152
The movemenkts for the year ended December 31, 2020 and 2019 are as follows:
Reconciliation of changes in Right-of-use assets 12312020 | 12312019 (in thousands ofUS$) MUS$ MUS$ Opening Balance 432,152 – Inital application ofIFRS 16 – 373,000 Increase in Right-of-use assets 195,956 109,505 Depreciation (139,442) (143,369) Increases (decreases) by other changes (27,139) 93,016 Dismissal of assets due to right of use (487) – Increase in Assets by rigth of use 28,888 432,152 Closing balance 461,040 432,152
The depreciation expense for the years ended December 31, 2020 corresponds to ThUS$139,442.
55
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
The composition by asset class is as follows:
Right-of-use assets 12312020 | 12312019 ThUS$ ThUS$ Buildings 13,089 18,286 Plantand equipment 204,747 298,463 Fixtures and fitings 8,025 11,931 Motor vehicles 228,180 97,525 Other right-ofuse assets 6,999 5,947 Total Right-of-use assets 461,040 432,152
8.2 Liabilities for current and non-current leases
As of December 31, 2020 and 2019, the payment commitments for leasing operations are summarized in the following table:
12312020 12312019 Leases Gross Interest Present Value Gross Interest Present Value ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Less than 90 days 43,916 (3,698) 40,218 39,668 (4,557) 35,111 Between 90 days and 1 year 115,085 (9,899) 105,186 105,315 (12,665) 92,650 Between 1 and 2 years 123,239 (9,230) 114,009 107,218 (12,248) 94,970 Between 2 and 3 years 91,978 (6,584) 85,394 77,753 (9,881) 67,872 Between 3 and 4 years 56,353 (4,554) 51,799 60,078 (6,813) 53,265 Between 4 and 5 years 53,053 (4,123) 48,930 32,384 (4,780) 27,604 More than 5 years 49,459 (9,987) 39,472 70,857 (9,458) 61,399 Total 533,083 (48,075) 485,008 493,273 (60,402) 432,871
Leasing operations are generated by service contracts, mainly for facilities, buildings, plants and equipment.
The expense related to short-term leases, low-value assets and variable leases not included in the measurement of lease liabilities, for the years ended December 31, 2020 and 2019 is presented in the following table:
112020 112019 Lease expense 12312020 12312019 ThUS$ ThUS$ Short-term leases 32,163 84,252 Low value leases 13,003 5,684 Variable lease payments not included in the initial measurement or remeasurement ofliabiliies (excluding, where applicable, changes in 1,225,051 1,488,409 indices or rates) TOTAL 1,270,217 1,578,345
56
CORPORACION NACIONAL DEL COBRE DE CHILE
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Investments accounted for using the equity method
The following table sets forth the carrying amount and the share of profit (loss) of the investments accounted for using the equity method (all material associates’ principal place of business is Chile):
Equity Interest Carrying Value Net income (loss) o Taxpayer Funct. 112020 112019 Associates Numbers Currency 12312020 12312019 12312020 12312019 12312020 12312019 % % ThUs$ ThUSs$ ThUs$ ThUs$ ¡Agua de la Falda S.A. 96.801.450-1 US$ 42.26% 42.26% 4,795 4,864 (246) (279) ¡Anglo American Sur S.A. 77.762.940-9 US$ 29.5% 29.5% 2,784,232 2,850,171 37,724 19,852 Inca de Oro S.A. 73.063.022-5 US$ 33.19% 33.19% 12,577 12,675 (95) (101) Kairos Mining S.A. 76.781.030-K US$ 40.00% 40.00% 123 82 31 29 Minera Purén SCM 76.028.880-2 US$ 35.0% 35.0% 9,933 9,934 (1) 32 Planta Recuperadora de Metales SpA | 76.255.054-7 US$ 34.0% 34.0% 12,218 10,914 1,304 549 Sociedad Contractual Minera El Abra 96.701.340-4 US$ 49.0% 49.0% 595,080 594,883 719 (12,799) Sociedad GNL Mejillones S.A. 76.775.710-7 US$ 0.0% 0.0% – – – 5,920 TOTAL 3,418,958 3,483,523 39,436 13,203
a) Associates
Agua de la Falda S.A.
As of December 31, 2020, Codelco holds a 42.26% ownership interest in Agua de la Falda S.A., with the remaining 57.74% owned by Minera Meridian Limitada.
The corporate purpose of this company is to exploit deposits of gold and other minerals, in the third region of Chile.
Sociedad Contractual Minera El Abra
Sociedad Contractual Minera El Abra was incorporated in 1994, As of December 31, 2020, Codelco holds a 49% ownership interest, with the remaining 51% owned by Cyprus El Abra Corporation, a subsidiary of Freeport-McMoRan Copper 8 Gold Inc.
The company business activities involve the extraction, production and selling of copper cathodes.
Sociedad Contractual Minera Purén
As of December 31, 2020, Codelco holds a 35% ownership interest, with the remaining 65% owned by Compañía Minera Mantos de Oro.
This company’s corporate purpose is to explore, identify, survey, investigate, develop and exploit mining deposits in order to extract, produce and process minerals.
Sociedad GNL Mejillones S.A.
The Corporation effected on August 6, 2019, the sale ofits 37% stake in the company GNL Mejillones
S.A. to the Ameris Capital AGF Investment fund, for an amount of US$193.5 million. (The remaining 63% corresponded to Suez Energy Andino S.A.).
57
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
The sale of the LNG Mejillones stake generated a profit of US$103 million before tax and a result after tax of US$36 million.
Inca de Oro S.A.
On June 1, 2009, Codelco’s Board of Directors authorized the incorporation of a new company aimed to develop studies allowing the continuity of the Inca de Oro Project, which is a wholly-owned subsidiary of Codelco.
As of December 31, 2020, Codelco holds a 33.19% ownership interest in this company. (PanAust IDO Ltda. has 66.31%).
Planta Recuperadora de Metales SpA
On December 3, 2012, Planta Recuperadora Metales SpA was incorporated by Codelco, which held a 100% ownership interest in this company.
On July 7, 2014, Codelco reduced its ownership interest in Planta Recuperadora de Metales SpA to 51%, with the remaining 49% ownership interest held by LS-Nikko Copper Inc.
On October 14, 2015, Codelco reduced its ownership interest to 34% interest, with LS-Nikko Copper Inc, holding the remaining 66%.
As of December 31, 2020, LS-Nikko Copper Inc, is the controlling shareholder of this company based on the control elements set out in the shareholders’ agreement.
The principal business activity of the company is the processing of intermediate products of the refining and processing of copper and other metals aiming to recover copper, other metals and other sub products, their transformation to commercial products and the selling and distribution of all classes of goods or inputs derived from such process.
Anglo American Sur S.A.
As December 31, 2020, the controlling shareholder of Anglo American Sur S.A. is Inversiones Anglo American Sur S.A. holding a 50.06% ownership interest, while the non-controlling interest is held by Inversiones Mineras Becrux SpA., which in turn is a subsidiary controlled by Codelco with a 67.8% ownership interest. Consequently, Codelco exercises significant influence in Anglo American Sur S.A.
through its indirect ownership interest of 29.5%.
The principal activities of the Company are the exploration, extraction, exploitation, production, processing and trading of minerals, concentrates, precipitates, copper bars and all metallic and non- metallic minerals, all fossil substances and liquid and gaseous hydrocarbons. This includes the exploration, exploitation and use of all natural energy sources capable of industrial use and the
58
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2) products or by-products obtained, as well as any other related, connected or complementary activities on which the shareholders agree.
On August 24, 2012, Codelco recognized the acquisition of ownership interest in Anglo American Sur
S.A. which resulted in the initial recognition of the cost of the investment for ThUS$6,490,000 that corresponded to the proportionate share (29.5%) of the net fair value of the identifiable assets and liabilities acquired.
In determining the share of the fair value of the identifiable assets and liabilities acquired, the Corporation considered the resources and mineral reserves that could be measured reliably.
As part of this updating process, and applying the valuation criteria indicated above, the fair value of the assets acquired and liabilities assumed of Anglo American Sur S.A. as of that date amounted to US $ 22,646 million, which in the proportion acquired by Inversiones Mineras Becrux SpA (29.5%) results in an investment at fair value of US $ 6,681 million at the acquisition date.
The allocation of the purchase price at fair value between the identifiable assets and liabilities was prepared by management using its best estimate and taking into account all relevant and available information at the acquisition date of Anglo American Sur S.A.
The Corporation used a discounted cash flows model to estimate cash flow projections, based on the life of mine. These projections were based on estimated production and future prices of minerals, operating costs and capital costs, among other estimates made at the date of acquisition. Additionally, proven and probable resources to explore were not included in the mine plan, therefore, they were valued separately using a market model. Such resources are included in item “Mineral Resources.
As of December 31, 2015, the Corporation identified indicators of impairment in the operating units of Anglo American Sur S.A. Consequently, and with the purpose of making the corresponding adjustments to the investment in this associate, the Corporation estimated ¡ts recoverable amount.
In determining the recoverable amount, the Corporation applied the methodology of fair value less costs of disposal. The recoverable amount of the operating units was determined based on the life of mine by using a discounted cash flow model whose main assumptions included ore reserves declared by the associate, copper price, supply costs, foreign exchange rates, discount rate and market information for the long-term asset valuation. The discount rate used was annual rate of 8% after taxes.
Furthermore, the proven reserves not included in the mining plan (LOM), as well as the probable reserves to explore, have been valued using a multiples market approach for comparable transactions.
Such methodology is consistent with the methodologies used at the acquisition date, which is described in the previous paragraph.
The recoverable amount as estimated was less than the carrying amount of the identified assets of the associate, therefore, the Corporation recognized an impairment loss of ThUS$2,439,495, which was included within the line item Share of profit or loss of associates and joint ventures accounted for using the equity method” in the consolidated statement of comprehensive income for the year ended
59
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
December 31, 2015. The impairment loss was mainly attributable to the drop in copper prices during the year 2015.
Subsequent to recognition of the impairment, there have been no indicators requiring the recognition of further impairment losses on the recoverable amount of the investment held in Anglo American Sur
S.A.
As of December 31, 2020 and 2019, there are no indicators of impairment nor reversal, therefore, there have been no adjustments recognized to the carrying amounts of the assets.
Kairos S.A.
Until before November 26, 2012, the Corporation held a 40% stake in conjunction with Honeywell Chile S.A. who was the majority shareholder with 60% of the capital stock of Kairos Mining S.A.
On November 26, 2012, the Corporation sold part of its stake to Honeywell Chile SA, which implies that Codelco maintained a 5% interest as of December 31, 2012, while the remaining 95% was held Honeywell Chile S.A. The result of this pre-tax operation was ThUS$13.
On June 6, 2019, Codelco purchased 350 shares of Kairos Mining from Honeywell Chile S.A., increasing ¡ts participation from 5% to 40%.
As of December 31, 2020, the control of the company lies in Honeywell Chile S.A. which owns 60% of the shares while Codelco owns the remaining 40%.
The purpose of the company is to provide automation and control services for industrial and mining activities and to provide technology and software licenses.
The following tables provide details of asset and liabilities of the associates as of December 31, 2020 and 2019, and their profit (loss) for the years ended December 31, 2020 and 2019: abia 12312020 | 12312019
Assets and Liabilities ThUs$ ThUSs$ Current Assets 2,044,436 1,735,588 Non-current Assets 5,366,998 5,248,569 Current Liabilities 934,703 618,644 Non-current Liabilites 2,088,420 1,793,879
60
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
112020 112019 Net Income 12312020 | 12312019 ThUS$ ThUS$ Revenue 2,644,477 2,825,062 Cost of sales (2,479,372)| (2,646,416) Profitfor the year 165,105 178,646 Movements of Investment in 1112020 1112019 Associates 12312020 | 12312019 ThUS$ ThUS$ Opening balances 3,483,523 3,568,293 Contributions 176 2,200 Dividends (100,131) (3,062) Resultofthe year 39,436 13,203 Sales – (90,328) Other comprehensive income (4,043) (6,648) Other (3) (135) Final balance 3,418,958 3,483,523
The following tables provide details of asset and liabilities of the principal associates as of December 31, 2020 and 2019, and their profit (loss) for the years ended December 31, 2020 and 2019.
Anglo American Sur S.A.
Assets and liabilities 12312020 | 12312019
ThUS$ ThUS$ Current Assets 1,511,000 1,099,695 Non-current Assets 4,090,000 4,083,739 Current Liabilities 865,000 531,089 Non-current Liabilities 1,676,000 1,405,143
112020 112019
Net Income 12312020 | 12312019 ThUS$ ThUS$ Revenue 2,146,000 2,286,876 Costof sales (1,982,020)| (2,174,029) Profitfor the year 163,980 112,847
61
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Sociedad Contractual Minera El Abra
Assets and liabilities 12312020 | 12312019
ThUS$ ThUS$ Current Assets 482,974 590,850 Non-current Assets 1,124,871 1,007,012 Current Liabilities 55,508 79,422 Non-current Liabilities 337,887 304,394
112020 112019
Net Income 12312020 | 12312019 ThUS$ ThUS$ Revenue 448,428 493,531 Cost of sales (446,960) (519,651) Profit (loss) for the year 1,468 (26,120)
b) Additional information on unrealized profits (losses)
Codelco enters into transactions for the purchase and sale of copper with Sociedad Contractual Minera El Abra. As of December 31, 2020 and 2019, there were no unrealized profits (losses) recognized in the carrying amount of inventories of finished products.
The Corporation has recognized unrealized gains for the purchase of rights to use the LNG terminal from the El Abra Mining Contract Company for ThUS$3,920 as of December 31, 2020 and 2019.
c) Share of profit or loss for the year
The share in profit or loss of the associate Anglo American Sur S.A. recognized for the years ended December 31, 2020 was profit of ThUS$48,374 (profit of ThUS$33,290 for the years ended December
31, 2019). In addition, the Corporation has made appropriate adjustments to its share of profit or loss in the associate for depreciation of the depreciable assets based on the fair values at the acquisition date, which resulted in an expense of ThUS$10,650 for the years ended December 31, 2020 (an expense of ThUS$13,438 for the years ended December 31, 2019) recognized within line item Share of profit or loss of associates and joint ventures accounted using the equity method in the consolidated statement of comprehensive income.
10. Subsidiaries
The following tables set forth a detail of assets, liabilities and profit (loss) of the Corporation’s subsidiaries, prior to consolidation adjustments:
62
11.
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2) bes 12312020 | 12312019 Assets and liabilities ThUS$ ThUS$ Current assets 589,014 464,674 Non Current Assets 3,508,221 3,607,177 Current Liabilities 343,081 281,973 Non Current Liabilities 1,059,481 1,086,975 112020 112019 Profit (loss) 12312020 | 12312019 ThUS$ ThUS$ Ordinary Income 1,128,181 1,140,473 Ordinary Expenses (1,141,365)| (1,176,801) Loss ofyear (13,184) (36,328)
Current and non-current financial assets
Current and non-current financial assets included in the statement of financial position are as follows:
12312020 Atfair value Derivatives for hedging . :
o . : – Total financial Classification in the statement of financial | though profitand | Amortized Cost Hedging Cross currency assets position loss derivatives swap Thus$ ThUs$ ThUus$ ThUs$ ThUS$ Cash and cash equivalents – 2,107,493 – – 2,107,493 Trade and other currentreceivables 915,454 2,333,863 – – 3,249,317 Non – currentreceivables – 93,986 – – 93,986 Currentreceivables from related parties – 98,397 – – 98,397 Non – currentreceivables from related parties – 224 – – 224 Other current financial assets – 280,278 3,612 – 283,890 Other non – current financial assets – 6,249 – 127,502 133,751 TOTAL 915,454 4,920,490 3,612 127,502 5,967,058
As of December 31, 2020, the balance of the caption Other financial assets, current includes
ThUS$280,194 invested in term deposit instruments with a maturity of more than 90 days. As of December 31, 2019, the amount invested in this type of instrument was ThUS$171,429.
12312019 Atfair value Derivatives for hedging . :
o . : – Total financial Classification in the statement of financial | though profitand | Amortized Cost Hedging Cross currency assets position loss derivatives swap ThUus$ ThUs$ ThUus$ ThUs$ ThUS$ Cash and cash equivalents 2,158 1,300,947 – – 1,303,105 Trade and other currentreceivables 723,619 1,864,649 – – 2,588,268 Non – currentreceivables – 98,544 – – 98,544 Currentreceivables from related parties – 20,874 – – 20,874 Non – currentreceivables from related parties – 15,594 – – 15,594 Other current financial assets – 171,636 1,315 – 172,951 Other non – current financial assets – 8,691 525 82,584 91,800 TOTAL 725,717 3,480,935 1,840 82,584 4,291,136
63
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2) ” Fair value through profit or loss: As of December 31, 2020 and 2019, this category mainly includes receivables from provisional invoicing sales. Section 11.2.r.
” Amortized cost: lt corresponds to financial assets held within a business model whose objective is to hold financial assets to collect contractual cash flows that are solely payments of principal and interest on the principal outstanding. These assets are not quoted in an active market.
The effects on profit or loss recognized for these assets are mainly from financial income and exchange differences from balances denominated in currencies other than the functional currency.
No material impairments were recognized in trade and other receivables.
e Derivatives for Hedging: Corresponds to the balance for changes in the fair value of derivative contracts to cover existing transactions (cash flow hedges) and that affect the profit or loss when transactions are settled or when, to the extent required by accounting standards, a compensation effect is charged (credited) to the income statement. The detail of derivative hedging transactions ¡is included in the Note 28.
As of December 31, 2020 and 2019, there were no reclassifications between the different categories of financial instruments, under the accounting standards at the respective dates.
12. Other financial liabilities
Current and non-current interest-bearing borrowings consists of loans from financial institutions and bond issuance obligations, which are measured at amortized cost using the effective interest rate method.
The following tables set forth other currentnon-current financial liabilities:
12312020 Current Non-current Items Amortized Cost] Hedging Total Amortized Cost| Hedging Total derivatives derivatives ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Loans from financial institutions 81,218 – 81,218 1,489,224 – 1,489,224 Bonds issued 438,301 – 438,301 16,067,913 – 16,067,913 Hedging derivatives – 10,427 10,427 – 121,594 121,594 Other financial liabiliies – – – 56,469 – 56,469 Total 519,519 10,427 529,946 17,613,606 121,594 17,735,200 12312019 Current Non-current Items Amortized Cost] Hedging Total Amortized Cost| Hedging Total derivatives derivatives ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Loans from financial institutions 666,144 – 666,144 2,408,267 – 2,408,267 Bonds issued 572,587 – 572,587 13,617,358 – 13,617,358 Hedging derivatives – 11,496 11,496 – 148,987 148,987 Other financial liabilities 363 – 363 58,501 – 58,501 Total 1,239,094 11,496 1,250,590 16,084,126 148,987 16,233,113
64
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Loans from financial institutions: The loans obtained by the Corporation aim to finance production operations.
In addition to the credits mentioned in the previous paragraph, Codelco, through the subsidiary company Inversiones Gacrux SpA., has a credit agreement with Oriente Copper Netherlands B.V. since 2012 (a subsidiary of Mitsui 8 Co. Ltd.), which was subscribed to with the aim of allocating this financing to the acquisition of the shareholding of Anglo American Sur SA, by the subsidiary company Inversiones Mineras Becrux SpA. (Subsidiary of Inversiones Gacrux SpA.). This loan has no associated personal guarantees and its rate is fixed at 3.25% per year and has a duration of 20 years, being payable in 40 semiannual installments of principal and interest on unpaid balances.
As of December 31, 2020, the outstanding balance of the credit agreements is ThUS$551,751.
Bond issued:
On May 10, 2005, the Corporation issued and placed bonds in the domestic market for a nominal amount of UF 6,900,000 of a single series labeled Series B, which consists of 6,900 bonds for UF 1,000 each.
These bonds are payable in a single installment on April 1, 2025, at an annual interest rate of 4% and semi-annual interest payments.
On September 21, 2005, the Corporation issued and placed bonds in the U.S. market under Rule 144- A and Regulation S, for a nominal amount of ThUS$500,000. These bonds are payable in a single installment on September 21, 2035, at an annual interest rate of 5.6250% and semi-annual interest payments.
On October 19, 2006, the Corporation issued and placed bonds in the U.S. market under Rule 144-A and Regulation S, for a nominal amount of ThUS$500,000. These bonds are payable in a single installment on October 24, 2036, at an annual interest rate of 6.15% and semi-annual interest payments.
On January 20, 2009, the Corporation issued and placed bonds in the U.S. market under Rule 144-A and Regulation S, for a nominal amount of ThUS$600,000. These bonds are payable in a single installment on January 15, 2019, at an annual interest rate of 7.5% and semi-annual interest payments.
On August 3, 2017, principal was paid for an amount of ThUS$333,155.
On November 4, 2010, the Corporation issued and placed bonds in the U.S. market under Rule 144-A and Regulation S, for a nominal amount of ThUS$1,000,000. These bonds are payable in a single installment on November 4, 2020, at an annual interest rate of 3.75% and semi-annual interest payments.
On August 3, 2017, February 6, 2019 and October 2, 2019, principal was paid for an amount of ThUS$414,763, ThuS$183,051 and ThUS$7,304 respectively.
On November 3, 2011, the Corporation issued and placed bonds in the U.S. market under Rule 144- A and Regulation S, for a nominal amount of ThUS$1,150,000. These bonds are payable in a single installment on November 4, 2021, atan annual interest rate of 3.875% and semi-annual interest payments. On August 3, 2017, February 6, 2019 and October 2, 2019, principal was paid for an amount
65
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2) of ThUS$665,226, TRUS$247,814 and ThUS$9,979 respectively. On December 16, 2020, principal was paid for an amount of ThUS$14,361.
On July 17, 2012, the Company issued and placed bonds in the U.S. market under Rule 144-A and Regulation S, for a nominal amount of ThUS$2,000,000. These bonds are payable in two installments (i) the first tranche on July 17, 2022 in the amount of US$1,250,000 at a 3% annual interest rate. On August 22, 2017, February 6, 2019 and October 22, 2019, principal was paid in the amounts of ThUS$412,514, ThUS$314,219, ThUS$106,972 and ThUS$$3,820 respectively. On December 16, 2020, principal was paid for an amount of ThUS$83,852. And (ii) the other tranche matures on July 17, 2042 and is in the amount of ThUS$750,000 at an annual interest rate of 4.25%.
On August 13, 2013, the Corporation issued and placed bonds in the U.S. market, under Rule 144-A and Regulation S, for a nominal amount of ThUS$750,000, payable in a single installment on August 13, 2023, at an annual interest rate of 4.5% and semi-annual interest payments. On August 22, 2017, February 12 and February 26, 2019, principal in the amounts of ThUS$162,502, ThUS$228,674 and ThUS$270 respectively, was paid. On October 8 and 22, principal was paid for ThUS$23,128 and ThUS$555 respectively. On May 6, 2020, the remaining principal due was increased for a nominal amount of ThUS$131,000, reaching a total amount of ThUS$465,871 with an annual coupon of 4.50%.
On December 16, 2020, principal was paid for an amount of ThUS$79,688.
On October 18, 2013, the Corporation issued and placed bonds in the U.S. market, under Rule 144-A and Regulation S, for a nominal amount of ThUS$950,000, payable in a single installment on October 18, 2043, at an annual interest rate of 5.625% and semi-annual interest payments.
On July 9, 2014, the Corporation issued and placed bonds in the international financial markets, under Rule 144-A and Regulation S, for a nominal amount of EUR$600,000,000, payable in a single installment on July 9, 2024, at an annual interest rate of 2.25% and annual interest payments.
On November 4, 2014, the Corporation issued and placed bonds in the U.S. market, under Rule 144-A and Regulation S, for a nominal amount of ThUS$980,000, payable in a single installment on November 4, 2044, at an annual interest rate of 4.875% and semi-annual interest payments.
On September 16, 2015, the Corporation issued and placed bonds in the U.S. market, under Rule 144- A and Regulation S, for a nominal amount of ThUS$2,000,000, payable in a single installment on September 16, 2025, at an annual interest rate of 4.5% and semi-annual interest payments. On August 22, 2017 and February 12, 2019, principal was paid for an amount of ThUS$378,655 and ThUS$552,754 respectively. On December 22, 2020, principal was paid in the amount of TRUS$392,499.
On August 24, 2016, the Corporation issued and placed bonds in the local market for a nominal amount of UF10,000,000 of single series labeled Series C, which consists of 20,000 bonds for UF500 each.
These bonds are payable in a single installment on August 24, 2026, at an annual interest rate of 2.5% and semi-annual interest payments.
On July 25, 2017, the Corporation made an offer in New York to buy its bonds issued in dollars with maturities between 2019 and 2025, repurchasing US$2,367 million.
66
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
On August 1, 2017, the Corporation issued and placed bonds on the North American market, under standard 144-A and Regulation S, for a total, nominal, amount of ThUS$2,750,000, ThUS$1,500,000 of which had an annual coupon rate of interest of 3.625% and semi-annual interest. On December 22, 2020, principal was paid for an amount of ThUS$227,154. Payments which will mature on August 1, 2027, while ThuS$1,250,000 had an annual coupon of 4.5% and semi-annual interest payments, will mature on August 1, 2047.
These operations allowed optimizing the debt maturity profile of Codelco. As a result of these transactions, 86% of the funds from the new issue (US$2,367 million) were used to refinance old debt.
The average interest rate of refinanced funds decreased from 4.36% to 4.02%.
On May 18, 2018, Codelco issued a bond for US$600 million with 30-year maturity in the market of Formosa, Taiwan. The bond issued is denominated in US dollars, had a yield of 4.85% and a prepayment option at the issue value that can be exercised from the fifth year onwards at its par value.
On January 28, 2019, the Corporation in New York made an offer to purchase ¡ts bonds issued in dollars with maturities between 2020 and 2025, repurchasing US$1,527 million.
Subsequently, on February 5, 2019, the Corporation issued and placed bonds in the North American market, under Rule 144-A and Regulation S, for a total nominal amount of ThUS$1,300,000, which maturity will be 5 February 2049 with a coupon of 4.375% per annum and interest payments on a semi- annual basis.
The effect recognized in results associated with this refinancing was a charge of US$10 million after taxes.
On July 22, 2019, the Corporation made a bond issue and placement, Regulation S, for a nominal amount of AUD $ 70,000,000, whose maturity will be in a single installment on July 22, 2039, with a coupon of 3.58% annual and interest payment annually.
On August 23, 2019, the Corporation made a bond issue and placement, Regulation S, for a nominal amount of US$130,000,000, whose maturity will be in a single installment on August 23, 2029, with a coupon of 2.869% annual and interest payment semiannually.
On September 30, 2019, the Corporation made an issue and placement of bonds in the North American market, under rule 144-A and Regulation S, for a total nominal amount of ThUS$2,000,000 whose maturity will be, under one tranche, on September 30, 2029 corresponding to an amount of ThUS$1,100,000 with a 3% annual coupon. The other tranche contemplates a maturity on January 30, 2050, corresponding to an amount of TRUS$900,000. On January 14, 2020, the principal for the last tranche was increased for a nominal amount of ThUS$1,000,000, reaching a total amount of ThUS$1,900,000 with a coupon of 3.70% per year.
Along with this placement, Codelco launched a purchase offer, in which a repurchase amount of US$
152 million was reached. The effect recognized in results associated with this refinancing was a charge of US$2 million after taxes.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
On January 14, 2020, the Corporation issued and placed bonds in the North American market, under rule 144-A and Regulation S, for a nominal amount of ThUS $ 1,000,000, the maturity of which will be in a single installment on 14 January 2030, with a coupon of 3.15% per annum and payment of interest every six months.
On May 6, 2020, the Corporation issued and placed bonds in the North American market, under Rule
144-A and Regulation S, for a nominal amount of ThUS$800,000 whose maturity will be in a single installment on 15 January 2031, with a coupon of 3.75% per annum and interest paid every six months.
On December 7, 2020, the Corporation made in New York an offer to purchase its bonds issued in dollars with maturities between 2021 and 2027, repurchasing ThUS$797,554.
On December 14, 2020, the Corporation carried out an issuance and placement of bonds in the North American market, under standard 144-A and Regulation S, for a total nominal amount of TRUS$500,000 whose maturity will be in a single installment on January 15, 2051, with a coupon of 3.15% per annum and interest payment on a semi-annual basis.
As a result of these transactions, 100% of the funds from the new issuance (US$500 million) were used to refinance old debt. The average nominal rate of the refinanced funds decreased from 4.08% to 3.15%.
The effect recognized in results associated with this refinancing was a charge of US$23 million after taxes.
As of December 31, 2020 and 2019, the Corporation is not required to comply with any financial covenants related to borrowings from financial institutions and bond obligations.
– Financial debt commissions and expenses: Transaction costs incurred in obtaining financial resources are deducted from the loan proceeds and are amortized using the effective interest rate.
68 (In thousands of US dollars of the United States of America, except as indicated in other currency or unit)
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
As of December 31, 2020, the details of loans from financial institutions and bond obligations are as follows:
12312020
Loans with Principal . s Current Non-current
Taxpayer 1D Country financial Institution Maturity Interest Currency | Amount Type of amortization Payment of | Nominal Effective balance balance
Number entities Rate Interest – [Interest Rate | Interest Rate ThUS$ ThUS$ Foreign [Japan Bilateral Credit. [Japan Bank Internatonal Cooperator| 5242022| Floaing | us$ |224,000,000| Year principal payment lama | 0.70% 0.86% 32,035 15,934 from 2015 to the present
Foreign |Panama Bilateral Credit [Banco Latinoamericano de Comercio | 12182026| Floating US$ 75,000,000 Maturity Semi-annual 1.46% 1.61% 30 74,464 Foreign [USA Bilateral Credit [Export Dev Canada 8122027| Floating US$ [300,000,000| Maturity Quarterly 1.36% 1.43% 557 299,098 Foreign [USA Bilateral Credit [Export Dev Canada 10252028| Floating US$ [300,000,000| Maturity Quarterly 1.43% 1.52% 774 298,519 Foreign [USA Bilateral Credit [Export Dev Canada 7252029| Floating US$ [300,000,000| Maturity Quarterly 1.43% 1.59% 739 296,541 Foreign – [Holland Bilateral Credit [Oriente Copper Netherlands B.V. 11262032| Fixed US$ 874,959,000| Semi-annual Semi-annual 3.25% 5.42% 47,083 504,668 TOTAL 81,218 1,489,224
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CORPORACION NACIONAL DEL COBRE DE CHILE
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Taxpayer Country Maturity Interest Currency JU Type of Payment of Nominal Effective balance an e 1D Number Rate amortization interest Interest Rate | Interest Rate ThUS$ ThUS$
144-A REG.S Luxembourg 1142020| Fixed US$ 1,000,000,000 | AtMaturity Semi-annual 3.88% 4.01% 213,679 –
144-A REG.S Luxembourg 7172022| Fixed US$ 1,250,000,000 | AtMaturity Semi-annual 3.00% 3.13% 4,511 327,989
144-A REG.S Luxembourg 8132023| Fixed US$ 750,000,000 | AtMaturity Semi-annual 4.50% 4.36% 6,666 387,473
144-A REG.S Luxembourg 792024| Fixed EUR 600,000,000 | AtMaturity Annual 2.25% 2.48% 7,923 731,581 BCODE-B Chile 412025] Fixed UF. 6,900,000 | AtMaturity Semi-annual 4.00% 3.24% 2,821 289,816
144-A REG.S Luxembourg 9162025| Fixed US$ 2,000,000,000 | AtMaturity Semi-annual 4.50% 4.74% 8,836 669,236 BCODE-C Chile 8242026| Fixed UF. 10,000,000 | AtMaturity Semi-annual 2.50% 2.48% 3,561 423,061
144-A REG.S Luxembourg 812027| Fixed US$ 1,500,000,000 | AtMaturity Semi-annual 3.63% 4.18% 19,215 1,232,545 REG.S Luxembourg 8232029| Fixed US$ 130,000,000 | AtMaturity Semi-annual 2.87% 2.97% 1,318 128,965
144-A REG.S Luxembourg 9302029| Fixed US$ 1,100,000,000 | AtMaturity Semi-annual 3.00% 3.14% 8,387 1,088,210
144-A REG.S Luxembourg 1142030| Fixed US$ 1,000,000,000 | AtMaturity Semi-annual 3.15% 3.28% 14,295 989,641
144-A REG.S Luxembourg 1152031| Fixed US$ 800,000,000 | AtMaturity Semi-annual 3.75% 3.79% 19,606 796,944 REG.S Luxembourg 1172034| Fixed HKD 500,000,000 | AtMaturity Annual 2.84% 2.92% 276 63,901
144-A REG.S Luxembourg 9212035| Fixed US$ 500,000,000 | AtMaturity Semi-annual 5.63% 5.78% 7,847 492,434
144-A REG.S Luxembourg 10242036| Fixed US$ 500,000,000 | AtMaturity Semi-annual 6.15% 6.22% 5,745 496,666 REG.S Luxembourg 7222039| Fixed AUD 70,000,000 | AtMaturity Annual 3.58% 3.64% 852 53,269
144-A REG.S Luxembourg 7172042| Fixed US$ 750,000,000 | AtMaturity Semi-annual 4.25% 4.41% 14,465 733,891
144-A REG.S Luxembourg 10182043| Fixed US$ 950,000,000 | AtMaturity Semi-annual 5.63% 5.76% 10,864 933,908
144-A REG.S Luxembourg 1142044| Fixed US$ 980,000,000 | AtMaturity Semi-annual 4.88% 5.01% 7,523 961,808
144-A REG.S Luxembourg 812047| Fixed US$ 1,250,000,000 | AtMaturity Semi-annual 4.50% 4.73% 23,387 1,206,748 144 – REG.S Luxembourg 5182048| Fixed US$ 600,000,000 | AtMaturity Semi-annual 4.85% 4.91% 3,457 594,582
144-A REG.S Luxembourg 252049| Fixed US$ 1,300,000,000 | AtMaturity Semi-annual 4.38% 4.97% 22,873 1,184,160
144-A REG.S Luxembourg 1302050| Fixed US$ 1,900,000,000 | AtMaturity Semi-annual 3.70% 3.89% 29,418 1,836,175
144-A REG.S Luxembourg 1152051| Fixed US$ 500,000,000 | AtMaturity Semi-annual 3.15% 3.49% 776 444,910 TOTAL 438,301| 16,067,913
Nominal and effective interest rates presented above correspond to annual rates.
70
CORPORACION NACIONAL DEL COBRE DE CHILE
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
As of December 31, 2019, the details of loans from financial institutions and bond obligations are as follows:
12312019 Loans with Principal e ss Current Non-current Taxpayer ID Country financial Institution Maturity Interest Currency Amount Type of amortization Payment of | Nominal Effective balance balance Number o Rate Interest | Interest Rate | Interest Rate entities ThUS$ ThUS$
97.036.000-K [Chile Bilateral Credit | Santander Chile 3272020 | Floating US$ 100,000,000|Maturity Semi-annual 2.36% 2.36% 100,597 –
97.018.000-1 [Chile Bilateral Credit | Scotiabank Chile 972020 | Floating US$ 100,000,000|Maturity Semi-annual 2.34% 2.34% 100,753
97.018.000-1 [Chile Bilateral Credit | Scotiabank Chile 9142020 | Floating US$ 65,000,000] Maturity Semi-annual 2.40% 2.40% 65,473
97.018.000-1 [Chile Bilateral Credit | Scotiabank Chile 12202020 | Floating US$ 300,000,000| Maturity Semi-annual 2.63% 2.63% 300,241 – Foreign USA Bilateral Credit | MUFG Bank Ltd. 9302021 | Floating US$ 250,000,000| Maturity Semi-annual 2.96% 3.06% 3,409 249,690 Foreign USA Bilateral Credit | Export Dev Canada 1132021 | Floating US$ 300,000,000| Maturity Semi-annual 2.54% 2.72% 1,205 299,265 Foreign Cayman Island | Bilateral Credit [Scotiabank 8 Trust (Cayman) Ltd 4132022 | Floating US$ 300,000,000| Maturity Quarterly 2.65% 2.86% 1,701 298,834 Foreign – [vapan Bilateral Credit |Japan Bank International Cooperation | 5242022 | Floaing | US$ | 24,000,000 AG no o lr anmual | 2.34% 2.53% 32,187 47,833 Foreign USA Bilateral Credit | Export Dev Canada 7172022 | Floating US$ 300,000,000| Maturity Semi-annual 2.83% 2.95% 3,774 299,550 Foreign Panama Bilateral Credit |Banco Latinoamericano de Comercio 12182026 | Floating US$ 75,000,000] Maturity Semi-annual 3.10% 3.28% 77 74,401 Foreign USA Bilateral Credit | Export Dev Canada 10252028 | Floating US$ 300,000,000| Maturity Semi-annual 3.40% 3.52% 4,505 298,390 Foreign USA Bilateral Credit | Export Dev Canada 7252029 | Floating US$ 300,000,000| Maturity Semi-annual 3.42% 3.62% 4,393 296,200 Foreign Holanda Bilateral Credit | Oriente Copper Netherlands B.V. 11262032 | Fixed US$ 874,959,000| Semi-annual Semi-annual 3.25% 5.42% 47,829 544,104 TOTAL 666,144 2,408,267
71
CORPORACION NACIONAL DEL COBRE DE CHILE
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Taxpayer s Interest Principal Type of Payment of Nominal Effective Current Non-current 1D Number Country Maturity Rate Currency Amount amortization interest Interest Rate | Interest Rate balance balance ThUS$ ThUS$
144-A REG.S Luxembourg 1142020 Fixed US$ 1,000,000,000 At Maturity Semi-annual 3.75% 3.89% 396,742 –
144-A REG.S Luxembourg 1142021 Fixed US$ 1,150,000,000 At Maturity Semi-annual 3.88% 4.02% 1,377 226,416
144-A REG.S Luxembourg 7172022 Fixed US$ 1,250,000,000 At Maturity Semi-annual 3.00% 3.16% 4,978 410,882
144-A REG.S Luxembourg 8132023 Fixed US$ 750,000,000 At Maturity Semi-annual 4.50% 4.74% 4,627 332,188
144-A REG.S Luxembourg 792024 Fixed EUR 600,000,000 At Maturity Annual 2.25% 2.48% 7,236 666,384 BCODE-B Chile 412025 Fixed UF. 6,900,000 At Maturity Semi-annual 4.00% 3.24% 2,595 270,374
144-A REG.S Luxembourg 9162025 Fixed US$ 2,000,000,000 At Maturity Semi-annual 4.50% 4.75% 14,003 1,055,236 BCODE-C Chile 8242026 Fixed UF. 10,000,000 At Maturity Semi-annual 2.50% 2.48% 3,292 394,774
144-A REG.S Luxembourg 812027 Fixed US$ 1,500,000,000 At Maturity Semi-annual 3.63% 4.20% 22,607 1,443,875 REG.S Luxembourg 8232029 Fixed US$ 130,000,000 At Maturity Semi-annual 2.87% 2.98% 1,328 128,808
144-A REG.S Luxembourg 9302029 Fixed US$ 1,100,000,000 At Maturity Semi-annual 3.00% 3.14% 8,385 1,087,092 REG.S Luxembourg 1172034 Fixed HKD 500,000,000 At Maturity Annual 0.00% 0.00% 275 63,593
144-A REG.S Luxembourg 9212035 Fixed US$ 500,000,000 At Maturity Semi-annual 5.63% 5.78% 7,804 492,115
144-A REG.S Luxembourg | 10242036 Fixed US$ 500,000,000 At Maturity Semi-annual 6.15% 6.22% 5,713 496,544 REG.S Luxembourg 7222039 Fixed AUD 70,000,000 At Maturity Annual 0.00% 0.00% 783 48,519
144-A REG.S Luxembourg 7172042 Fixed US$ 750,000,000 At Maturity Semi-annual 4.25% 4.41% 14,465 733,450
144-A REG.S Luxembourg | 10182043 Fixed US$ 950,000,000 At Maturity Semi-annual 5.63% 5.76% 10,804 933,573
144-A REG.S Luxembourg 1142044 Fixed US$ 980,000,000 At Maturity Semi-annual 4.88% 5.01% 7,481 961,425
144-A REG.S Luxembourg 812047 Fixed US$ 1,250,000,000 At Maturity Semi-annual 4.50% 4.73% 23,387 1,205,925 144 – REG.S Luxembourg 5182048 Fixed US$ 600,000,000 At Maturity Semi-annual 4.85% 4.91% 3,438 594,487
144-A REG.S Luxembourg 252049 Fixed US$ 1,300,000,000 At Maturity Semi-annual 4.38% 4.97% 22,874 1,182,292
144-A REG.S Luxembourg 1302050 Fixed US$ 900,000,000 At Maturity Semi-annual 3.70% 3.78% 8,393 889,406 TOTAL 572,587 13,617,358
Nominal and effective interest rates presented above correspond to annual rates.
The undiscounted amounts that the Corporation will have to disburse to settle the obligations with financial institutions, are as follows:
7
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
12312020 Current Non-current a Effective Nominal Payments of Less than | More than More than 5 | Non-current
Debtor’s Name Currency interest rate Rate Interest 90 days 90 days Current total] 1to 3 years | 3to 5 years years total Japan Bank International Cooperation US$ 0.86% 0.70% Semi-annual – 32,283 32,283 16,057 – 16,057 Banco Latinoamericano de Comercio US$ 1.61% 1.46% Semi-annual – 1,113 1,113 2,220 1,667 76,658 80,545 Export Dev Canada US$ 1.43% 1.36% Quarterly 1,045 3,102 4,147 8,295 8,307 307,250 323,852 Export Dev Canada US$ 1.52% 1.43% Quarterly 1,097 3,257 4,354 8,708 8,720 313,051 330,479 Export Dev Canada US$ 1.59% 1.43% Quarterly – 3,252 3,252 8,696 8,707 317,343 334,746 BONO 144-A REG.S 2021 US$ 4.01% 3.88% Semi-annual – 220,859 220,859 – – – – BONO 144-A REG.S 2022 US$ 3.13% 3.00% Semi-annual 4,929 4,929 9,858 338,482 – 338,482 BONO 144-A REG.S 2023 US$ 4.36% 4.50% Semi-annual 8,689 8,689 17,378 34,756 386,183 420,939 BONO 144-A REG.S 2025 US$ 4.74% 4.50% Semi-annual 15,212 15,212 30,424 60,849 736,951 – 797,800 BONO 144-A REG.S 2027 US$ 4.18% 3.63% Semi-annual 23,070 23,070 46,140 92,281 92,281 1,365,127 1,549,689 BONO REG.S 2029 US$ 2.97% 2.87% Semi-annual 1,865 1,865 3,730 7,459 7,459 144,919 159,837 BONO 144-A REG.S 2029 US$ 3.14% 3.00% Semi-annual 16,500 16,500 33,000 66,000 66,000 1,232,000 1,364,000 BONO 144-A REG.S 2030 US$ 3.28% 3.15% Semi-annual 15,750 15,750 31,500 63,000 63,000 1,141,750 1,267,750 BONO 144-A REG.S 2031 US$ 3.79% 3.75% Semi-annual 15,000 15,000 30,000 60,000 60,000 965,000 1,085,000 BONO 144-A REG.S 2035 US$ 5.78% 5.63% Semi-annual 14,063 14,063 28,126 56,250 56,250 781,250 893,750 BONO 144-A REG.S 2036 US$ 6.22% 6.15% Semi-annual – 30,750 30,750 61,500 61,500 838,250 961,250 BONO 144-A REG.S 2042 US$ 4.41% 4.25% Semi-annual 15,938 15,938 31,876 63,750 63,750 1,291,875 1,419,375 BONO 144-A REG.S 2043 US$ 5.76% 5.63% Semi-annual – 53,438 53,438 106,875 106,875 1,911,875 2,125,625 BONO 144-A REG.S 2044 US$ 5.01% 4.88% Semi-annual – 47,775 47,775 95,550 95,550 1,887,725 2,078,825 BONO 144-A REG.S 2047 US$ 4.73% 4.50% Semi-annual 28,125 28,125 56,250 112,500 112,500 2,487,500 2,712,500 BONO 144 REG.S 2048 US$ 4.91% 4.85% Semi-annual – 29,100 29,100 58,200 58,200 1,254,750 1,371,150 BONO 144-A REG.S 2049 US$ 4.97% 4.38% Semi-annual 28,438 28,438 56,876 113,750 113,750 2,636,563 2,864,063 BONO 144-A REG.S 2050 US$ 3.89% 3.70% Semi-annual 35,150 35,150 70,300 140,600 140,600 3,622,350 3,903,550 BONO 144-A REG.S 2051 US$ 3.49% 3.15% Semi-annual – 7,875 7,875 31,500 31,500 901,625 964,625 Oriente Copper Netherlands B.V. US$ 5.42% 3.25% Semi-annual – 69,775 69,775 135,320 129,589 408,051 672,960 Total ThUS$ 224,871 725,308 950,179 1,742,598 2,409,339| 23,884,912| 28,036,849 BONO BCODE-B 2025 UF. 3.24% 4.00% Semi-annual 138,000 138,000 276,000 552,000 7,452,000 8,004,000 BONO BCODE-C 2026 UF. 2.48% 2.50% Semi-annual – 248,457 248,457 496,913 496,914] 10,248,457] 11,242,284 Total U.F. 138,000 386,457 524,457 1,048,913 7,948,914] 10,248,457] 19,246,284 Subtotal ThUS$ 5,643 15,802 21,445 42,889 325,027 419,053 786,969 [ BONO 144-A REG.S 2024 [ EUR [ 2.48% [ 2.25% [ Annual -| 13,5500,000| 13,500,000 27,000,000| 613,500,000 640,500,000 Subtotal ThUS$ – 16,583 16,583 33,165 753,593 786,758 [ BONO REG.S 2039 [ AUD [ 3.64% [ 3.58% [ Annual – 2,506,000 2,506,000 5,012,000 5,012,000| 105,084,000| 115,108,000 Subtotal ThUS$ – 1,924 1,924 3,848 3,848 80,685 88,381 [ BONO REG.S 2034 [ HKD [ 2.92% [ 2.84% [ Annual 14,238,904| -| 14,238,904) 28,400,000| 28,438,904| 642,077,808| 698,916,712 Subtotal ThUS$ 1,837 – 1,837 3,664 3,669 82,826 90,459 | Total ThUS$ 232,351 759,617 991,968 1,826,164 3,495,476| 24,467,476] 29,789,116
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Nominal and effective interest rates presented above correspond to annual rates.
12312019 Current Non-current Creditor Name Currenoy | Efecive Nominal Payments of | Less han 90] More han 90 current | 1103 years] 3105 years | MOre han 5 | Noncurrent
InterestRate | InterestRate Interest days days ears total Santander Chile US$ 2.36% 2.36% Semi-annual 101,165 – 101,165 – – – – Scotiabank Chile US$ 2.34% 2.34% Semi-annual 101,182 – 101,182 – – – – Scotiabank Chile US$ 2.40% 2.40% Semi-annual 65,790 – 65,790 – – – – Scotiabank Chile US$ 2.63% 2.63% Semi-annual – 304,054 304,054 – – – – MUFG Bank LTD US$ 3.06% 2.96% Semi-annual 3,840 3,737 7,577 261,212 – – 261,212 Export Dev Canada US$ 2.72% 2.54% Semi-annual – 7,757 7,757 307,715 – – 307,715 Scotiabank 8. Trust (Cayman) Ltd US$ 2.86% 2.65% Quarterly 1,988 6,053 8,041 312,062 – – 312,062 Japan Bank International Cooperation US$ 2.53% 2.34% Semi-annual – 33,720 33,720 49,137 – – 49,137 Export Dev Canada US$ 2.95% 2.83% Semi-annual 4,411 4,293 8,704 317,291 – – 317,291 Export Dev Canada US$ 3.52% 3.40% Semi-annual 5,213 5,156 10,369 20,683 20,711 346,607 388,001 Export Dev Canada US$ 3.62% 3.42% Semi-annual 5,244 5,187 10,431 20,804 20,833 351,897 393,534 Banco Latinoamericano de Comercio US$ 3.28% 3.10% Semi-annual – 2,380 2,380 4,722 3,545 80,886 89,153 BONO 144-A REG.S 2020 US$ 3.89% 3.75% Semi-annual – 409,690 409,690 – – – – BONO 144-A REG.S 2021 US$ 4.02% 3.88% Semi-annual – 8,796 8,796 235,777 – – 235,777 BONO 144-A REG.S 2022 US$ 3.16% 3.00% Semi-annual 6,187 6,187 12,374 437,224 – – 437,224 BONO 144-A REG.S 2023 US$ 4.74% 4.50% Semi-annual 7,535 7,535 15,070 30,138 349,940 – 380,078 BONO 144-A REG.S 2025 US$ 4.75% 4.50% Semi-annual 24,044 24,044 48,088 96,174 96,174| 1,116,688] 1,309,036 BONO 144-A REG.S 2027 US$ 4.20% 3.63% Semi-annual 27,188 27,188 54,376 108,750 108,750] – 1,663,125| 1,880,625 REG.S 2029 US$ 2.98% 2.87% Semi-annual 1,865 1,865 3,730 7,459 7,459 148,649 163,567 BONO 144-A REG.S 2029 US$ 3.14% 3.00% Semi-annual 16,500 16,500 33,000 66,000 66,000| 1,265,000| 1,397,000 BONO 144-A REG.S 2035 US$ 5.78% 5.63% Semi-annual 14,063 14,063 28,126 56,250 56,250 809,375 921,875 BONO 144-A REG.S 2036 US$ 6.22% 6.15% Semi-annual – 30,750 30,750 61,500 61,500 869,000 992,000 BONO 144-A REG.S 2042 US$ 4.41% 4.25% Semi-annual 15,938 15,938 31,876 63,750 63,750| 1,323,750] 1,451,250 BONO 144-A REG.S 2043 US$ 5.76% 5.63% Semi-annual – 53,438 53,438 106,875 106,875] 1,965,313| 2,179,063 BONO 144-A REG.S 2044 US$ 5.01% 4.88% Semi-annual – 47,775 47,775 95,550 95,550| 1,935,500| 2,126,600 BONO 144-A REG.S 2047 US$ 4.73% 4.50% Semi-annual 28,125 28,125 56,250 112,500 112,500] 2,543,750| 2,768,750 BONO 144 REG.S 2048 US$ 4.91% 4.85% Semi-annual – 29,100 29,100 58,200 58,200| 1,283,850] 1,400,250 BONO 144-A REG.S 2049 US$ 4.97% 4.38% Semi-annual 28,438 28,438 56,876 113,750 113,750] 2,693,438| 2,920,938 BONO 144-A REG.S 2050 US$ 3.78% 3.70% Semi-annual 11,100 22,261 33,361 66,782 66,782| 1,745,911] 1,879,476 Oriente Copper Netherlands B.V. US$ 5.42% 3,25% Semi-annual 72,705 72,705 141,137 135,320 537,640 814,097 Total TRUS$ 469,816] 1,216,735| 1,686,551] 3,151,442] 1,543,889] 20,680,379| 25,375,711 [‘ BONO BCODE-B 2025 UF. 3.24% 4.00% Semi-annual 138,000 138,000 276,000 552,000 552,000] 7,038,000] 8,142,000 [BONO BCODE-C 2026 ur. 2.48% 2.50% Semi-annual 124,228 124,228 248,457 496,913 496,913] 10,496,914] 11,490,740 Total U.F. 262,228 262,228 524,457| 1,048,913] 1,048,913] 17,534,914] 19,632,740 Subtotal TRUS$ 9,915 9,915| 19,830 39,661 39,660 662,997 742,318 [BONO 144-A REG.S 2024 [EUR 2.48% 2.25% | Annual -| -13,500,000| 13,500,001 27.000,000| 27.000,000| 600.000,000| 654,000,000 Subtotal TRUS$ – 15,138 15,138 30,276 30,276 672,798 733,350 [REG.S 2039 [-AuD 3.65% 3,58% | Anual -[ 2,506,001 2,506,001 5,012,000 5.012,000| 107.590,000| 117,614,000 Subtotal TRUS$ – 1,755 1,755 3,509 3,509 75,332 82,350 [REG:S 2034 [HKD 2.92% 2.84% ] Annual -|[ 14,238,904 14,238,904] 28,400,001 28,438,904] 642,077,808| 698,916,712 Subtotal TRUS$ – 1,829 1,829 3,648 3,653 82,468 89,769 [rotar Tnus$ 479,731] 1,245,372] 1,725,103] 3,228,536] 1,620,987] 22,173,974| 27,023,498
Nominal and effective interest rates presented above correspond to annual rates.
74
CORPORACION NACIONAL DEL COBRE DE CHILE
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
13.
14.
The table below details changes in CODELCO’s financing activities in the statement of cash flow, including both cash and non-cash changes for the years ended December 31, 2020 and 2019:
Changes that do not represent cash flow Flows of Effective Interest Final Balance at Breakout of financial activities. | “tl Balance at cash Financial Cost | Exchange Fair Value – | accretionamortization Other 112020 From Used Total (1) Difference | Adjustment | notcash flow related 1213112020 ThUS$ Tnuss | Thus$ | Tnus$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Loans with fnancial insttuions 3,074,411] – 565,000 | (2,146,160)| (1,581,160) 70,966 – 3,643 2,582 1,570,442 Bond Obligañons 14,189,945 | 3,431,000 | (1,829,394)| 1,601,606 685,122 121,266 – (91,725) 16,506,214 Hedge Obigatons 157.826 | (25729)| (25729) 23,202 (64,492) 37,634 – 767 129,208 Paid Dividends (239,076)| (239,076) – – – – – Financial assets for hedge derivaives (82,584) – – – (56,774) 11,175 681 (127,502) Leases 432,871 (132,263)| (132,263) 19,572 18,603 – 146,225 485,008 Capital contributon – – – – – – Other 58,864 -| (161,273)] (161,273) – – – – 158,878 56,469 Total break-out of financial activities 17,831,333 | 3,996,000 | (4,533,895)| (537,895) 798,862 18,603 48,809 (88,082) 309,133 18,619,839 Changes that do not represent cash flow Flows of Financial Cost Fair Value Effective Interest Final Balance at Breakout of financial activities. | “tal Balance at cash 1 Exchange | Adjustment | accretionamortization Other 1112019 From Used Total Difference not cash flow related 1213112019 ThUS$ Tnuss | Thus$ | Tnus$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Loans with fnancial insttuions 2,511,949] – 840,000 | (386,625)| – 453,375 104,592 – 1,606 2,889 3,074,411 Bond Obligañons 12,745,736 | 3,543,199 | (2,610,321)| – 932,878 591,920 (45,137) – (35452) 14,189,945 Hedge Obigatons 116,132 | (21:167)| – (21,167) 21,556 13,142 27,575 – 588 157,826 Paid Dividends – – – – – – – – Financial assets for hedge derivaives (107,700) – – – 31438 (6,322) (82,584) Leases 107,839 -| (16881)| (148,181) 31,416 (18,114) – 459,911 432,871 Capital contributon -| 400,000 – | 400,000 – – – – Other 64,343 -| (75483)] (75483) 51,082 – – – 18,922 58,964 Total break-out of financial activities 15,438,299 | 4,783,199 | (3,241,777)| 1,541,422 800,566 (18,674) 21,253 (33,846) 482,310 17,831,333
(1) The finance costs consider the capitalization of interest, which for the years ended December 31, 2020 and 2019, amounted to ThUS$223,931 and ThUS$367,548 respectively.
Fair Value of financial assets and liabilities
The carrying amount of financial assets is a reasonable approximation to their fair value, therefore, no additional disclosures are required in accordance with IFRS 7 with respect thereto.
Regarding financial liabilities, the following table shows a comparison as of December 31, 2020 between the carrying amount and the fair value of financial liabilities other than those whose carrying amount is a reasonable approximation of fair value, which fair value estimate complies with Level 1 definition in the hierarchy defined in Note 14.
Comparison value book vs fair value | Accounting treatment for Carmina Fair value as of December 31, 2020 valuation ThUS$ ThUS$ Financial liabilities: Bond Obligations Amortized cost 16,506,214 19,389,790
Fair value hierarchy The estimated fair value for the Corporation’s portfolio of financial instruments is based on valuation techniques and observable inputs. Considering the hierarchy of the data used in these valuation techniques, the assets and liabilities measured at fair value can be classified into the following levels:
75
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
+” Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
+ Level 2: Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i,e, as prices) or indirectly (i,e, derived from prices).
+ Level 3: Inputs are significant unobservable inputs for the asset or liability.
The following table presents financial assets and liabilities measured at fair value as of December 31, 2020:
Fi sal inst 4 dat 12312020 mnancia e rvaluo measuree a Level 1 Level 2 Level 3 Total ThUS$ ThUS$ ThUS$ ThUS$
Financial Assets Provisional price sales contracts – 915,454 – 915,454 Cross Currency Swap – 127,502 – 127,502 Metal futures contracts 3,612 – 3,612 Financial Liabilities Metal futures contracts 1,812 1,001 – 2,813 Cross Currency Swap – 129,208 – 129,208
There were no transfers between the different levels during the years ended December 31, 2020.
15. Trade and other payables
The detail of trade and other current payables as of December 31, 2020 and 2019, is as follows:
Currents Items 12312020 | 12312019 ThUS$ ThUS$ Trade payables 1,176,101 1,150,047 Payables to employees 29,318 8,390 Withholdings 100,014 113,147 Withholding taxes 87,634 76,387 Other payables 105,218 72,944 Total 1,498,285 1,420,915
76
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
16. Other provisions
The detail of other current and non-current provisions as of December 31, 2020 and 2019, is as follows:
Current Non-current Other Provisions 12312020 | 12312019 | 12312020 | 12312019 ThUS$ ThUS$ ThUS$ ThUS$ Sales-related provisions (1) 8,734 2,932 Operating (2) 307,004 260,973 Law No. 13196 130,854 109,643 – – Other provisions 115,435 128,624 468 2,320 Decommissioning and restoration (3) – – 2,232,942 2,038,483 Legal proceedings – – 61,097 49,684 Total 562,027 502,172 2,294,507 2,090,487
(1) Corresponds to sales-related accruals, which includes charges for freight, loading, and unloading that were not invoiced at the end of the period.
(2) Corresponds to a provision for customs duties, freight on purchases, electricity, among others.
(3) Corresponds to a provision for future decommissioning and site restoration costs primarily related to tailing dams, closures of mine operations and other mining assets. The amount of the provision is the present value of future expected cash flows discounted at a pre-tax rate of 0.86% for the obligations in
Chilean currency and 1.13% for the obligations in U.S. dollar. Both, discount rates reflect the corresponding assessments of the time value of money and the risks specific to the liability. The discount rate does not reflect risks for which future cash flow estimates have been made. The discount period varies between 10 and 62 years.
The Corporation determines and recognized this liability in accordance with the accounting policy described in Note 2, letter p) on Significant Accounting Policies.
Changes in Other provisions, were as follows:
112020 12312020 Changes Other Decommissionin Provisions, non- gand Contingencies Total current restoration
ThUs$ ThUS$ ThUs$ ThUS$ Opening balance 2,320 2,038,483 49,684 2,090,487 Cost Capitalization of the period – 486 – 486 Closing provision adjustment 83,949 83,949 Financial expenses 30,322 – 30,322 Payment ofliabilites – – (2,873) (2,873) Foreign currency translation 7 80,289 (25) 80,271 Provision decrease (2,375) – – (2,375) Other increases (decreases) 516 (587) 14,311 14,240 Closing Balance 468 2,232,942 61,097 2,294,507
17
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
17. Employee benefits
a. Provisions for post-employment benefits and other long term benefits
Provision for post-employment benefits mainly corresponds to employee severance indemnities and medical care plans. The provision for severance indemnities recognizes the contractual obligation that the Corporation has with its employeesretirees regardless of the reason for employee’s departure. The provision for medical care plans recognizes the contractual obligation that the Corporation has with its retirees to cover their medical care costs.
Both long-term employee benefits are stated in the terms of employment contracts and collective bargaining agreements as agreed to by the Corporation and its employees.
These defined benefit liabilities are recognized in the statement of financial position, at the present value of the defined benefit obligation. The discount rate applied is determined by reference to the market yields of government bonds in the same currency and estimated term of the post-employment benefit obligations.
The defined benefit obligations are denominated in Chilean pesos, therefore the Corporation is exposed to foreign exchange rate risk.
Actuarial gains and losses resulting from changes in actuarial assumptions and experience adjustments are recognized in other comprehensive income and are not subsequently reclassified to profit or loss.
For the years ended December 31, 2020 and 2019, there were no significant changes in post- employment benefits plans.
The following actuarial assumptions were used in the actuarial calculation of the defined benefit plans:
12312020 12312019 Assumptions Retirement Health plan Retirement Health plan plan plan
Annual Discount Rate 3.21% 3.21% 3.68% 3.68% Voluntary Annual Turnover Rate for Retirement(Men) 5.00% 5.00% 5.00% 5.00% Voluntary Annual Turnover Rate for Retirement (Women) 5.90% 5.90% 4.70% 4.70% Salary Increase (real annual average) 3.06% 3.06% 3.26% 3.26% Future Rate of Long-Term Inflation 2.80% 2.80% 3.00% 3.00% Infaton Health Care – 4.85% – 5.05% Mortality tables used for projections CB14-RV14 | CB14-RV14 | CB14-RV14 | CB14-RV14 Average duration of future cash flows (years) 7.85 17.96 7.21 17.13 Expected Retirement Age (Men) 60 60 60 60 Expected Retirement Age (Women) 59 59 59 59
The discount rates correspond to the rates in the secondary market of government bonds issued in Chile.
The annual inflation corresponds to the long-term expectation set by the Central Bank of Chile and
78
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2) corresponds to the market expectation as of December 31, 2020. The turnover rates were determined using the past three years of historical experience of the Corporation’s employee departure behavior.
The expected rate of salary increases has been estimated using the long-term behavior of historical salaries paid by the Corporation. The mortality tables used were those issued by the CMF, which are considered an appropriate representation of the Chilean market given the lack of comparable statistical series to develop independent studies. The period over which the obligation is being amortized corresponds to the estimate of the period over which the cash flows will occur.
2019, is as follows:
Current Non-current Accrual for employee benefits 12312020 | 12312019 | 12312020 | 12312019 ThUS$ ThUS$ ThUS$ ThUS$
Employees’ collective bargaining agreements 182,905 181,040 – – Employee pension 28,840 21,904 620,940 704,877 Bonus 59,771 35,195 – – Vacation 155,069 143,971 – – Medical care programs (1) 591 497 607,403 561,709 Retirement plans (2) 20,694 37,479 8,994 8,181 Other 12,908 15,479 6,603 8,590 Total 460,778 435,565 1,243,940 1,283,357
The detail of current and non-current provisions for employment benefits as of December 31, 2020 and
(1) Corresponds to a provision recognized for the obligations with health care institutions as agreed with current and former employees.
(2) Correspond to the provision recognized for early retirement benefits provided to employees.
The reconciliation of the present value of the retirement plan and post-employment benefit obligation, is as follows: 112020 112019 12312020 12312019 Movements Retirement Health plan Retirement Health plan plan plan ThUus$ ThUus$ ThUus$ ThUus$
Opening balance 726,781 562,206 829,507 496,783 Service cost 69,170 47,094 51,086 39,980 Financial cost 3,705 3,379 15,512 9,290 Paid contributions (179,618) (31,308) (115,970) (44,275) Actuarial (gains)losses 5,486 (5,845) 4,828 93,889 Subtotal 625,524 575,526 784,963 595,667 (Gains) Losses on foreign exchange rate 24,256 32,468 (58,182) (33,461) Final Total 649,780 607,994 726,781 562,206
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
The balance of the defined benefit liability as of December 31, 2020, comprises a short term portion of ThUS$28,840 and ThUS$591 for the severance indemnity and the medical care plan, respectively. The expected amount of the defined benefit liability projected at December 31, 2021, consists of ThUS$722,896 for the severance indemnity and ThUS$575,867 for the medical care plan. The expected monthly average future disbursements related to defined benefit plans are of ThUS$2,403 for severance indemnity and of ThUS$49 for medical care.
In relation to the actuarial loss (gain), its results are composed of the following concepts:
12312020 12312019 Technical remedies Retirement plan | Health plan | Retirement plan | Health plan ThUS$ ThUS$ ThUS$ ThUS$ Reassessment of demographic assumptions 159 18,644 (11,513) Revaluation of financial assumptions 1,916 (25,890) 7,262 9,365 Reassessment by experience 3,411 1,401 9,079 84,524 Total net effect 5,486 (5,845) 4,828 93,889
The following table sets forth the sensitivity analysis of the value of each line item for a change in estimates, respectively, from the medium (used in the estimate recorded) to the low and from the medium to the high; the second to the last column represents the change between the low and medium and the last column represents the change between the medium and the high:
Severance Benefits for Years of Service Low Medium High Reduction Increase
Financial efect on interestrates 2.965% 3.215% 3.465% 1.44% -1.39% Financial efect on the real increase in income 2.807% 3.057% 3.307% -1.24% 1.27% Demographic effect of job rotations 4.590% 5.090% 5.590% 0.15% -0.13% Demographic efect on mortality tables -25.00%| CB14-RV14, Chile 25.00% 0.04% -0.04% Health Benefits and Other Low Medium High Reduction Increase
Financial efect on interestrates 2.965% 3.215% 3.465% 1.04% -1.00% Financial efect on health infation 2.711% 3.211% 3.711% -11.31% 14.29% Demographic efect, planned retirement age 58 57 6059 6261 3.55% 3.61% Demographic efect on mortality tables -25.00%| CB14-RV14, Chile 25.00% 10.90% -7.45%
Cc. Retirement benefits provision
The Corporation under its operational optimization programs seeks to reduce costs and increase labor productivity, and through the incorporation of modern technologies andor best management practices has established employee retirement programs by making corresponding modifications to employment contracts or collective bargaining agreements, with benefits encouraging early retirement. The early retirement plans are recognized as a liability and expense as the Corporation can no longer withdraw the offer of those benefits.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
As of December 31, 2020 and 2019, the retirement plan provision current balance was ThUS$20,694 and ThUS$37,479, respectively, while the non-current balance was ThUS$8,994 and ThUS$8,181, respectively. The non-current amounts recognized have been determined using a discount rate equivalent to that used for calculating employee benefits provisions and whose outstanding balances are part of the balances as of December 31, 2020 and 2019.
d. Employee benefits expenses
The employee benefit expenses recognized for the years ended December 31, 2020 and 2019, are as follows: 112020 112019 ns py AA 1213112020 | 12312019
Proy ThUS$ ThUS$ Benefits – Short term 1,337,651 1,519,659 Benefits – Post employment 47,094 39,980 Benefits – Early retirement 106,168 100,747 Benefits by years of service 69,170 51,086 Total 1,560,083 1,711,472
18. Equity
The Corporation’s total equity as of December 31, 2020 is ThUS$11,626,491 (ThUS$11,634,677 as of December 31, 2019).
In accordance with article 6 of Decree Law 1350 of 1976, it is established that, before March 30 of each year, the Board must approve the Corporation’s Business and Development Plan for the next three-year period. Taking that plan as a reference, and keeping in mind the Corporation’s balance sheet for the immediately preceding year and aiming to ensure its competitiveness, before June 30 of each year the amounts that the Corporation shall allocate to the formation of capitalization funds and reserves shall be determined by decree from the Ministries of Mining and Treasury.
Net income shown in the balance sheets, after deducting the amounts referred to in the previous paragraph, shall belong to the State and becomes part of the Nation’s general income.
Pursuant to the Exempt Decree No. 184 of June 27, 2014 of the Ministry of Finance, the Corporation was authorized to capitalize US$200 million of the net profit of the financial statements as of December 31, 2013.
On October 24, 2014, the President of the Republic of Chile signed Law No. 20790. Such Law sets forth an extraordinary capital contribution of up to US$3 billion for the Corporation during the period of 2014-2018.
The resources obtained from such capital contribution, together with the capitalization of the profits obtained during such period up to US$800 million. At December 31, 2014, there were no capitalized resources under such statute.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
On October 16, 2018, the Ministry of Finance issued Exempt Decree 311 in which it has an extraordinary capital contribution for Codelco pursuant to Law No. 20,790 of US$1,000 million, which will be made in a first part for US$600 million and in a second part for US$400 million, and which were received on December 26, 2018 and February 26, 2019 respectively.
During fiscal year 2020, payments were made to the Treasury for a total of TNUS$239,076 for dividends charged to 2020 profits. In fiscal year 2019 there were no dividend payments.
As of December 31, 2020, there is a balance in favor of Codelco of ThUS$159,223 for dividends paid in excess. As of December 31, 2019, the balance in favor is ThUS$163,140.
The consolidated statement of changes in equity discloses the changes in the Corporation’s equity.
The movement and composition of other equity reserves is presented in the consolidated statement of changes in equity.
Reclassification adjustments from other comprehensive income to income for the years meant a loss of ThUS$877 and a gain of ThUS$3,337 for the years ended December 31, 2020 and 2019, respectively.
a) Other reserves
The detail of other reserves as of December 31, 2020 and 2019, ¡is as follows:
Other Reserves 12312020 | 12312019 ThUS$ ThUS$ Reserve on exchange differences on translation (2,939) (6,672) Reserve of cash fiow hedges 2,988 19,506 Capitalization fund and reserves 4,962,393 4,962,393 Reserve of remeasurement of defined beneft plans (305,556) (305,770) Other reserves 619,936 622,290 Total other reserves 5,276,822 5,291,747
b) Non-controlling interests
The detail of non-controlling interests, included in equity and profit or loss, as of and for each reporting period, is as follows:
Societies tiination o Net equity Gain (loss) 12312020 | 12312019 | 12312020 | 12312019 112020 112019 12312020 | 12312019 % % ThUS$ ThUS$ ThUS$ ThUS$ Inversiones Gacrux SpA 32.20% 32.20% 924,924 919,764 13,864 7,905 Other – – 18 (7) 24 (14) Total 924,942 919,757 13,888 7,891
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
For the years ended December 31, 2020, Inversiones Gacrux SpA, made an equity distribution of ThUS$7,567 paid to non-controlling interests.
The percentage of non-controlling interest in Inversiones Mineras Becrux SpA (previously Inversiones Mineras Acrux SpA) generates a non-controlling interest in our subsidiary Inversiones Gacrux SpA, which presents the following figures relating to its statement of financial position, statement of comprehensive income and cash flows:
Assets and liabilities 12312020 | 12312019
ThUS$ ThUS$ Current Assets 325,385 227,367 Non-current assets 2,790,802 2,855,708 Currentliabilities 221,242 157,345 Non-currentliabilites 516,030 554,890
112020 112019
Results 12312020 | 12312019 ThUS$ ThUus$ Revenues 741,628 682,079 Expenses (722,455) (681,954) Profitofthe year 19,173 125
112020 112019
Cash flow 12312020 | 12312019 ThUS$ ThUus$ Net cash fow from operating activities 31,745 84,426 Net cash fow from (using) investing activities 90,781 (42,403) Net cash fiow using financing activities (78,932) (128,413)
19. Revenue
Revenues for the years ended December 31, 2020 and 20109, are as follows:
112020 112019 Item 12312020 12312019 ThUS$ ThUS$ Revenue from sales ofown copper 11,771,832 10,392,975 Revenue from sales of third-party copper 1,234,329 1,006,199 Revenue from sales of molybdenum 527,058 595,967 Revenue from sales of other products 636,407 520,351 Gain in futures market 3,542 9,439 Total 14,173,168 12,524,931
The Corporation’s revenue is recognized at a point in time.
The breakdown of revenue ¡is presented in explanatory note No.24 Operating Segments.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
20. Expenses by nature
Expenses by nature for the years ended December 31, 2020 and 2019, are as follows:
112020 112019 Item 12312020 | 12312019
ThUS$ ThUS$ Short-term benefits to employees 1,337,651 1,519,659 Depreciation 2,452,786 2,217,265 Amortization 2,284 2,804 Total 3,792,721 3,739,728
21. Asset impairment
As of December 31, 2020, the Corporation made a calculation of the recoverable amount of ¡ts cash- generating unit, Ventanas Division, in order to verify the existence of an impairment in the value of the assets associated with said division. Said recoverable amount amounted to US$140 million, which when compared with the book value of the assets of the cash-generating unit of US$164 million, an impairment of US$24 million (before tax) was determined, which was recorded in the caption Other expenses by function, of the comprehensive income statements for the year 2020 (note 22b).
The recoverable amount determined corresponds to the value in use using a 7.09% annual discount rate before taxes. The main variables used to determine the recoverable amount of this asset correspond to the price of acid, cost of treatment and refining, exchange rates and discount rates.
As of December 31, 2020 and 2019, there are no indications of additional impairments or reversals of impairment recognized in previous years, for the rest of the cash-generating units, as well as for their associates.
22. Other income and expenses by function
Other income and expenses by function for the years ended December 31, 2020 and 2019, are as follows:
a) Other income by function
112020 112019 Hem 12312020 12312019 ThUS$ ThUS$ Penalties to suppliers 9,062 27,954 Delegated Administration 3,975 4,713 Miscellaneous sales (net) 22,058 39,870 Insurance claims for claims – 27,054 Customer recovery – 7,836 Reversal of provisions 2,570 – Gain on sale ofshares of related companies (Note 9) – 103,151 Material Return 6,642 43,510 Insurance case compensation 10,962 – Reverse site closure update – 33,993 Other miscellaneous income 42,052 72,609 Total 97,321 360,690
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
b) Other expenses by function
112020 112019 Item 12312020 | 12312019 ThUS$ ThUS$ Law No. 13196 (1,047,663) (935,599) Research expenses (46,625) (85,621) Bonus for the end of collective bargaining (18,395) (109,651) Expenses plan (106,168) (100,747) Write-off of investment projects (11,244) (7,261) Write-off of property, plant 8 equipment (9,347) (27,495) Medical care plan (47,093) (39,979 Impairment of assets (note 21) (24,053) – Write-offinventories (8,553) (35,136) Inventory obsolescence (20,631) – Customer bad debt – (1,307) Contingency expenses (14,363) (20,482) Fixed indirect costs, low production level (55,824) (313,917) Other (46,862) (70,643) Total (1,456,821)| (1,747,838)
Cc) Law No. 13196
The Corporation is subject to Law No. 13196, which mandates the payment of a 10% tax over the foreign currency return on the actual sale revenue of copper production, including its by-products.
On January 27, 2017, Law No. 20989, article 3, establishes changes in the application of Law No. 13196 as of January 1, 2018, through which the Corporation will deposit annually, no later than December 15 of each year, the funds established in article 1 in that law.
On September 26, 2019, Law No. 21174 was published, which repeals Law No. 13196 and establishes that the 10% tax to the tax benefit provided by the Corporation will subsist for a period of nine years, decreasing from the tenth year 2.5% per year until reaching 0% at the beginning of the thirteenth year. The validity of this law is as of January 1, 2020, maintaining the payment annually at a date no later than December 15 of each year.
On March 23, 2020, the Ministry of Finance issued Ordinary Letter No. 843, which modifies the payment method of the funds related to Law 13196, in order to address funds to meet national needs generated by the COVID-19 crisis. Said Official Letter establishes the payment of funds owed to the Treasury for the application of Law No. 13196, equivalent to ThUS$240,168 (contribution for December 2019, January and February 2020), before March 31 this year. Subsequently and from the month of April, the Corporation should carry out the monthly transfer of the corresponding resources according to their recordkeeping, within a period not exceeding the last day of the month following its booking.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
23. Finance costs
The detail of finance costs for the years ended December 31, 2020 and 2019, is as follows:
112020 112019 Item 12312020 | 12312019 ThUS$ ThUS$ Bond interest (579,910) (302,393) Bank loan interest (61,461) (56,457) Unwinding of discounton severance indemnity provision (3,705) (12,332) Unwinding of discounton other non-current provisions (33,538) (43,798) Other (63,850) (64,327) Total (742,464) (479,307)
24. Operating segments
The Corporation has defined its Divisions as its operating segments in accordance with the requirements of IFRS 8, Operating Segments. The revenues and expenses of the Head Office are allocated among the defined operating segments.
The mining deposits in operation, where the Corporation conducts its extractive and processing activities are managed by the following Divisions: Chuquicamata, Radomiro Tomic, Ministro Hales, Gabriela Mistral, Salvador, Andina and El Teniente. In addition, the smelting and refining activities are managed at the Ventanas Division. All these Divisions have a separate operational management, which reports to the Chief Executive Officer, through the North and South Central Vice-President of Operations, respectively.
The information on each Division and their corresponding mining deposits is as follows:
Chuquicamata
Types of mine sites: Open pit mines and underground mines
Operating: since 1915
Location: Calama – Region |
Products: Electro refined and electrolytic (electro-obtained) copper cathodes and copper concentrate
Radomiro Tomic
Types of mine sites: Open pit mines
Operating: since 1997,
Location: Calama – Region |
Products: Electro refined and electrolytic (electro-obtained) copper cathodes and copper concentrate
Ministro Hales
Type of mine: Open pit mine
Operating: since 2014
Location: Calama – Region |
Products: Calcined copper, copper concentrates
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Gabriela Mistral
Type of mine: Open pit mine
Operating: since 2008
Location: Calama – Region |
Products: Electrolytic (electro-obtained) cathodes
Salvador
Type of mine: Underground mine and open pit mine
Operating: since 1926
Location: Salvador – Region |Il
Products: Electro refined and electrolytic (electro-obtained) copper cathodes and copper concentrate
Andina
Type of mines: Underground and open pit mines Operating: since 1970
Location: Los Andes – Region V
Product: Copper concentrate
El Teniente
Type of mine: Underground mine
Operating: since 1905
Location: Rancagua – Region VI
Products: Fire-refined copper and copper anodes
a) Allocation of Head Office revenue and expenses
Revenue and expenses controlled by the Head Office are allocated to the Divisions based on following criteria.
The main items are assigned based on the following criteria:
Revenue and Cost of Sales of Head Office commercial transactions
+ Allocation to the operating segments is made in proportion to revenues of each Division.
Other income, by function
+ Other income by function, associated and identified with each Division, ¡is directly allocated.
+ Recognition of realized profits and other income by way of subsidiaries are allocated in proportion to the revenues of each Division.
+ The remaining other income is allocated in proportion to the aggregate of balances of other income and finance income of each Division.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Distribution costs
+ Expenses associated and identified with each Division are directly allocated.
+ Distribution costs of subsidiaries are allocated in proportion to the revenues of each Division.
Administrative Expenses
+ Administrative expenses associated and identified with each Division are directly allocated.
+ Administrative expenses recorded in cost centers associated with the sales function and administrative expenses of subsidiaries are allocated in proportion to the revenues of each Division.
+ Administrative expenses recorded in cost centers associated with the supply function are allocated in proportion to inventory balances in warehouse in each Division.
+ The remaining administrative expenses are allocated in proportion to operating cash outflows of each Division.
Other Expenses, by function
+ Other expenses associated and identified with each Division are directly allocated.
+ Expenses for pre-investment studies and other expenses by function of subsidiaries are allocated in proportion to the revenues of each Division.
Other gains
+ Other gains associated and identified with each Division are directly allocated.
+ Other gains of subsidiaries are allocated in proportion to the revenues of each Division.
Finance Income
+ Finance income associated and identified with each Division is directly allocated.
+ Finance income of subsidiaries is allocated in proportion to the revenues of each Division.
+ The remaining finance income is allocated in relation to the operating cash outflows of each Division.
Finance costs
+ Finance costs associated and identified with each Division are directly allocated.
+ Finance costs of subsidiaries are allocated in proportion to the revenues of each Division.
Share in profit (loss) of associates and joint ventures accounted for using the equity method
+ Share in profit or loss of associates and joint ventures identified for each Division is directly allocated.
Foreign exchange differences
+ Foreign exchange differences identifiable with each Division are directly allocated.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
+ Foreign exchange difference of subsidiaries is allocated in proportion to the revenues of each Division.
+ The remaining foreign exchange differences are allocated in relation to operating cash outflows of each Division.
Contribution to the Chilean Treasury under Law No. 13196
+ The amount of the contribution is allocated and accounted for in proportion to the invoiced and recorded amounts for copper and sub-product exports of each Division, that are subject to the surcharge.
Income tax benefit (expense)
+ Corporate income tax under D.L. 2398 and specific mining tax are allocated based on the income before income taxes of each Division, considering for this purpose the income and expenses allocation criteria of the Head Office and subsidiaries mentioned above.
+ Other tax expenses are allocated in proportion to the corporate income tax, specific mining tax and tax under D.L. 2398 of each Division.
b) Transactions between segments
Transactions between segments mainly related to products processing services (or tolling services), are recognized as revenue for the segment rendering the tolling services and as the cost of sales for the segment that receives the service. Such recognition is made in the period in which these services are rendered, as well as ¡ts elimination in the consolidated corporate financial statements.
Additionally, the reallocation of the profit and loss assumed by Ventanas Division, associated with the corporate mineral processing contract between Codelco and Enami, in which a distribution is applied based on the revenue of each division is included as a transaction between segments.
c) Cash flows by segments The operating segments defined by the Corporation, maintains a cash management function which refers mainly to operational activities that need to be covered periodically with funds constituted in each of these segments and whose amounts are not significant in relation to corporate balances of cash and cash equivalents.
Conversely, activities such as obtaining financing, investment and payment of relevant financial obligations are mainly based at the Head Office.
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
The following tables details the financial information organized by operating segments:
From 112020 12312020 Chuquicamata R. Tomic Salvador Andina El Teniente Ventanas G. Mistral M. Hales Total Segments Others Total Segments Consolidated ThUS$ ThUs$ ThUS$ ThUS$ ThUS$ ThUs$ ThUS$ ThUS$ ThUs$ ThUS$ ThUS$
Revenue from sales ofown copper 3,776,420 1,669,342 686,893 1,124,322 2,700,812 69,986 653,324 1,090,764 11,771,863 (31) 11,771,832 Revenue from sales ofthird-party copper 1,742 – – – – 26,263 – 28,005 1,206,324 1,234,329 Revenue from sales of molybdenum 301,441 12,459 10,984 40,571 153,228 – – 518,683 8,375 527,058 Revenue from sales of other products 181,447 – 78,108 4,715 84,947 206,626 5 71,222 627,070 9,337 636,407 Revenue from futures market 1,368 691 151 (415) 2,958 (1,457) 217 29 3,542 – 3,542 Revenue between segments 59,279 – 46,936 4,183 – 75,336 – 185,734 (185,734) – Revenue 4,321,697 1,682,492 823,072 1,173,376 2,941,945 376,754 653,546 1,162,015 13,134,897 1,038,271 14,173,168 Costofsales ofown copper (2,829,128) (1,198,292) (654,375) (891,082) (1,584,552) (61,077) (544,491) (853,395) (8,616,392) (1,347) (8,617,739) Costofsales of copper third-party copper (1,789) – – – – (30,265) – – (32,054) (1,195,291) (1,227,345) Costofsales of molybdenum (79,422) (5,162) (5,393) (21,888) (50,077) – – – (161,942) (26,540) (188,482) Costofsales ofother products (157,263) – (79,527) (673) (50,216) (219,034) (418) (11,127) (518,258) (13,355) (531,613) Costofsales beween segments (125,628) 9,099 (44,530) 9,184 32,290 (101,071) (1,463) 36,385 (185,734) 185,734 – [Cost of sales (3,193,230) (1,194,355) (783,825) (904,459) (1,652,555) (411,447) (546,372) (828,137) (9,514,380) (1,050,799)| (10,565,179) ¡Gross profit (loss) 1,128,467 488,137 39,247 268,917 1,289,390 (34,693) 107,174 333,878 3,620,517 (12,528) 3,607,989 Other income, by function 18,427 7,729 8,543 14,140 8,872 5,199 752 (7) 63,655 33,666 97,321 e loss determined in accordance wi (3,291) (16) (873) (197) (646) (892) – (1,080) (6,495) (2,968) (9,463) Distribution costs (46,653) (28,450) (16,697) (21,468) (69,022) (7,546) (21,677) (21,915) (233,428) (163,617) (397,045) Administrative expenses (156,797) (8,803) (17,981) (38,688) (47,884) (39,536) (12,450) (9,016) (831,155) (78,003) (409,158) Other expenses, by function (334,480 (144,876 (67,101) (109,604) (229,409 (23,339) (64,251) (74,603 (1,047,663 – (1,047,663) Law No. 13.196 – – – – – – – – – 30,425 30,425 Other gains (losses) (511) (28) 74 98 1,068 134 1 (262) 584 39,629 40,213 Finance income (261,922) (45,215) (21,750) (77,544) (251,979) (9,199) (14,011) (45,560) (727,180) (15,284) (742,464) Finance costs – – – – – – – – – (206) (206) Share in the profit ofassociates and joint ventures 659 1.058 3,431 – – 5,148 34,288 39,436 ‘accounted by the equity method Exchange differences (40,738) (12,644) (12,084) (20,825) (50,827) (6,214) (9,002) (10,002) (162,336) (3,165) (165,501) Income (loss) before taxes 302,502 255,834 (87,463) 15,887 652,994 (116,086) (13,454) 171,433 1,181,647 (137,763) 1,043,884 Income tax expenses (224,032) (176,627) 56,134 (14,672) (451,651) 77,029 8,133 (118,807) (844,493) 57,490 (787,003) Income (loss) 78,470 79,207 (31,329) 1,215 201,343 (39,057) (5,321) 52,626 337,154 (80,273) 256,881
90
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
From 112019 12312019 Chuquicamata R. Tomic Salvador Andina El Teniente Ventanas G. Mistral M. Hales Total Segments Others Total Segments Consolidated ThUS$ ThUS$ ES LES ThUS$ ThUS$ ThuS$ ThUS$ ThUS$ ThUuS$ ThuS$
Revenue from sales ofown copper 3,341,305 1,655,359 344,116 916,542 2,496,457 65,680 666,997 906,516 10,392,972 3 10,392,975 Revenue from sales of third-party copper 1,634 – – – – 19,233 – – 20,867 985,332 1,006,199 Revenue from sales of molybdenum 297,324 10,251 20,026 67,524 194,153 – – – 589,278 6,689 595,967 Revenue from sales of other products 138,935 – 35,741 2,107 109,344 192,567 3,520 31,229 513,443 6,908 520,351 Revenue from futures market 5,859 3,023 418 (69) 29 (733) 805 107 9,439 – 9,439 Revenue between segments 35,928 – 24,103 2,554 1,330. 105,184 – – 169,099 (169,099) – Revenue 3,820,985 1,668,633 424,404 988,658 2,801,313 381,931 671,322 937,852 11,695,098 829,833 12,524,931 Costofsales ofown copper (2,842,594) (1,244,908) (355,946) (918,185) (1,594,596) (55,974) (675,313) (731,320) (8,418,836) 622 (8,418,214) Costofsales of copper third-party copper (1,704) – – – – (20,225) – – (21,929) (974,448) (996,377) Costofsales of molybdenum (83,780) (13,937) (9,241) (25,982) (47,803) – – – (180,743) (25,256) (205,999) Costofsales ofother products (130,612) – (20,442) (597) (60,816) (197,169) (3,390) (10,616) (423,642) (7,209) (430,851) Costofsales between segments (102,971) 42,164 (26,515) (1,589) 6,770 (98,331) (1,720) 13,093 (169,099) 169,099 – Cost of sales (3,161,661)| (1,216,681) (412,144) (946,353) (1,696,445) (871,699) (680,423) (728,843) (9,214,249) (837,192)| (10,051,441) Gross profit (loss) 659,324 451,952 12,260 42,305 1,104,868 10,232 (9,101) 209,009 2,480,849 (7,359) 2,473,490 Other income, by function 100,500 8,817 20,493 24,001 42,197 1,853 6,878 5,535 210,274 150,416 360,690 SS determined in acoordanoe wi (5,680) (214) (826) (270) (1,761) (1,262) (90) (1,323) (11,426) (5643) (17,069) Distribution costs (50,451) (28,061) (13,913) (16,504) (45,847) (8,484) (28,135) (25,215) (216,610) (192,624) (409,234) Administrative expenses (440,991) (17,273) (96,233) (17,305) (104,232) (13,520) (18,937) (15,871) (724,362) (87,877) (812,239) Other expenses, by funcion (304,321) (148,096 (32,023) (89,524) (222,475) (18,931) (64,906) (55,323) (935,599) – (935,599) Law No. 13.196 – – – – – – – – – 22,672 22,672 Other gains (losses) (1,209) (97) 89 251 874 202 18 (347) (219) 37,090 36,871 Finance income (64,411) (47,344) (115,309) (64,068) (172,137) (9,899) (115,300) (46,784) (435,252) (44,055) (479,307) Finance costs – – – – – – – – – 378 378 Share in the profit (loss) of associates and joint ventures accounted by he equi method – (403) (1,255) (1,201) – (2,859) 16,062 13,203 Exchange difierences 52,099 10,535 9,807 18,840 56,738 5,586 8,113 13,565 175,283 (21,366) 153,917 Income (loss) before taxes (55,140) 230,219 (116,058) (103,529) 657,024 (34,223) (121,460) 83,246 540,079 (132,306) 407,773 Income tax expenses 29,969 (162,974) 76,094 61,658 (479,456) 20,763 83,454 (59,847) (430,339) 37,094 (393,245) Income (loss) (25,171) 67,245 (39,964) (41,871) 177,568 (13,460) (38,006) 23,399 109,740 (05,212) 14,528
91 (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The assets and liabilities related to each operating segment, including the Corporation’s head office as of December 31, 2020 and 2019, are detailed in the following tables:
12312020 Category Chuquicamata Radomiro Salvador | Andina |El Teniente | Ventanas | G. Mistral | M. Hales Others Total Tomic Consolidated ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Current assets 1,525,225 734,895| 593,497 320,903 967,649 55,640] 262,057 521,154 2,777,102 7,758,122 Non-current assets 9,171,623] 2,069,919| 1,109,815] 4,943,152] 7,799,234| 250,617| 1,081,860 3,144,884 4,881,160 34,452,264 Currentliabilities 801,185| 231,953 208,235 235,889 436,916| 86,373| 93,817 141,957 1,203,582 3,439,907 Non-currentliabilities 766,127] 340,723 297,955 610,450 1,284,736] 139,142] 160,279 130,656 23,413,920 27,143,988 12312019 Category Chuquicamata Radomiro Salvador Andina | El Teniente | Ventanas | G. Mistral | M. Hales Others Total Tomic Consolidated ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Current assets 1,318,498 673,058 409,962 269,730 959,041 63,802] 264,389| 342,614 1,748,927 6,050,021 Non-current assets 9,079,665] 2,097,006| 1,022,033| 4,828,805| 7,521,778] 268,457| 1,149,763| 3,247,562 5,079,521 34,294,590 Currentliabilities 821,067 179,649 140,456 214,350 474,126| 76,222] 103,484 139,946 1,773,657 3,922,957 Non-currentliabilities 765,850 262,729] 255,063 588,841 1,257,577] 138,455] 152,528 115,909 21,250,035 24,786,987
The revenue segregated per geographical areas is the following:
112020 112019 Revenue per geographical areas 12312020 | 12312019 ThUS$ ThUS$ Total revenue from domestic customers 2,087,303 2,616,605 Total revenue from foreign customers 12,085,865 9,908,326 Total 14,173,168 | 12,524,931 112020 112019 Revenue per geographical areas 12312020 | 12312019 ThUS$ ThUS$ China 3,404,994 2,315,772 Restof Asia 1,896,307 1,673,357 Europe 4,761,323 3,673,299 America 3,425,289 3,932,012 Other 685,255 930,491 Total 14,173,168 | 12,524,931
During the periods January – December 2020 and 2019, there is no income from ordinary activities from transactions with a single client, representing 10 percent or more of the income of ordinary activities of the
Corporation.
92
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
25.
26.
27.
Foreign exchange differences
The detail of foreign exchange differences for the years ended December 31, 2020 and 2019, ¡is as follows: : : : 112020 112019 Gain (loss) Mccain phange differences 1213112020 | 12312019 ThUS$ ThUS$ Gain from foreign exchange differences 97,221 254,314 Loss from foreign exchange diferences (262,722) (100,397) Total exchange difference, net (165,501) 153,917
Statement of cash flows
The following table shows the items that comprise other collections and payments from operating activities in the Statement of Cash Flows:
112020 1112019 Other collections from operating activities 12312020 | 12312019
ThUs$ ThUuS$ VAT Refund 1,261,769 1,580,041 Sales hedge 3,340 12,357 Other 595,862 234,866 Total 1,860,971 1,827,264
112020 1112019 Other payments from operating activities 12312020 | 12312019
ThUs$ ThUuS$ Contribution to Chilean treasury Law N*13.196 (1,024,751) (917,632) VAT and other similar taxes paid (1,352,266)| (1,319,723) Total (2,377,017)| _ (2,237,355)
During the period January – December 2020, no capital contributions were received.
During the years ended December 31, 2019, as indicated in the equity note, capital contributions were received for a total of ThUS$400,000, which are presented in other cash inflows (outflows) corresponding to the net cash flows provided by (used in) activities of financing.
Financial risk management, objectives and policies
Codelco has committees within its organization to set out strategies allowing to reduce the financial risks to which it may be exposed.
93
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
The risks to which Codelco is exposed and a brief description of the management procedures that are carried out in each case, are described below:
a. Financial risks
Exchange rate risk:
According to IFRS 7, exchange rate risk is understood to be the risk that arises from financial instruments that are denominated in foreign currencies, that is, a currency other than the Corporation’s functional currency (US dollar).
Codelco’s activities that generate this exposure correspond to funding in UF, accounts payable and receivable in Chilean pesos, other foreign currencies used in its business operations and obligations with employees.
Most transactions in currencies other than US$ are denominated in Chilean pesos. Also, there ¡is another portion in Euro, which corresponds mainly to a long-term loan issued through the international market, which exchange rate risk is mitigated with hedging instruments (Swap).
Taking into consideration the financial assets and liabilities as of December 31, 2020 as the base, a fluctuation (positive or negative) of 10 Chilean pesos against the U.S. dollar (keeping the other variables constant), could affect profits before taxes by US$42 million in net income, respectively.
This result is obtained by identifying the main items (including assets and financial liabilities) denominated in foreign currencies in order to measure the impact on profit or loss that a variation of +- 10 Chilean pesos would have in terms of US$, with respect to the closing exchange rate at the end of the reporting period.
Interest rate risk:
This risk arises from interest rate fluctuations in Codelco’s investment and financing activities. This movement can affect future cash flows or the market value of fixed rate financial instruments.
These rate variations refer to U.S. dollar variations, mostly with respect to the LIBOR rate. To manage this risk, Codelco maintains an adequate combination of fixed and variable rate debt, which is complemented by the possibility of using interest-rate derivatives to meet the strategic guidelines defined by Codelco’s Corporate Finance Department.
Itis estimated that, on the basis of net debt balance as of December 31, 2020, a 1% change in interest rates on the financial liabilities subject to variable interest rates would mean approximately a US$21 million change in finance costs, before tax. This estimation is made by identifying the liabilities assigned variable interest, accrued at the end of the financial statements, which may vary with a change of one percentage point in variable interest rates.
94
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Total fixed and variable interest rate obligations maintained by Codelco as of December 31, 2020 correspond to amounts of ThUS$17,057,965 and ThUS$1,018,691, respectively.
b. Market risks
– – Commodity price risk:
As a result of its commercial operations and activities, the Corporation’s income is mainly exposed to the volatility of copper prices and certain sub-products such as gold and silver.
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 market price for specified future periods. At the reporting date, the provisionally priced metal sales are marked-to-market, with adjustments (both gains and losses) being recorded in revenues in the consolidated statement of comprehensive income. Forward prices at the period-end are used for copper sales, while period-end average prices are used for molybdenum concentrate sales due to the absence of an assets futures market. (See Note 2.r) “Income from Activities Ordinary Procedures from Contracts with Customers “of section II” Main policies countable ).
For the years ended December 31, 2020, if the future price of copper fluctuates by + – 5% (with the other variables constant), the result would be US$221 million before taxes as a result of setting the mark to market of sales revenue to provisional prices in effect as of December 31, 2020 (593 thousands of dry metric tons). For the estimate indicated, all of those physical sales contracts were valued according to the monthly average immediately following the close of the financial statements, and proceeds to be estimated regarding what the final settlement price would be if there is a difference of + – 5% with respect to the future price known to date for this period.
In order to protect cash flow and adjust, where necessary, ¡ts sales contracts to its trade policy, the Corporation holds operations in futures markets. At the end of the reporting period, these contracts are adjusted to fair value, recording this effect, at the settlement date of the hedging transactions as part of net product sales.
The Corporation has not entered into any hedging transactions with the specific purpose of hedging the price risk caused by fluctuations in prices of production inputs.
Cc. Liquidity risk The Corporation ensures that it has sufficient resources, such as pre-approved credit lines (including refinancing), in order to meet short-term requirements, after considering the necessary working capital for its operations and any other commitments it has.
In this sense, the Corporation maintains resources at its disposal sufficient to meet its obligations, whether in cash, liquid financial instruments or credit facilities.
95
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
In addition, the Finance Department constantly monitors the Corporation’s cash flow projections based on short and long term projections and available financing alternatives. In addition, the Corporation estimates that it has enough headroom to increase the level of borrowing for the normal requirements of its operations and investments established in its development plan.
In this context, according to current existing commitments with creditors, the cash requirements to cover financial liabilities classified by maturity and presented in the statement of financial position are detailed as follows:
s . ar abi Less than Between one More than Maturity of financial liabilities as of 12312020 one year and five years five years ThUS$ ThUS$ ThUS$
Loans from financial institutions 81,218 217,967 1,271,257 Bonds 438,301 2,406,095 13,661,818 Derivatives 10,427 – 121,594 Other financial liabilities – 56,469 – Total 529,946 2,680,531 15,054,669
d. Credit risk
This risk comprises the possibility that a third party does not fulfill its contractual obligations, thereby causing a loss for the Corporation.
Given the Corporation’s sales policy, principally with cash and advance payments and bank letters of credit, the uncollectability of client debt balances is minimal. This is complemented by the familiarity the Corporation has with its clients and the length of time it has operated with them. Therefore, the credit risk of these transactions is not significant.
The indications with respect to the payment conditions to the Corporation are detailed in every sales contract and the negotiation management is under the charge of the Vice Presidency of Marketing.
In general, the Corporation’s other accounts receivable have a high credit quality according to the Corporation’s evaluations, based on each debtor’s solvency analysis and payment history.
The maximum exposure to credit risk as of December 31, 2020 ¡is represented by the financial asset items presented in the Corporation’s Statement of Financial Position.
The Corporation’s accounts receivable do not include customers with balances that could be classified as a significant concentration of debt and would represent a material exposure for Codelco. This exposure is distributed among a large number of clients and other counterparties.
In the customer items, the provisions, which are not significant, are included based on the review of the outstanding balances and characteristics of the clients, destined to cover eventual insolvencies.
96
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
In explanatory note 2, trade and other receivables, past due balances that have not been impaired are presented.
The Corporation estimates that unimpaired amounts overdue over 30 days are recoverable based on clients’ historical payment behavior and their existing credit ratings.
As of December 31, 2020 and 2019, there are no receivable balances that have been renegotiated.
Codelco works with major banks, which have high national and international ratings, and continually assesses them; therefore, the risk that could affect the availability of the Corporation’s funds and financial instruments is not significant.
Also, in some cases, to minimize credit risk, the Corporation has contracted credit insurance policies through which it transfers to third parties the commercial risk associated with some aspects of its business.
During the years ended December 31, 2020 and 2019, no guarantees have been executed to ensure the collection of third party debt.
Personnel loans mainly relate to mortgage loans, according to programs included in union agreements, which are paid for through payroll discounts.
28. Derivatives contracts
The Corporation has entered into transactions to hedge cash flows, to minimize the risk of foreign exchange rate variations and sales price variations, detailed as follows:
a. Hedges The Corporation maintains an exposure associated with its hedging operations against exchange rate and interest rate variations, whose positive fair value, net of taxes, amounts to ThUS$2,709 as of December 31, 2020.
The following table summarizes the detail of the financial hedges contracted by the Corporation:
December 31, 2020
Financial Type of Amount | obligation: Lo . Fair value Hedged item Bank derivative | Maturity | Currency | Hedged hedging Derivative [Fairvalue hedged| “¿4 0ipg : Asset(Liability) item .
contract (Spot) instrument instrument (Spot) ThUS$ TRUS$ ThUS$ ThUS$ ThUS$ Bond UF Mat 2025 – [CreditSuisse (USA) Swap | 4m2025 | US$ 282,137 208,519 96,981 356,507 (259,526) Bond EUR Mat 2024 [Santander (Chile) Swap | 792024 | US$ 368,505 409,650 (69,079) 408,058 (467,137) Bond EUR Mat 2024 – [BNP Paribas (USA) swap | 792024 | US$ 368,505 409,680 (68,824) 408,022 (466,846) Bond UF Mat 2026 [Santander (Chile) Swap | 8242026 | US$ 408,894 406,212 28,013 507,154 (479,141) Bond AUD Mat 2039 – [JP Morgan London Branch (England) Swap | 7222089 | US$ 53,747 49,266 2,507 71,746 (69,239) Bond HKD Mat 2034 _ |HSBC Bank USA N.A. (USA) swap | 1172034 | -USs 64,500 63,792 (2,689) 79,180 (81,869) Total 1,546,288 | 1,547,119 6.909 1,830,667 | (1,823,758)
97
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
December 31, 2019
Financial Type of Amount | obligation: a . Fair value Hedged item Bank derivative | Maturity | Currency | Hedged | hedging Derivative [Fairvaluo hedged]-, ¿¿oipg . Asseti(Liability) item .
contract (Spot) | instrument instrument (Spot) Thus$ ThUS$ ThUS$ ThUs$ ThUS$ Bond UF Mat 2025 – [CreditSuisse (USA) Swap | 412025 | US$ 260,890 208,519 75,608 329,480 (253,872) Bond EUR Mat 2024 [Santander (Chi) Swap | 7192024 | US$ 336,399 409,650 (73,114) 380,570 (453,684) Bond EUR Mat 2024 – |Deusthe Bank (England) Swap | 7192024 | US$ 336,399 409,680 (72,756) 380,583 (453,339) Bond UF Mat 2026 – [Santander (Chi) Swap | 8242026 | – US$ 378,101 406,212 6.976 461,581 (454,605) Bond AUD Mat 2039 – [Santander (Chi) Swap | 7222039 | – US$ 49,013 49,266 (1,558) 54,509 (56,067) Bond HKD Mat 2034 _ |HSBC Bank USA N.A. (USA) Swap | 1122034 | US$ 64,220 63,792 (703) 64,220 (64,923) Total 1,425,022 | 1,547,119 165.547) 1,670,943 | – (1,736,490)
As of December 31, 2020, the Corporation no maintains cash deposit guarantee balances.
The current methodology for valuing currency swaps is to use the bootstrapping technique from the mid – swap rate to construct the curves (zero) in UF and US$ respectively, from market information.
The notional amounts are detailed below:
Notional amount of contracts with final maturity December 31, 2020 | Currency Less than 90 | More than 90 Current Total | 1to 3 years | 3to 5 years More than 5 | Non-current days days years Total Thus$ ThUS$ ThUS$ ThUS$ ThUus$ ThUS$ ThUS$ Currency derivaives ThUS$ 13,156 48,151 61,306 122,611 1,113,279 577,064 1,812,954,
b. Cash flows hedging contracts and commercial policy adjustment
The Corporation enters into metals hedging activities. Such results increase or decrease the total sales revenue based on the market prices of the metals. As of December 31, 2020, these operations generated a loss of ThUS$654.
b.1. Commercial flexibility operations of copper contracts
The purpose of these contracts is to adjust the price of shipments to the price defined in the Corporation’s related policy, defined in accordance with the London Metal Exchange (LME). As of December 31, 2020, the Corporation performed derivative market transactions of copper that represent 448,565 metric tons of fine copper. These hedging operations are performed as part of the Corporation’s commercial policy.
The current contracts as of December 31, 2020, present a positive fair value of TRUS$977 and their final result will only be known at their maturity, offsetting the hedging transactions with revenue from the sale of the hedged products.
98
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
The transactions settled as of years ended December 31, 2020 resulted in a net positive effect on net income of ThUS$572, which is comprised of the amounts received for sales contracts for
ThUS$4,768 and the amounts net off against purchases contracts for ThUS$4,196.
b.2. Commercial Transactions of Current Gold and Silver Contracts
As of December 31, 2020, the Corporation maintains derivative contracts for the sale of gold of
ThOZ 7,973.
The contracts in force as of December 31, 2020, present a negative fair value of ThuS$177, the final result of which can only be known at the expiration of these operations, after the compensation between the hedging operations and the income from the sale of the protected products. These hedging operations expire up to February 2021.
The operations completed between January 1 and December 31, 2020, generated a negative effect on results of ThUS$1,226, corresponding to values per physical sales contracts.
b.3. Cash flow hedging operations backed by future production
The Corporation does not hold cash flow hedges backed by future production as of December 31,
2020.
The following tables set forth the maturities of metal hedging activities, as referred to in point b above: December 31, 2020 Maturity date ThUus$ 2021 2022 2023 2024 2025 Upcoming Total Flex Com Cobre (Asset) 3,612 (850) (150) – – – 2,612 Flex Com Cobre (Liability) (1,635) – – (1,635) Flex Com GoldSilver (177) (177) Price setting – – Metal options – – – – Total 1,800 (850) (150) 800 December 31, 2019 Maturity date Thus$ 2020 2021 2022 2023 2024 Upcoming Total Flex Com Cobre (Asset) 1,315 525 – – – – 1,840 Flex Com Cobre (Liabiliy) (1,799) (844) (12) (2,655) Flex Com GoldSilver (1) – – (1) Price setting – – – Metal options – – – – Total (485) (319) (12) (816)
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
December 31, 2020 Maturity date All figures in thousands of metric tons ounces 2021 2022 2023 2024 2025 Upcoming Total Copper Futures [MT] 315.010 123.660 9.900 – – – 448.570
GoldSilver Futures [ThOZ] 7.970 – – – 7.970 Copper price seting [MT] – – Copper Options [MT]
December 31, 2019 Maturity date All figures in thousands of metric tons ounces 2020 2021 2022 2023 2024 Upcoming Total Copper Futures [MT] 335.650 96.650 0.500 – – – 432.800
GoldSilver Futures [ThOZ] 2.720 – – – 2.720 Copper price seting [MT] – – Copper Options [MT]
29. Contingencies and restrictions
a) Litigations and contingencies
There are various lawsuits and legal actions initiated by or against the Corporation, which derive from ¡ts operations and the industry in which it operates. In general, these are civil, tax, labor and mining litigations, all related to the Corporation’s activities.
In the opinion of Management and ¡ts legal advisors, the lawsuits where the Corporation is being sued and could have negative results do not represent significant loss contingencies or cash flows. Codelco defends its rights and employs all corresponding relevant legal instances, resources and procedures.
The most significant lawsuits that involve Codelco are related to the following matters:
– Tax proceedings: There is a tax proceeding for liquidation No.141 of tax year 2015 and Exempt Resolution No. 89 of 2016 issued by the Internal Revenue Service (SII), for which the Corporation presented the corresponding appeals, which were received and resolved in favor of the Tax and Customs Courts, a resolution that was appealed by the SII.
– Labor proceedings: Labor proceedings brought by the workers of the Andina Division against the Corporation with regard to occupational diseases (silicosis).
– Mining proceedings and others arising from the Operation: The Corporation has been participating, and will probably continue to participate, as plaintiff and defendant in given court proceedings involving its mining operation and activities, through which ¡it seeks to exercise certain actions or set up certain defenses in relation to given mining concessions that have been established or are in the process of being established, as well as also with regard to its other activities. These proceedings currently do not involve any given amount and do not have any essential effect on Codelco’s development.
Some procedures pending final judgment are the simultaneous claim for arbitration between Codelco, Santa Elvira S.A., Mining Services Group S.A. and Sociedad de Servicios para la Minería Limitada (collectively “Santa Elvira”) and the arbitration procedure between Codelco and Colbún regarding the sale of energy between them, among others.
100
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
– At the date of issuance of these financial statements, the Codelco faces various lawsuits and legal actions against it for a total of approximately US$436 million corresponding to 838 cases. According to the estimate made by the legal advisors of the Corporation, 624 cases, which represent 74.46% of the universe, have associated probable loss results amounting to ThUS$60,863. (Additionally, with the same probable outcome, there are 11 causes for ThUS$234 from subsidiaries).
There are also 60 cases, representing 7.16% for an amount of ThUS$33,844, for which it is more likely than not, that the ruling will not be against the Corporation. For the remaining 154 cases, representing 18.38% for an amount of ThUS$1.881, the Corporation’s legal advisors consider an unfavorable result remote.
Lawsuit under administrative law: On August 2, 2017, a Nullity in Public Law claim was filed in the 25th Civil Court of Santiago against Audit Report No. 900 of 2016, issued by the General Comptrollership of the Republic on May 10, 2017.
Once the discussion and evidence stage concluded, the Santiago Civil Court, on September 11, 2020, delivered ¡ts judgment in which it dismissed the annulment action filed by the Corporation, condemning it to the respective costs of said lawsuit. The Corporation announces that it will appeal said judgment.
On October 27, 2020, the Corporation filed appeals and cassation in the form of the sentence of the 25th Civil Court of Santiago, which dismissed the Public Law nullity action filed by the Codelco against Report No. 900 of 2016 of the Comptroller General of the Republic.
For litigation with a probable unfavorable outcome for the Corporation, the necessary provisions have been recognized as provisions for legal proceedings.
b) Other Commitments
On May 31, 2005, Codelco, through its subsidiary Codelco International Ltd. signed an agreement with Minmetals to form a company, CuPIC, in which both companies have an equal equity interest.
A 15-year copper cathode sales contract to that associated company was agreed upon, as well as a purchase contract from Minmetals to CupiC for the same period and for equal monthly shipments to complete a total of 836,250 metric tons. Each shipment shall be paid for by the buyer at a price formed by a fixed re-adjustable component plus a variable component, which depends on current copper prices at the time of shipment.
During the first quarter of 2006 and on the basis of the negotiated financial terms, financing contracts were formalized with the China Development Bank allowing CuPIC to make the US$550 million advance payment to Codelco in March 2006.
With regard to financial obligations incurred by the associate CuPIC with the China Development Bank, Codelco Chile and Codelco International Ltd, must meet certain commitments, mainly relating to the delivery of financial information. In addition, Codelco Chile must maintain 51% ownership of Codelco International Limited.
101
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
According to the Sponsor Agreement, dated March 8, 2006, the Codelco International Ltd.
subsidiary gave its participation in CUuPIC as a guarantee to the China Development Bank.
Subsequently, on March 14, 2012, CUuPIC paid off its debt to the abovementioned bank. As of December 31, 2017. Codelco does not hold any indirect guarantee regarding ¡ts participation in this associated company.
On December 17, 2015, the Company’s management presented a restructuring for the Supply Contract, which implies the removal of its share in CUPIC.
On April 7, 2016, the Corporation formalized the removal of its share in CUPIC, of which Codelco retained 50% ownership through the subsidiary Codelco International. Until that date, Codelco shared the ownership of the Company in the same proportion with the company Album Enterprises Limited (a subsidiary of Minmetals).
In order to realize the above mentioned term of the shareholding, Codelco signed a set of agreements which formalized primarily the following issues:
+ Copper sales contract modifications from Codelco to CUPIC signed in 2006, which establishes the reduction of half of the outstanding tonnage to deliver to this company and in which Codelco pays to CUPIC the amount of ThUS$99,330.
+ Reduction of share capital in CuPIC, equivalent to the 50% of the Codelco International shares in said company and by which CuPIC repays to Codelco the amount of ThUS$99,330.
+ Waiver of Codelco to any dividends associated with the profits generated by CuPIC from January 1, 2016 and the date of signing the agreement.
+ Additionally, the cessation of dividends reception as a consequence of the removal of the Codelco share in the ownership of CuPIC since 2016, led to a reduction of the net profit estimated by Codelco until the end of the contract signed with that company (May 2021).
Regarding the financing agreement signed on August 23, 2012, between the subsidiary, Gacrux Inversiones SpA and Mitsui 8, Co. Ltd. for the acquisition of the 24.5% stake in Anglo American Sur
S.A. which was subsequently amended on October 31, 2012, a pledge is included over the shares that the subsidiary has on Acrux Inversiones SpA (shared participation with Mitsui and minority shareholder in Anglo American Sur S.A.), in order to ensure compliance with the obligations that the financial agreement contemplates.
This pledge extends to the right to collect and receive from Acrux dividends which have been agreed in the corresponding meetings of shareholders of the company and any other distributions paid or payable to Gacrux respect of the pledged shares.
102
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
On December 22, 2017 according to archive No. 12326 2017, it was established that, Gacrux, the Creditor and the Guarantee Agent, the latter representing the Guaranteed Parties, modified , by virtue of the Merger (see Note 2d), the Contract of Pledge and the Modified Pledge Agreement as to the pledge on transferable securities and the commercial pledge, as well as the restrictions and prohibitions established in the Pledge Contract and in the Modified Pledge Contract, making it subject to , by virtue of the Merger, two thousand thirteen million two hundred and forty-five thousand four hundred and seventy-three shares pledge issued by Becrux, owned by Gacrux, hereinafter the “Pledged Becrux Shares.
Law 19.993 dated December 17, 2004, authorized the purchase of the Refinery and Smelter Las Ventanas assets from ENAMI, establishing that the Corporation must ensure that the smelting and refining capacity required is maintained, without any restriction and limitation, for treating the products of the small and medium mining sector sent by ENAMI, under the form of toll production or another form agreed upon by the parties.
Obligations with the public for bond issues means that the Corporation must meet certain restrictions related to limits on pledges and leaseback transactions on ¡ts principal assets and on its ownership interest in subsidiaries.
The Corporation has complied with these conditions as of December 31, 2020 and 2019.
On January 20, 2010, the Corporation signed two energy supply contracts with Colbún S.A., which includes energy and power sales and purchases for a total of 510 MW of power. The contract provides a discount for that unconsumed energy from Codelco’s SIC divisions with respect to the amount of contracted power. The discount is equivalent to the value of the sale of that energy on the spot market.
The contracted power for supplying these Divisions is comprised by two contracts:
– Contract No.1 for 176 MW, current until December 2029
– Contract No.2 for 334 MW, current until December 2044. This contract is based on energy production from Colbún’s Santa María thermal power station, which is currently in operation.
This plant is coal-fired, and therefore the electric energy tariff rate applied for the energy supplied to Codelco is linked to the price of coal.
Both of these contracts comply with Codelco’s long-term energy and power requirements from the SIC of approximately 510 MW.
Through these contracts, which operate through take or pay, the Corporation agrees to pay for the contracted energy and Colbún undertakes to reimburse at market price the energy not consumed by Codelco.
These contracts have maturity dates in 2029 and 2044.
103
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2) vi.
vil.
viii.
On November 6, 2009, Codelco signed the following long-term electric energy supply contracts with ELECTROANDINA S.A. (associate until January 2011), which matured in August 2017.
For the electric power supply of the Chuquicamata’s work center, there are three contracts:
– – Engie for a 15-year term from January 2010, that is maturing in December 2024, for 200 MW capacity, and another contract for a 200 MW capacity which was signed in January 2018 and will be effective as of January 2025 with maturity in December 2035.
– CTA effective from 2012 for 80 MW capacity, maturity in 2032.
On August 26, 2011, Codelco signed two energy supply contracts with AESGener. The first one for the Minister Hales division for a 99 MW capacity and the second contract for the Radomiro Tomic work center, for a maximum capacity of 145 MW. Both contracts will mature in 2028.
On November 11, 2011, Law No. 20551 was published in the Official Journal, which regulates the tasks and closure of mining facilities. Additionally, on November 22, 2012, the Supreme Decree No.
41 of the Minister of Mining, which approves the Regulations of this Law, was published in the Diario Oficial.
This law requires the Corporation, among other requirements, to provide financial guarantees to the State to ensure the implementation of closure plans. It also establishes the obligation to make contributions to a fund which aims to cover the costs of post-closure activities.
The Corporation, in accordance with the mentioned regulation, provided to SERNAGEOMIN the Mine Closure Plan (ARO) for all of the Codelco operating divisions in 2014, which were approved in 2015 in accordance with the provisions of the Act.
The mine closure plans delivered to SERNAGEOMIN were developed by invoking the transitional regime of the Act, which was specified for the affected mining companies under the general application procedure (extraction capacity > 10,000 tons per month), and which, at the date of enactment of the Law, will abide in operation and move forward with a mine closure plan previously approved under Mine Safety Regulations Supreme Decree No. 132.
The Corporation considers that the accounting liability recorded caused by this obligation differs from the law’s requirement, mainly by differences concerning the horizon that is considered for the projection of flows, in which the law requires the determination of the obligations in terms of mineral reserves, while the financial-accounting approach incorporates some of ¡ts mineral resources.
Therefore, the discount rate established by law, may differ from that used by the Corporation under the criteria set out in lAS 37 Provisions, Contingent Liabilities and Contingent Assets and described in Note 2, letter p) of Main Accounting Policies.
As of December 31, 2020, the Corporation has agreed guarantees for an annual amount of U.F.
33,100,482 to comply with the aforementioned Law No. 20551. The following table details the main given guarantees:
104
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Transmitter Mine site Amount Currency Date Maturity date A ThUus$ Liberty Radomiro Tomic 3,791,167] UF 11102020 | 11102021 0.25 155,019 Liberty Ministro Hales 2,251,252 | UF 11132020 | 11132021 0.25 92,052 Banco de Chile [Chuquicamata 3,731,732 | UF 11202020 | 11262021 0.23 152,588 Banco Bci Chuquicamata 1,200,000] UF 11202020 | 11262021 0.22 49,067 Aspor Teniente 2,273,000] UF 1212020 | 1232021 0.15 92,942 Banco Santander_ [Teniente 5,000,000] UF 1212020 | 1222021 0.20 204,447 Banco Santander _ [Teniente 250,000] UF 14272020 | 1222021 0.20 10,222 Banco Estado Teniente 3,169,500] UF 11302020 | 1222021 0.21 129,599 Banco Bci Teniente 57,236] UF 14272020 | 1222021 0.21 2,340 Banco Estado Gabriela Mistral 2,457,185] UF 12102020 | 12152021 0.21 100,473 Banco ltau Salvador 1,300,000] UF 21122020 | 2182021 0.11 53,156 Banco Bci Salvador 2,643,667 | UF 21122020 | 2182021 0.18 108,098 Banco Estado Andina 3,310,724] UF 4282020 | 532021 0.35 135,374 Banco Bci Andina 663,655| UF 4282020 | 532021 0.70 27,136 Banco Santander _ [Ventana 1,001,364] UF 1072020 | 1072021 0.30 40,945 Total 33,100,482 1,353,458 ix. On August 24, 2012, Codelco through its subsidiary Inversiones Mineras Nueva Acrux SpA (Nueva Acrux) (whose minority shareholder is Mitsui), signed a contract with Anglo American Sur S.A.
Under this contract, Codelco agreed to sell a portion of its annual copper production to the mentioned subsidiary, who in turn agrees to purchase such production.
Such annual portion is determined by the share of Codelco’s indirect subsidiary, Inversiones Mineras Becrux SpA (also shared ownership with Mitsui), maintained for the shares of Anglo American Sur S.A.
In turn, the subsidiary Nueva Acrux agrees to sell to Mitsui, the products purchased under the agreement described in the preceding paragraphs.
The contract expiration will occur when the shareholders agreement of Anglo American Sur S.A ends or other events related to the completion of mining activities of the company take place.
On June 11, 2019, Codelco and Anglo American Sur S.A. signed an agreement that ensures and optimizes the operation of their respective copper mines, Andina and Los Bronces, respectively.
This agreement is similar to others that the same parties have signed during the last 40 years and that favor the independent, safe and sustainable operation of these neighboring mines.
Xx. On March 11, 2020, the World Health Organization characterized the outbreak of a strain of the new coronavirus (“COVID-19”) as a pandemic that has resulted in a series of public health and emergency measures that have been put in place and are underway to combat the spread of the virus. The duration and impact of COVID-19 are unknown at this time and itis not possible to reliably estimate the impact of the duration and severity of these developments in future periods. Codelco is permanently monitoring the aforementioned outbreak, its constant evolution, eventual impact on the Corporation’s financial and operational indicators. additional
105
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2) possible effects on our workers, clients, suppliers, as well as continuing collaborating with the government actions that are being taken to reduce its spread, with no material impact observed to date on its ability to meet its financial, production or sale commitments. The foregoing is without prejudice to the impact on world demand for copper, which has meant a decrease in the price, which is public knowledge.
Due to the above, as of December 31, 2020 Codelco has taken a series of restrictive measures in its operation and development of investment projects, in order to protect the health of its workers, which are indicated below:
– March 25, 2020, the Corporation announced the temporary suspension of the projects: the remaining works of the Chuquicamata Underground Mine Project, Early Works of Rajo Inca and Assembly Works of Traspaso Andina. The suspension was carried out gradually as of March 25 for a period of 15 days.
– April 8, 2020, the Corporation announced the decision to partially or totally suspend some third- party services both for projects and for operations support (which involves around 30% of the total contractor workers), for a period of 30 days, extendable. With this decision, Codelco asked the contracting companies to take steps with their respective unions to benefit from the benefits of the Employment Protection Law No. 21227. The conditions in which the total or partial suspension was implemented was agreed independently with each of the contracting companies.
– – June 20, 2020, the Corporation announced the stoppage of construction of all its projects in the Antofagasta Region and to maintain operational continuity of the Chuquicamata Division only with workers from Calama. With this measure, the construction of underground Chuquicamata and other divisional projects were completely suspended. The activities were resumed in the month of August 2020.
– June 25, 2020, the Corporation announced the temporary halt of activities in the Chuquicamata Division smelter and refinery managements, a measure that reduces the participation in work of about 400 people, together with the detention of equipment and reduction of the productive rhythms in both areas. The measure considered the continuity of minor operations and preventive maintenance. The activities were resumed in the month of August 2020.
The aforementioned measures have not significantly affected Codelco Chile’s accounting results for the January-December 2020 period, nor the value of its assets as of December 31, 2020.
106
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
30. Guarantees
The Corporation as a result of its activities has received and given guarantees.
The following tables list the main guarantees given to financial institutions and others:
Direct Guarantees provided to Financial Institutions
12312020 12312019 Creditor of the Guarantee Type of Guarantee Currency Maturity Number of ThUS$ ThUS$ documents
Viability management Building project UF 2182020 1 1 Viability management Building project UF 312020 4 4 Viability management Building project UF 3102020 3 8 Viability management Building project UF 4222020 1 – 4 Viability management Building project UF 1252021 1 1 Viability management Building project UF 1272021 1 2 Viability management Building project UF 432021 3 33 Viability management Building project UF 4152021 2 22 Viability management Building project UF 4292021 1 56 Viability management Building project UF 6252021 2 9 Viability management Building project UF 722021 1 15 – Viability management Building project UF 482024 1 4 4 General Directorate of Maritime Territory and Merchant Marine Maritime concession CLP 312020 1 1,409 General Directorate of Maritime Territory and Merchant Marine Maritime concession CLP 6302020 1 2 General Directorate of Maritime Territory and Merchant Marine Maritime concession CLP 7152020 1 – 230 General Directorate of Maritime Territory and Merchant Marine Maritime concession CLP 312021 1 1,484 Minera Doña Ines de Collahuasi Offer to purchase an asset US$ 122021 1 8 – Ministry of national goods Project of exploitation CLP 2282020 22 – 154 Ministry of national goods Project of exploitation CLP 21252021 22 176 – Ministry of national goods Project of exploitation UF 692021 3 24 24 Ministry of national goods Project of exploitation UF 6232021 3 24 – Minestry of Public Works Building project UF 12312019 1 – 22,364 Minestry of Public Works Building project UF 122021 1 24,186 – Minestry of Public Works Building project UF 1022021 1 559 516 Minestry of Public Works Building project UF 12312021 1 180 Minestry of Public Works Building project UF 7292022 1 42 – Oriente Copper Netherlands B.V. Pledge on shares US$ 1112032 1 877,813 877,813 Sernageomin Environmental UF 2182020 2 – 125,213 Sernageomin Environmental UF 532020 1 125,179 Sernageomin Environmental UF 1072020 2 32,321 Sernageomin Environmental UF 11102020 1 122,239 Sernageomin Environmental UF 11132020 1 69,796 Sernageomin Environmental UF 11262020 1 158,485 Sernageomin Environmental UF 1222020 3 346,606 Sernageomin Environmental UF 12152020 1 – 74,795 Sernageomin Environmental UF 2182021 2 161,254 – Sernageomin Environmental UF 532021 2 162,510 Sernageomin Environmental UF 1072021 1 40,945 Sernageomin Environmental UF 11102021 1 155,019 Sernageomin Environmental UF 11132021 1 92,052 Sernageomin Environmental UF 11262021 2 201,655 Sernageomin Environmental UF 1222021 4 346,608 Sernageomin Environmental UF 1232021 1 92,942 ¡Sernageomin Environmental UE 12152021 1 100,473 – Total general 2,258,096 1,957,167
As for the documents received as collateral, they cover mainly obligations of suppliers and contractors related to the various development projects. Below are given the amounts received as collateral, grouped according to the Operating Divisions that have received these amounts:
107
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Guarantees received from third parties Division 12312020 | 12312019 ThUS$ Thus$ Andina 135 418 Chuquicamata 82 375 Casa Matriz 713,404 887,051 Salvador – 387 El Teniente 427 447 Ventanas 50 52 Total 714,098 888,730
31. Balances in foreign currency
a) Assets by of Currency 12312020 Assets national and Foreign currrency US Dollars Euros Other currencies IS UF. TOTAL Current Assets Cash and cash equivalenis 1,908,543 52,168 5,079 138,898 2,805 2,107,493 Other currentfinancial assets 283,806 – – 22 62 283,890 Other current non-financial assets 29,997 421 177 2,030 9 32,634 Trade and other currentreceivables 2,542,742 157,668 321 548,586 3,249,317 Accounts receivable from related partes, current 98,396 – – 1 98,397 Inventories 1,912,067 – – – 1,912,067 Currenttax assets 71,849 965 – 1,510 – 74,324 Total current assets 6,847,400 211,222 5,577 691,047 2,876 7,758,122 Non-current assets Investments accounted for using equity method 3,418,958 – – – 3,418,958 Property, plant and equipment 29,010,721 1 540,754 358 29,551,905 Non-current tax assets 41,215 9 4,684 – 45,908 Others assets 894,980 – 57,269 356,571 126,673 1,435,493 Total non-current assets 33,365,874 57,350 902,009 127,031 34,452,264 [Total Assets 40,213,274 211,222 62,927 1,593,056 129,907 42,210,386
31-12-2019 Assets national and Foreign currrency US Dollars Euros Other currencies IS UF. TOTAL Current Assets Cash and cash equivalenis 1,212,657 49,773 4,674 34,348 1,653 1,303,105 Other currentfinancial assets 172,794 – – 19 138 172,951 Other current non-financial assets 20,762 – 3 196 8 20,969 Trade and other currentreceivables 2,006,046 112,649 384 450,304 18,885 2,588,268 Accounts receivable from related partes, current 20,874 – – – – 20,874 Inventories 1,921,135 – – – 1,921,135 Currenttax assets 20,960 2 19 1,738 – 22,719 Total current assets 5,375,228 162,424 5,080 486,605 20,684 6,050,021 Non-current assets Investments accounted for using equity method 3,483,523 – – 3,483,523 Property, plant and equipment 29,268,012 – – 29,268,012 Non-current tax assets 43,736 – – – – 43,736 Others assets 611,426 189 65,692 181,627 640,385 1,499,319 Total non-current assets 33,406,697 189 65,692 181,627 640,385 34,294,590 [Total Assets [ 38,781,925 162,613 70,772 668,232 661,069 40,344,611 ]
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
b) Liability by type of currency: [ 31-12-2020
National and foreign currency liabilities US Dollars Euros Oher Non-indexed UF TOTAL currencies Ch$
Current liabilities Other current financial liabilites 529,998 (28) 7 – (31) 529,946 Currrentlease liabilities 36,063 – 865 95,091 13,385 145,404 Trade and other current payables 1,068,185 4,268 282 425,482 68 1,498,285 Accounts payable to related parties, current 197,304 – – 1,620 – 198,924 Other current provisions 552,536 937 – 8,554 – 562,027 Current tax liabilites 1,587 5,024 243 1,540 51 8,445 Current provisions for employee benefits 2,201 – 320 457,981 276 460,778 Other current non-financial liabiliies 32,836 – 145 3,059 58 36,098 Total current liabilities 2,420,710 10,201 1,862 993,327 13,807 3,439,907 Non-current liabilities Other non-current financial liabiliies 16,931,003 (6,016) 53,257 – 756,956 17,735,200 Non-current lease liabilities 124,274 – 2,481 162,685 50,164 339,604 Non-current payables – 460 – – 460 Other non-current provisions 1,212,543 – – 79,586 1,002,378 2,294,507 Deferred tax liabilites 5,521,956 – – 5,839 – 5,527,795 Non-current provisions for employee benefits 13,010 – 592 1,230,338 – 1,243,940 Other non-current non-financial liabiliies 2,203 – – 279 – 2,482 Total non-current liabilities 23,804,989 (6,016) 56,790 1,478,727 1,809,498 27,143,988 [Total liabilities [26,225,699 4,185 58,652 2,472,054 1,823,305 | 30,583,895 |
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CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2) Í 31-12-2019
National and foreign currency liabilities US Dollars Euros Oher Non-indexed UF TOTAL currencies Ch$
Current liabilities Other current financial liabilities 1,244,765 (2) 5,721 370 (264) 1,250,590 Currrentlease liabilities 36,702 – 272 74,109 16,678 127,761 Trade and other current payables 886,390 12,439 1,300 520,470 316 1,420,915 Accounts payable to related parties, current 135,281 – 1,953 – 137,234 Other current provisions 356,871 64,664 8,167 61,545 10,925 502,172 Current tax liabilities – – 13,857 – 13,857 Current provisions for employee benefits – 435,565 – 435,565 Other current non-financial liabilities 27,223 – 7,582 58 34,863 Total current liabilities 2,687,232 77,101 15,460 1,115,451 27,713 3,922,957 Non-current liabilities Other non-current financial liabiliies 15,462,011 (6,414) 112,112 3 665,401 16,233,113 Non-current lease liabilities 113,062 – 378 118,701 72,969 305,110 Non-current payables 8,346 – – – 8,346 Other non-current provisions 1,481,547 410 26,624 581,906 2,090,487 Deferred tax liabilites 4,860,881 – – 4,860,881 Non-current provisions for employee benefits 14,699 1,260,559 8,099 1,283,357 Other non-current non-financial liabiliies 5,447 – – 246 – 5,693 Total non-current liabilities 21,945,993 (6,414) 112,900 1,406,133 1,328,375 24,786,987 [Total liabilities 24,633,225 70,687 128,360 2,521,584 1,356,088 | 28,709,944 |
32. Sanctions
33.
As of December 31, 2020 and 2019, neither Codelco Chile nor its Directors and Managers have been sanctioned by the CMF or any other administrative authorities.
Environmental Expenditures
Each of Codelco’s operations is subject to national, regional and local regulations related to protection of the environment and natural resources, including standards relating to water, air, noise and disposal and transportation of dangerous residues, among others. Chile has introduced environmental regulations that have obligated companies, including Codelco, to carry out programs to reduce, control or eliminate relevant environmental impacts. Codelco has executed and shall continue to execute a series of environmental projects to comply with these regulations.
Pursuant to the Letter of Values approved in 2010, Codelco is governed by a series of internal policies and regulations that frame its commitment to the environment, among which is the Corporate Sustainable Development Policy (2016).
The environmental management systems of the divisions, structure their efforts in order to comply with the commitments assumed by the corporation’s environmental policies, incorporating elements of planning, operating, verifying and reviewing activities. As of December 31, 2020, Codelco is implementing a strategic change process in all divisions to manage the aspects and risks associated with environmental matters,
110
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2) under a corporate management system issued by Head Office, seeking to obtain the ISO 14001: 2015 certification.
To comply with the Circular No. 1901 of 2008 of the CMF, the details of the Corporation’s main expenditures related to the environment during the years ended December 31, 2020 and 2019, respectively, and the projected future expenses are stated below.
111
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Disbursements 12312020 12312019 Future committed Entity Proyect name Proyect Status Amount Asset Asset Expenditure Amount Amount Estimated Thus$ Expense Item ThUS$ ThUS$ date Chuquicamata Codelco Chile |Talambre dam capacity extension, 8th stage In Progress 35,560 Asset P,PS8E 76,611 – 2020 Codelco Chile [Replacement of circulation pot 1A and 2A Finished – Asset P,PS8E 14,033 – 2019 Codelco Chile [Construction installation surplus management Finished – Asset P,PS8E 761 – 2019 Codelco Chile [Replacement of water treatment plant Finished – Asset P,PS8E 8,944 – 2019 Codelco Chile [Replacement gas management system Finished – Asset P,PS8E 9,671 – 2019 Codelco Chile [Acid plant tranformation 3-4 DCDA In Progress 966 Asset P,PS8E 160,546 – 2020 Codelco Chile |Enablement refining gas treatment system In Progress 16,607 Asset P,PS8E 50,009 – 2020 Codelco Chile |Dryer replacementn * 5 fuco In Progress 8,386 Asset P,PS8E 39,136 – 2020 Codelco Chile [Construction Relle Res Dom-Asim Montec In Progress 4,271 Asset P,PS8E 2,181 – 2020 Codelco Chile [Construction IX stage Talabre tanque Finished – Asset P,PS8E 9,542 – 2019 Codelco Chile [Construction 8 Seg Montecristo In Progress 804 Asset P,PS8E 11,393 – 2020 Codelco Chile [Acid plants In Progress 17,406 | Expenditure Operational expenses 35,823 – 2020 Codelco Chile [Solid waste In Progress 1,745 | Expenditure Operational expenses 2,388 25 2021 Codelco Chile [Tailings In Progress 22,518 | Expenditure Operational expenses 23,153 – 2020 Codelco Chile [Water treatment plant In Progress 24,843 | Expenditure Operational expenses 25,143 – 2020 Codelco Chile [Environmental monitoring In Progress 1,470 | Expenditure Operational expenses 2,152 – 2020 Codelco Chile |Normalization drainage system drill hole In Progress 89 Asset P,PS8E 4,551 2,483 2021 Codelco Chile [Standard handling feeding transport powder In Progress 6,441 Asset P,PS8E 61 13,736 2021 Codelco Chile [Construction talabres thickened tailings In Progress 8,058 Asset P,PS8E – 18,902 2022 Total Chuquicamata 149,164 476,098 35,146 Salvador Codelco Chile [Improved integration ofthe gas process In Progress 9,871 Asset P,PS8E 87,710 18,132 2021 Codelco Chile [Tailings In Progress 4,426 | Expenditure Operational expenses 3,141 – 2020 Codelco Chile [Acid plants In Progress 62,293 | Expenditure Operational expenses 51,131 – 2020 Codelco Chile [Solid waste In Progress 1,500 | Expenditure Operational expenses 1,472 – 2020 Codelco Chile [Water treatment plant In Progress 671 | Expenditure Operational expenses 855 – 2020 Codelco Chile [Overhaul thickeners tailings sal-proy Finished – Asset P,PS8E 3,413 – 2019 Codelco Chile [Dangerous substances warehouse Finished – Asset P,PS8E 301 – 2019 Codelco Chile [Bell replacement In Progress 639 Asset P,PS8E 23,639 3,340 2021 Codelco Chile |Ditch hazardous waste Finished – Asset P,P8E 785 – 2019 Codelco Chile [DRPA Emergency In Progress 4,766 Asset P,PS8E 4,564 14,269 2021 Codelco Chile [Compliance DS 43 storage dangerous substances In Progress 243 Asset P,PS8E 68 712 2021 Total Salvador 84,409 177,079 36,453 Andina Codelco Chile [Construction site emergency plan Finished – Asset P,PS8E 3,886 – 2019 Codelco Chile [Improved water internal tip E2 Finished – Asset P,PS8E 256 – 2019 Codelco Chile |Catchment water drainage hill black Finished – Asset P,PS8E 306 – 2019 Codelco Chile [Construction canal outine DL east In Progress 3,092 Asset P,PS8E 5,133 2,101 2021 Codelco Chile [Construction site emergency plan In Progress 2,469 Asset P,PS8E 4,436 – 2020 Codelco Chile [Expansion dam In Progress 36,753 Asset P,PS8E 49,430 – 2020 Codelco Chile [Construction Structure and instruments In Progress 1,827 Asset P,PS8E 378 – 2020 Codelco Chile [Water injection system Finished – Asset P,PS8E 761 – 2019 Codelco Chile [construcion of pits containment of spills In Progress 320 Asset P,PS8E 441 – 2020 Codelco Chile [Valve and works rating In Progress 1,580 Asset P,PS8E 1,097 1,512 2021 Codelco Chile [Construction of catchment tower N.5 Finished – Asset P,P8E 336 – 2019 Codelco Chile [Solid waste In Progress 2,351 | Expenditure Operational expenses 2,833 – 2020 Codelco Chile [Water treatment plant In Progress 3,945 | Expenditure Operational expenses 4,063 – 2020 Codelco Chile [Trailing In Progress 74,700 | Expenditure Operational expenses 65,557 – 2020 Codelco Chile [Acid drainage In Progress 33,288 | Expenditure Operational expenses 27,615 – 2020 Codelco Chile [Environmental monitoring In Progress 808 | Expenditure Operational expenses 882 – 2020 Codelco Chile |Sustainability and external matters management In Progress 1,750 | Expenditure Operational expenses 2,410 – 2020 Codelco Chile [DLN conditioning works In Progress 11,086 Asset P,PS8E 8 2,054 2021 Codelco Chile [Construcion works mitigation water shortage In Progress 7,952 Asset P,PS8E 7,605 – 2020 Codelco Chile [Excavation operation improvement In Progress 824 Asset P,PS8E 34 2,679 2021 Codelco Chile [Water dispatch tunnel modification In Progress 1,350 Asset P,PS8E 34 5,841 2021 Codelco Chile [Implementation of the catchment system for rafis tove In Progress 45 Asset P,PS8E – 12,044 2022 Codelco Chile [Dam Ovejeria: longitudinal drainage stage 8 In Progress 459 Asset P,PS8E – 43,196 2021 Codelco Chile [North extended ballast deposit In Progress 13,669 Asset P,PS8E – 283,335 2024 Total Andina 198,268 177,501 352,762 ¡Subtotal 431,841 830,678 424,361
112
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Disbursements 12312020 12312019 Future committed Entity Proyect name Amount Asset Asset Expenditure Amount Amount Estimated Thus$ Expense Hem ThUuS$ ThUus$ date El Teniente Codelco Chile [Construction of7h phase of Carén In Progress 52,765 Asset P,P8E 58,357 275,427 2023 Codelco Chile [Construction of slag treatment plant In Progress 31,987 Asset P,P8E 122,158 2,108 2021 Codelco Chile |Smelting emissions network Finished – Asset P,P8E 26,393 – 2020 Codelco Chile [Smoke capacity reduction Finished – Asset P,P8E 11,412 – 2019 Codelco Chile [Construction of slag treatment plant In Progress 969 Asset P,P8E 843 – 2020 Codelco Chile [Acid plants In Progress 60,007 | Expenditure Operational expenses 66,348 – 2020 Codelco Chile [Solid waste In Progress 2,887 | Expenditure Operational expenses 2,929 – 2020 Codelco Chile [Water treatment plant In Progress 15,021 | Expenditure Operational expenses 13,786 – 2020 Codelco Chile [Tailings In Progress 63,641 | Expenditure Operational expenses 65,003 – 2020 Codelco Chile [Well construcion and hydrogeology modification Colihue-| In Progress 145 Asset P,P8E 18 4,551 2022 Codelco Chile [Improvement ofthe container washing system for filter pla] In Progress 33 Asset P,P8E 231 – 2020 Codelco Chile [Land acquisition In Progress 6,791 Asset P,P8E – – 2020 Total El Teniente 234,246 367,478 282,086 ¡Gabriela Mistral Codelco Chile [Environmental monitoring In Progress 75| Expenditure Operational expenses 54 – 2020 Codelco Chile [Solid waste In Progress 2,350 | Expenditure Operational expenses 2,031 – 2020 Codelco Chile [Environmental consultancy In Progress 172 | Expenditure Operational expenses 131 – 2020 Codelco Chile [Water treatment plant In Progress 3| Expenditure Operational expenses 1 – 2020 Codelco Chile [Garbage dump extension Finished – Asset P,P8E 25,270 – 2020 Codelco Chile [Improved dust collection system Finished – Asset P,P8E 382 – 2019 Total Gabriela Mistral 2,600 27,869 – Ventanas Codelco Chile [Acid plants In Progress 28,740 | Expenditure Operational expenses 24,694 – 2020 Codelco Chile [Solid waste In Progress 1,463 | Expenditure Operational expenses 1,689 – 2020 Codelco Chile [Environmental monitoring In Progress 1,442 | Expenditure Operational expenses 1,362 – 2020 Codelco Chile [Water treatment plant In Progress 5,639 | Expenditure Operational expenses 5,573 – 2020 Codelco Chile [Distribution system replacement Finished – Asset P,P8E 770 – 2019 Codelco Chile [Main chinney implementation In Progress 327 Asset P,P8E 474 – 2020 Codelco Chile [Implementation of abatement water system In Progress 79 Asset P,P8E 239 – 2020 Codelco Chile |Stockpile improvement In Progress 97 Asset P,P8E 525 – 2020 Codelco Chile [Improvement closure facilites and crusher belts In Progress 131 Asset P,P8E 219 – 2020 Codelco Chile [Stabilized road operations In Progress 76 Asset P,P8E 211 – 2020 Codelco Chile |Improves gas abatement capture In Progress 34 Asset P,P8E – 1,125 2021 Codelco Chile [Critical Var monitoring implementation In Progress 128 Asset P,P8E – 801 2021 Total Ventanas 38,156 35,756 1,926 Radomiro Tomic Codelco Chile [Solid waste In Progress 880 | Expenditure Operational expenses 2,031 – 2020 Codelco Chile [Environmental monitoring In Progress 387 | Expenditure Operational expenses 54 – 2020 Codelco Chile [Water treatment plant In Progress 1,087 | Expenditure Operational expenses 1 – 2020 Codelco Chile [Obras preliminares suministro agua In Progress 266 Asset P,P8E – 4,781 2021 Total Radomiro Tomic 2,620 2,086 4,781 Ministro Hales Codelco Chile [Solid waste In Progress 1,948 | Expenditure Operational expenses 1,961 – 2020 Codelco Chile [Water treatment plant In Progress 175 | Expenditure Operational expenses 159 – 2020 Codelco Chile [Pit drainage wells mine In Progress 191 Asset P,P8E 3,148 – 2020 Codelco Chile [Implementation monitoring acuifero pit In Progress 1,547 Asset P,P8E 173 1,561 2021 Codelco Chile [Silice barn extension and dome control room In Progress 19 Asset P,P8E 45 3,955 2022 Total Ministro Hales 3,880 5,486 5,516 Ecometales Limited Codelco Chile |Smelting powders leaching plant In Progress 566 | Expenditure Operational expenses 730 685 2019 Codelco Chile |Smelting powders leaching plant In Progress 8| Expenditure Operational expenses 7 89 2019 Total Ecometales Limited 574 737 774 ¡Subtotal 282,076 439,412 295,083 [Total [713,917] [1,270,090] 719,444]
113
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
34. Subsequent events
– On January 26, 2021, it was reported as an essential fact that on this date Mr. Rodrigo Cerda Norambuena has submitted his resignation as Director of the National Copper Corporation of Chile, in accordance with the provisions of article 8C letter b) of the Decree Law No. 1350.
Considering the provisions of the same Decree Law No. 1350 in article 8, ithe President of the Republic appoints the new member of the Board.
– On January 29, 2021, it was reported as an essential fact that on this date Mr. Raúl Alejandro Puerto Mendoza has been appointed as Codelco’s Auditor General as of March 11, 2021.
As of that same date, Rodrigo Miranda S., who continues to act as Audit Manager of the Corporation, ceases to act as Interim Auditor General.
– – On February 18, 2021, it was reported as an essential fact that it has been decided to make organizational adjustments in Codelco’s higher-level structure, consisting of the elimination of the Productivity and Costs Vice Presidency and its corresponding position, distributing its functions in other areas of the Corporation .
In consideration of the above, the Vice Presidency of Supply is created, reporting to the Executive President.
As Vice President in charge of the same, Mr. Mauricio Acuña Sapunar was appointed, as of April 5, 2021.
As of that same date, Alejandro Rivera S. will cease to act as Interim Vice President of Productivity and Costs, who will continue to serve as Vice President of Administration and Finance of the Corporation.
– On February 25, 2021, it was reported as an essential fact that Francisco Balsebre Olarán has been appointed as titular General Manager of the Ministro Hales Division, as of March 1, 2021, who to date was acting as interim in the same charge.
Management of the Corporation is not aware of other significant events of a financial nature or of any other nature that could affect these financial statements, occurring between January 1, 2021 and the date of issue of these consolidated financial statements as of February 25, 2021.
114
CORPORACION NACIONAL DEL COBRE DE CHILE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands of US dollars of the United States of America, except as indicated in other currency or unit) (Translation to English of the Consolidated Financial Statements originally issued in Spanish – see Note 1.2)
Octavio Araneda Osés Alejandro Rivera Stambuk Chief Executive Officer Chief Financial Officer Juan Ogas Cabrera Cristóbal Parrao Cartagena Accounting Manager Accounting Director
115
Execution version
CORPORACIÓN NACIONAL DEL COBRE DE CHILE
BofA Securities, Inc.
One Bryant Park New York, New York 10036
BNP Paribas Securities Corp.
787 Seventh Avenue, New York, New York 10019
U.S.$900,000,000
5.125% Notes Due 2033
Purchase Agreement
New York, New York January 30, 2023
Santander Investment Securities Inc.
437 Madison Avenue, 7th floor New York, New York 10022 and
Scotia Capital (USA) Inc.
250 Vesey Street New York, New York 10281
As Representatives of the Initial Purchasers
Ladies and Gentlemen:
Corporación Nacional del Cobre de Chile, a state-owned enterprise organized under the laws of Chile (the Company), proposes to issue and sell to the several purchasers named in SCHEDULE 1 hereto (the
Initial Purchasers), for which you (the
Representatives) are acting as representatives, U.S.$900,000,000 principal amount of its
5.125% Notes Due 2033, (the Securities), to be issued pursuant to the indenture (the Original Indenture), dated February 5, 2019, among the Company, The Bank of New York Mellon, as trustee, paying agent, transfer agent and registrar (the Trustee), and The Bank of
New York Mellon (Luxembourg) S.A., as Luxembourg paying agent (the Luxembourg Agent), as supplemented by the eleventh supplemental indenture to be dated February 2, 2023 (the Eleventh Supplemental Indenture and, together with the Original Indenture, the Indenture). Unless otherwise specified, defined terms used herein shall have the meanings set forth in Section 21 hereof.
The sale of the Securities to the Initial Purchasers will be made without registration of the Securities under the Act in reliance upon exemptions from the registration requirements of the Act.
In connection with the sale of the Securities, the Company has prepared a preliminary offering memorandum, dated January 30, 2023 (including any and all exhibits thereto, the Preliminary Memorandum), and a final offering memorandum, dated January 30, 2023 (as amended or supplemented at the Execution Time, including any and all exhibits thereto, the Final Memorandum). For the purposes of this purchase agreement (this Agreement), Additional Written Offering Communication means any written communication (as defined in Rule 405 under the Act) that constitutes an offer to sell or a solicitation of an offer to buy the Securities other than the Preliminary Memorandum or the Final Memorandum, and Time of Sale Memorandum means the Preliminary Memorandum together with the pricing term sheet prepared by the Company substantially in the form of Exhibit B hereto and any Additional Written Offering Communications identified in SCHEDULE II hereto. Each of the Preliminary Memorandum, the Time of Sale Memorandum and the Final Memorandum sets forth certain information concerning the Company and the Securities. The Company hereby confirms that it has authorized the use of the Preliminary Memorandum, the Time of Sale Memorandum, the Final Memorandum and any Additional Written Offering Communications identified in SCHEDULE II hereto, and any amendment or supplement thereto, in connection with the offer and sale of the Securities by the Initial Purchasers.
1. Representations and Warranties. The Company represents and warrants to each Initial Purchaser as set forth below in this Section 1.
(a) The Time of Sale Memorandum, at the Execution Time, does not and, on the Closing Date, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Preliminary Memorandum, at the date thereof, did not, and the Final Memorandum, at the date thereof, did not and, on the Closing Date, will not (and any amendment or supplement thereto, at the date thereof, and at the Closing Date, will not), contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty as to any information contained in the Preliminary Memorandum, the Time of Sale Memorandum or the Final Memorandum, or any amendment or supplement thereto, in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Initial Purchasers through the Representatives specifically for inclusion therein, it being understood that the only such information is set forth in Section 7(b) hereof.
(b) Except for the Additional Written Offering Communications, if any, identified in SCHEDULE II hereto, and electronic road shows, if any, furnished to you before first use, the Company has not prepared, used or referred to, and will not, without your prior consent, prepare, use or refer to, any Additional Written Offering Communication.
(c) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf has, directly or indirectly, made offers or sales of any security (as defined in the Act), or solicited offers to buy or otherwise negotiated in respect of any security, which is or will be integrated with the sale of the Securities in a manner that would require the registration of the Securities under the Act.
(d) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf, has, directly or indirectly, offered or sold the Securities in Chile or to any resident of Chile, except as permitted by applicable Chilean law.
(e) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf has, directly or indirectly, offered, solicited offers to buy or sell any of the Securities by any form of general solicitation or general advertising (within the meaning of Regulation D) or in any manner involving a public offering (within the meaning of Section 4(a)(2) of the Act).
(f) The Securities satisfy the eligibility requirements of Rule 144A(d)1(3) under the Act.
(g) The Company is a foreign issuer (as defined in Regulation S), and neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf has engaged in any directed selling efforts (as defined in Regulation S) with respect to the Securities, except no such representation, warranty or agreement is made by the Company with respect to the Initial Purchasers.
(h) Ttis not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers in the manner contemplated by this Agreement to register the Securities under the Act or to qualify the Indenture under the Trust Indenture Act.
(i)_ Each of the Company and its Affiliates, and any person acting on its or their behalf, has complied with the offering restrictions requirement of Regulation S.
(ji) The Company is not, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in each of the Time of Sale Memorandum and the Final Memorandum will not be, required to register as an investment company within the meaning of the Investment Company Act.
(k) The Company has not paid or agreed to pay to any person any compensation for soliciting another to purchase any securities of the Company (except as contemplated by this Agreement).
(1) The Company has not taken, directly or indirectly, any action designed to cause or result in, or that has constituted or which might reasonably be expected to constitute or cause or result in, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.
(m) Except as disclosed in each of the Time of Sale Memorandum and the Final Memorandum, there are no transaction, stamp or other issuance or transfer taxes or duties or other similar fees or withholdings or charges required to be paid in connection with the execution and delivery of this Agreement, the Indenture, the issuance or sale by the Company of the Securities or the enforcement of the Securities, other than (1) a 0.8% stamp tax on the incurrence of the indebtedness evidenced by the Securities, which will be paid by the Company upon the issuance of the Securities, (ii) a 4% withholding tax on interest payments, and all other payments deemed to be interest payments, with respect to the Securities to the extent paid to a person domiciled or residing outside of Chile, and (iii) the value added tax (impuesto al valor agregado or VAT) that may be payable on fees and commissions paid or to be paid to non-domiciled andor non-resident individuals or entities. If thin capitalization rules apply, as described in the Time of Sale Memorandum and the Final Memorandum, such interest payments would be subject to a 35% penalty tax that would be payable by the Company. The withholding tax applicable to the interest payments made by the Company can be credited against such 35% penalty tax. Payments of fees, compensations and reimbursement of costs contemplated in this Agreement or in the Indenture, made to persons domiciled or residing outside of Chile are (or may be, in the case of reimbursement of costs) subject to a withholding tax at a rate of up to 35%; provided, however, that any such payment (A) is exempted from withholding tax if it is deemed a comisión mercantil pursuant to the Commercial Code of Chile and the interpretation of the Chilean Internal Revenue Service (Servicio de Impuestos Internos, or the SIT) or (B) subject to a 15% withholding tax if it is deemed payment for a professional or technical assistance service, provided that the payment is not made to a party organized, domiciled or resident in one of the countries which falls under the scope of article 41H of the Chilean Income Tax Law in which case the withholding tax rate would be 20%. The withholding tax rate applicable to payments of fees, compensation, services and reimbursement of costs to a person not domiciled in, or resident of, Chile may be reduced or may be exempted if there is a double taxation treaty in force between Chile and the country of such persons residency that contemplates a reduced or exempt regime applicable to such payments. Capital gains arising from the sale or other dispositions of the Securities made by a person domiciled or residing outside of Chile will not be deemed as Chilean source income, and therefore, not subject to withholding tax in Chile.
(n) Any information provided by the Company pursuant to Section 5(j) hereof will not, at the date thereof, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(o) The Company has been duly created and is validly existing as a state-owned enterprise under the laws of Chile with corporate power and authority to issue and sell the
4
Securities as contemplated hereby. Each of the Companys subsidiaries has been duly organized and is validly existing and in good standing under the laws of their respective jurisdictions of organization and, together with the Company, have the corporate power to own or lease, as the case may be, and to operate their properties and conduct their business as described in the Time of Sale Memorandum and the Final Memorandum, and are duly qualified to transact business in each jurisdiction which requires such qualification, except to the extent that the failure to be so qualified to transact business would not have a current or prospective material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.
(p) The Company has no significant subsidiary as defined in Rule 1-02 of Regulation S-X pursuant to the Act.
(q) This Agreement has been duly authorized, executed and delivered by the Company; the Original Indenture has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and binding instrument enforceable against the Company in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptey, liquidation, reorganization, insolvency, moratorium or other laws affecting creditors rights generally and general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law)); and the Supplemental Indenture and the Securities have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchasers under this Agreement, will have been duly executed and delivered by the Company and will constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture (subject, as to the enforcement of remedies, to applicable bankruptcy, liquidation, reorganization, insolvency, moratorium or other laws affecting creditors rights generally and general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law)).
(r) The Securities and the Indenture will conform in all material respects to the descriptions thereof in the Final Memorandum.
(s) No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein, in the Indenture or in the Securities, except (i) such as may be required under the blue sky or securities laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Initial Purchasers in the manner contemplated herein and in each of the Time of Sale Memorandum and the Final Memorandum, and (ii) the following authorizations and registrations required by Chilean law, which have been obtained and remain in full force and effect: (A) authorization granted by the President of Chile and by Decree of the Minister of Finance, whether
5 general or specific, pursuant to Article 4 of Decree Law No. 2,349 of 1978 and pursuant to Decree No. 1,009 issued by the Ministry of Finance, published in the Official Gazette on December 23, 1978, as renewed by Decree No. 2,327 dated December 22, 2022 and published in the Official Gazette on January 28, 2023; (B) authorization granted by the Minister of Finance to the Company to enter into negotiations relating to the issue of the Securities, pursuant to Decree Law No. 1,350 of 1976, as amended and pursuant to Ordinary Resolution No. 1,978 issued by the Ministry of Finance on November 9, 2022; (C) authorization granted by the Minister of Finance to the Company to issue the Securities, pursuant to Decree Law No. 1,350 of 1976, as amended and pursuant to Ordinary Resolution No. 221 issued by the Ministry of Finance on January 27, 2023; and (D) the delivery to the Ministry of Finance and the Ministry of Mining for approval and possible review of the proposed annual budget and a debt amortization budget pursuant to Decree Law No. 1,350 of 1976, as amended; (t) Neither the execution and delivery of the Indenture or this Agreement, the issue and sale of the Securities, nor the consummation of any other of the transactions herein or therein contemplated, nor the fulfillment of the terms hereof, thereof or of the Securities has conflicted or will conflict with, or has resulted or will result in, a default, breach or violation of or imposition of any lien, charge or encumbrance upon, any property or assets of the Company or any of its subsidiaries (except, in the case of (1), (111) or (iv) below, for any such conflict, default, breach, violation or imposition as would not have a current or prospective material adverse effect on (x) the consummation of the transactions contemplated hereby or the rights of the holders of the Securities or (y) the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole) pursuant to (i) any provision of applicable law; (ii) Decree Law No. 1,350 of 1976, as amended from time to time, and the Companys by- laws, as restated in Decree No. 3 of January 13, 2012 and published in the Official Gazette on July 4, 2012, or the Estatutos of the Company; (iii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which its respective property is subject; or (iv) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company, any of its subsidiaries or their respective properties.
(u) The consolidated historical financial statements and schedules of the Company and its consolidated subsidiaries included in each of the Time of Sale Memorandum and the Final Memorandum present fairly in all material respects the financial condition, results of operations and cash flows of the Company as of the dates and for the periods indicated and have been prepared in conformity with International Financial Reporting Standards as adopted by the International Accounting Standards Board (IFRS,) in respect of full year periods for 2019, 2020 and 2021 and interim periods, in each case applied on a consistent basis throughout the periods involved (except as otherwise noted therein); the selected financial data set forth under the captions Summary Consolidated Financial Data and Selected Consolidated Financial Data in each of the Time of Sale Memorandum and the Final Memorandum fairly
6 present, on the basis stated in each of the Time of Sale Memorandum and the Final Memorandum, the information included therein and have been prepared in conformity with IFRS in respect of full year periods for 2019, 2020 and 2021 and interim periods, in each case applied on a consistent basis throughout the periods involved (except as otherwise noted therein).
(v) Thereis no pending or threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property that is not described in each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto), except for such proceedings that, if the subject of an unfavorable decision, ruling or finding would not, singly or in the aggregate, have a current or prospective material adverse effect (1) on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, or (ii) on the power or ability of the Company to perform its obligations under this Agreement, the Indenture or the Securities or to consummate the transactions contemplated in each of the Time of Sale Memorandum and the Final Memorandum.
(w) No circumstance or other event has arisen that has caused or, with the giving of notice or the lapse of time, or both, would cause the Company to be in violation or default of: (i) any provision of Decree Law No. 1,350 of 1976, as amended, or its Estatutos, (11) the terms of any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole; or (iii) any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, except for such contraventions as would not have a current or prospective material adverse effect on the Company or its subsidiaries, taken as a whole.
(x) The Company and its subsidiaries possess all concessions, licenses, certificates, permits and other authorizations issued by the appropriate government and other regulatory authorities necessary to conduct their respective businesses, as described in each of the Time of Sale Memorandum and the Final Memorandum, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such concession, certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a current or prospective material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.
(y) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS and to maintain asset accountability; (111) access to assets is permitted only in accordance with management’s general or specific authorization; and
7 (iv) the recorded accountability for assets is compared to existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(z) The Company and its subsidiaries have good and marketable title to all real property owned by them and good title to all other properties owned by them, including the Companys mining concessions, mining rights and water rights, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except (1) such as are set forth in or contemplated by each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto) or (1i) where the failure to have good title would not have a current or prospective material adverse effect on the condition (financial or otherwise), earnings business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business; all of the leases and subleases material to the business of the Company and its subsidiaries, taken as a whole, and under which the Company or any of its subsidiaries holds properties described in each of the Time of Sale Memorandum and the Final Memorandum, are in full force and effect, except (i) where the failure to be in full force and effect would not have a current or prospective material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, or (ii) such as are set forth in or contemplated by each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto); and none of the Company or its subsidiaries has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or any of its subsidiaries to the continued possession of the leased or subleased premises under any such lease or sublease, except
(1) claims which are being contested by the Company or its subsidiaries in good faith and which would not have a current or prospective material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, or (ii) such as are set forth in or contemplated by each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto).
(aa) Deloitte Auditores y Consultores Limitada, who have audited the full-year 2019 and 2020 financial statements of the Company included in each of the Time of Sale Memorandum and the Final Memorandum, are an independent audit firm with respect to the Company. PricewaterhouseCoopers Consultores Auditores SpA, who have audited the full-year 2021 financial statements of the Company included in each of the Time of Sale Memorandum and the Final Memorandum, and conducted a limited review of the interim unaudited financial statements of the Company as of September 30, 2022 and for the nine-month period ended September 30, 2022 and 2021 included in each of the Time of Sale Memorandum and the Final Memorandum, are an independent audit firm with respect to the Company.
(bb) The Company and its subsidiaries (1) are in compliance with any and all applicable laws, regulations and approvals relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (Environmental Laws); (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except (x) where such non-compliance with Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not, individually or in the aggregate, have a current or prospective material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, and (y) as described in each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto).
(cc) In the ordinary course of its business, the Company periodically reviews the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws, or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties); on the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a current or prospective material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto).
(dd) Since the respective dates as of which information is given in each of the Time of Sale Memorandum and the Final Memorandum, nothing has occurred giving rise to a current or prospective material adverse change in the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto).
(ee) Pursuant to Article 52 of Law No. 18,840 of 1989, the Organic Law of the Central Bank of Chile, as amended, and Decree Law No. 1,350 of 1976, as amended, the Company is exempt from the Central Bank of Chiles exchange regulations in connection with the issuance, placement and payments upon the Securities. The Company is entitled to make payments under the Securities with its own available foreign currency obtained from its export operations and deposited with the Central Bank of Chile.
(ff) The Company has validly and irrevocably submitted to the non-exclusive jurisdiction of any state or federal court located in the City of New York, New York, has validly and irrevocably waived, to the extent permitted by law, any objection to the venue of a proceeding in any such court and has validly and irrevocably appointed Cogency Global Inc. in New York, New York as its authorized agent for service of process.
(gg) The Company has validly and irrevocably waived, pursuant to Section 17 hereof, and will have validly and irrevocably waived pursuant to the Indenture and the Securities, for itself and its revenues and assets, to the extent permitted by applicable law, any immunity from suit, jurisdiction, attachment in aid or execution of a judgment or prior to a judgment, execution of a judgment or any other legal process with respect to its obligations, respectively, under this Agreement, the Indenture and the Securities to which it may be entitled or become entitled whether or not claimed, including sovereign immunity, except that (i) for the attachment and judicial sale of mining concessions and installations and other goods permanently dedicated to exploration or extraction of minerals relating to such mining concessions, except with respect to mortgages, the consent of the Company will be required and shall be given in the same judicial proceeding in which the attachment and sale is sought (as set forth in Article 226 of the Mining Code of Chile); and (ii) pursuant to the Chilean Constitution, the mining concessions corresponding to mining deposits exploited by the Company upon its creation in 1976 cannot be subject to attachment nor to any act of disposition by the Company. Each such waiver is binding under Chilean law and remains in full force and effect.
(hh) The Company has an authorized capitalization as set forth in each of the Time of Sale Memorandum and the Final Memorandum under the heading Capitalization; and all the outstanding shares of capital stock or other equity interests of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party.
(ii) Neither the Company nor any of its subsidiaries nor, to the best knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries has: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (1i) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) taken any action, directly or indirectly, that violated or is in violation of any provision of any applicable anti-bribery or anti-corruption law or regulation enacted in any jurisdiction, including, without limitation, the Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or under the Bribery Act of 2010 of the United Kingdom, or any other applicable anti-bribery or anti- corruption laws; or (iv) made any unlawful bribe, influence payment, kickback or other unlawful payment or gift of money or anything of value prohibited under any applicable law or regulation in connection with the Company. The Company has instituted, and
10 maintains, policies and procedures designed to promote and achieve the Company and its subsidiaries? compliance with all applicable anti-bribery and anti-corruption laws.
(jj) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, and applicable money laundering statutes of all jurisdictions, rules and regulations thereunder and related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the Money Laundering Laws), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened or contemplated.
(kk) Neither the Company, any of its subsidiaries, nor any director or officer of the Company or any of its subsidiaries, nor to the knowledge of the Company, any agent, employee or affiliate (other than the Republic of Chile) of the Company or any of its subsidiaries (1) is currently an individual or entity that is, or is owned or controlled or is acting on behalf of, one or more individuals or entities (other than the Republic of Chile) that are currently the subject of any sanctions administered or enforced by the United States (including administered or enforced by the Office of Foreign Assets Control of the
U.S. Department of the Treasury (OFAC,) or the U.S. Department of State), the European Union, His Majestys Treasury or the United Nations Security Council (collectively, the Sanctions), (11) organized, located or a resident in a country or territory that is currently the subject of territorial Sanctions broadly prohibiting dealing with such country or territory (each such country, a Sanctioned Country, currently the Crimea region, the so-called Donetsk Peoples Republic and the so-called Luhansk Peoples Republic regions of Ukraine, Cuba, Iran, North Korea or Syria, and such persons, Sanctioned Persons and each such person, a Sanctioned Person, or (111) will, directly or indirectly, use the proceeds of the offering of the Securities hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity in any manner that would result in a violation of any Sanctions by, or would reasonably be expected to result in the imposition of Sanctions against, any individual or entity participating in the offering, whether as underwriter, advisor, investor or otherwise. Neither the Company nor any of its subsidiaries has, to the knowledge of the Company, engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, in the preceding three years, that have resulted in a violation of Sanctions by, or the imposition of Sanctions against, the Company or the Initial Purchasers, nor does the Company or any of its subsidiaries have any plans to engage in dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, that would result in a violation of Sanctions by, or would reasonably be expected to result in the imposition of Sanctions against, the Company or the Initial Purchasers.
(1) No labor disturbance by or dispute with employees of the Company or any of its subsidiaries exists or, to the best knowledge of the Company, is contemplated or threatened, and the Company is not aware of any existing or imminent labor disturbance
11 by, or dispute with, the employees of any of the Companys subsidiaries principal suppliers, contractors or customers, except (x) as would not have a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business and (y) as set forth in or contemplated in each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto).
(mm) The Company and its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, which insurance is in amounts and insures against such losses and risks as are adequate to protect the Company and its subsidiaries and their respective businesses, except where any failure to have such insurance would not result in a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business; and neither the Company nor any of its subsidiaries has (i) received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business at a cost that would not result in a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.
Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Initial Purchasers in connection with the offering of the Securities shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Initial Purchaser.
2. Purchase and Sale. (a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees, severally and not jointly, to purchase from the Company, at a purchase price of 99.858% of the principal amount of the Securities, plus accrued interest from February 2, 2023 to the Closing Date (as defined below), the principal amount of Securities set forth opposite such Initial Purchasers name in SCHEDULE T hereto.
(b) The Company acknowledges and agrees that the Initial Purchasers are acting solely in the capacity of an arm’s length contractual counterparty to the Company with respect to the offering of Securities contemplated hereby (including in connection with determining the terms of the offering) and not as a financial advisor or a fiduciary to, or an agent of, the Company or any other person. Additionally, no Initial Purchaser is advising the Company or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction. The Company shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and the Initial Purchasers shall have no responsibility or liability to the Company with respect thereto.
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Any review by the Initial Purchasers of the Company, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Initial Purchasers and shall not be on behalf of the Company. The Company acknowledges that none of the activities of the Initial Purchasers in connection with the offering of Securities constitutes a recommendation, investment advice or solicitation or any action by the Initial Purchasers with respect to the Company.
3. Delivery and Payment. Delivery of and payment for the Securities shall be made at 10:00 A.M., New York City time, on February 2, 2023 or at such time on such later date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 8 hereof (such date and time of delivery and payment for the Securities, including as so postponed, being herein called the Closing Date). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Initial Purchasers against payment by the several Initial Purchasers through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to the account specified by the Company.
Delivery of the Securities shall be made through the facilities of The Depository Trust Company (DTC) unless the Representatives shall otherwise instruct.
4. Offering by the Initial Purchasers. Each Initial Purchaser, severally and not jointly, represents and warrants to and agrees with the Company that: (a) It has not offered or sold, and will not offer or sell, any Securities except (i) to persons it reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Act) and that, in connection with each such sale, it has taken or will take reasonable steps to ensure that the purchaser of such Securities is aware that such sale is being made in reliance on Rule 144A; or (ii) in accordance with the restrictions set forth in Exhibit A hereto.
(b) Neither it nor any person acting on its behalf has made or will make offers or sales of the Securities in the United States by means of any form of general solicitation or general advertising (within the meaning of Regulation D) in the United States or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Act.
(c) Unless it has obtained or will obtain the prior written consent of the Company, it has not used, and will not use, or authorize use of, any written communication that constitutes an offer to sell or the solicitation of an offer to buy the Securities other than: (1) the Preliminary Memorandum, (ii) the Time of Sale Memorandum, (iii) the Final Memorandum, (iv) any Additional Written Offering Communications identified in SCHEDULE II hereto; and (v) any Bloomberg or other customary electronic communications providing certain ratings or proposed terms of the Securities or relating to marketing, administrative or procedural matters in connection with the offering of the Securities.
5. Covenants of the Company. The Company agrees with each Initial Purchaser that:
13 (a) The Company will furnish to each Initial Purchaser and to counsel for the Initial Purchasers, without charge, during the period referred to in paragraph (d) below, electronic copies of the materials contained in the Time of Sale Memorandum, the Final Memorandum and any amendments and supplements thereto as they may reasonably request.
(b) Before amending or supplementing the Preliminary Memorandum, the Time of Sale Memorandum or the Final Memorandum, the Company will furnish to the Initial Purchasers a copy of each such proposed amendment or supplement and will not use any such proposed amendment or supplement to which the Initial Purchasers reasonably object.
(c) The Company will furnish to each Initial Purchaser a copy of each proposed Additional Written Offering Communication to be prepared by or on behalf of, used by, or referred to by the Company and agrees not to use or refer to any proposed Additional Written Offering Communication to which the Initial Purchasers reasonably object.
(d) If at any time prior to the completion of the sale of the Securities by the Initial Purchasers (as determined by the Representatives), any event occurs as a result of which the Time of Sale Memorandum or the Final Memorandum, as then amended or supplemented, would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it should be necessary to amend or supplement the Time of Sale Memorandum or the Final Memorandum to comply with applicable law, the Company promptly: (1) will notify the Representatives of any such event; (11) subject to the requirements of paragraph (b) of this Section 5, will prepare an amendment or supplement that will correct such statement or omission or effect such compliance; and (iii) will supply any supplemented or amended Time of Sale Memorandum or the Final Memorandum to the several Initial Purchasers and counsel for the Initial Purchasers without charge in such quantities as they may reasonably request.
(e) The Company will arrange, if necessary, for the qualification of the Securities for sale by the Initial Purchasers under the laws of such jurisdictions as the Initial Purchasers may reasonably designate and will maintain such qualifications in effect so long as required for the sale of the Securities; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. The Company will promptly advise the Representatives of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.
(£) During the period of one year after the Closing Date, the Company will not resell, and will not permit any person that is an affiliate (as defined in Rule 144 under the Act) at the time of any contemplated resale or that has been an affiliate within the three months preceding such time to resell, any of the Securities that have been reacquired by
14 any of them, except for Securities purchased by the Company or any of its affiliates and resold in a transaction registered under the Act or in reliance of Regulation S.
(2) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf will, directly or indirectly, make offers or sales of any security, or solicit offers to buy any security, under circumstances that would require the registration of the Securities under the Act.
(h) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf will, directly or indirectly, make offers or sales of the Securities in Chile or to any resident of Chile, except as permitted by applicable Chilean law.
(1) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Securities in the United States or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Act.
(i) So long as any of the Securities are restricted securities within the meaning of Rule 144(a)(3) under the Act, the Company will, unless it becomes subject to and complies with Section 13 or 15(d) of the Exchange Act, or becomes exempt from such reporting requirements pursuant to, and complies with, Rule 12g3-2(b) under the Exchange Act, provide to each holder of such restricted securities and to each prospective purchaser (as designated by such holder) of such restricted securities, upon the request of such holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the Act. This covenant is intended to be for the benefit of the holders, and the prospective purchasers designated by such holders, from time to time of such restricted securities.
(k) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf will engage in any directed selling efforts (as defined in Regulation S) with respect to the Securities.
(1) The Company will cooperate with the Representatives and use its best efforts to permit the Securities to be eligible for clearance and settlement through DTC, including its indirect participants, Euroclear Bank S.A.N.V. (Euroclear) and Clearstream Banking, S.A., Luxembourg (Clearstream).
(m) The Company will use its best efforts to effect the listing of the Securities on the Euro MTF market of the Luxembourg Stock Exchange and for so long as the Securities are outstanding, will file with the Euro MTF market of the Luxembourg Stock Exchange and any other governmental agency, authority or instrumentality in Luxembourg as may be required, such reports, documents, agreements and other information which may, from time to time, be required to be so filed; provided that the Company may, in its reasonable discretion, de-list the Securities in the event that any European or national legislation becomes effective in Luxembourg in a manner that would require the Company to publish or produce financial statements according to
15 accounting principles or standards that are different from IFRS or that would otherwise impose requirements that the Company determines, in its reasonable discretion, are not reasonable.
(n) The Company will not for a period of 30 days following the Execution Time, without the prior written consent of the Representatives, offer, sell or contract to sell, or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company or any Affiliate of the Company or any person in privity with the Company or any Affiliate of the Company), directly or indirectly, or announce any public or broadly marketed offering of, any U.S. dollar-denominated debt securities issued or guaranteed by the Company in the international capital markets (other than the Securities).
(o) The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or which might reasonably be expected to constitute or cause or result in, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.
(p) The Company agrees either to pay directly or to reimburse the Initial Purchasers, as the case may be, for the reasonable and documented expenses relating to the following matters: (i) the issuance of the Securities and the fees and expenses of the Trustee (including, without limitation, the fees of counsel for such trustee); (ii) the preparation, printing and reproduction of each of the Preliminary Memorandum and Final Memorandum and each amendment or supplement to either of them, including the pricing term sheet prepared by the Company and any Additional Written Offering Communications identified in SCHEDULE II hereto; (iii) the printing (and reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of each of the Preliminary Memorandum and Final Memorandum, and all amendments or supplements to either of them, as may, in each case, be reasonably requested for use in connection with the offering and sale of the Securities; (iv) the preparation, printing, authentication, issuance and delivery of certificates for the Securities, including any stamp or transfer taxes in connection with the original issuance and sale of the Securities; (v) the printing (and reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Securities; (vi) any registration or qualification of the Securities for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of counsel for the Initial Purchasers relating to such registration and qualification); (vii) the listing of the Securities with the Euro MTF market of the Luxembourg Stock Exchange (including the fees of the agent retained in connection with such listing); (viii) the approval of the Securities for book-entry transfer by DTC, Euroclear and Clearstream; (ix) the rating of the Securities by rating agencies; (x) the expenses incurred by the Company or the Initial Purchasers in connection with presentations to prospective purchasers of the Securities; (xi) the fees and expenses of the Companys accountants; (xii) the fees and expenses of counsel (including local and
16 special United States and Chilean counsels) for the Company; (xiii) all other reasonable and documented expenses incurred by the Initial Purchasers in connection with the offering and sale of the Securities, except for the fees and expenses of counsels (including United States and Chilean counsels) for the Initial Purchasers; and (xiv) all other fees and expenses incident to the performance by the Company and the Initial Purchasers of their obligations hereunder; provided that, if the offering of the Securities (A) is not completed within twelve months because any condition to the obligations of the Initial Purchasers set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 9 hereof or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Initial Purchasers, the Company shall pay directly all costs and expenses contemplated by this Section 5(p) or, to the extent the Initial Purchasers have borne such costs and expenses, shall reimburse the Initial Purchasers severally through the Representatives; and (B) is completed, the Initial Purchasers shall pay for all such costs and expenses of this Section 5(p) pro rata in proportion to each Initial Purchaser?s commitment to purchase Securities as listed in SCHEDULE I hereto in accordance with Section 2(a) and this Section 5(p) (except for the costs and expenses contemplated by S(p)(ix), S(pAxiyand S(pXxii), which shall be paid directly by the Company whether or not the offering of the Securities is completed), and the Company shall cover such costs and expenses of this Section 5(p) pursuant to Section 2(a).
(q) The Company will apply the net proceeds from the sale of the Securities substantially in accordance with the description set forth under the heading Use of Proceeds in each of the Time of Sale Memorandum and the Final Memorandum.
(1) The Company will not take any action or omit to take any action (such as issuing any press release relating to any Securities without an appropriate legend) which may result in the loss by any of the Initial Purchasers of the ability to rely on any stabilization safe harbor provided by the Financial Conduct Authority under the U.K.
Financial Services and Markets Act 2000 (the FSMA).
6. Conditions to the Obligations of the Initial Purchasers. The obligations of the Initial Purchasers to purchase the Securities on the Closing Date shall be subject to the accuracy of the representations and warranties of the Company contained herein at the Execution Time and the Closing Date, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: (a) The Company shall have requested and caused Cleary Gottlieb Steen 82 Hamilton LLP, U.S. counsel for the Company, to furnish to the Representatives its opinion, dated the Closing Date and addressed to the Representatives, substantially to the effect that: (i) the Indenture has been duly executed and delivered by the Company under the laws of the State of New York and is a valid, binding and enforceable agreement of the Company; the Securities, when delivered to and paid for by the
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Initial Purchasers in accordance with this Agreement, will be the valid, binding and enforceable obligations of the Company, entitled to the benefits of the Indenture pursuant to which such Securities are to be issued; the statements set forth under the headings Description of Notes and Transfer Restrictions in the Time of Sale Memorandum and the Final Memorandum, insofar as such statements purport to summarize certain provisions of the Securities and the Indenture, provide a fair summary of such provisions; and the statements in Final Memorandum under the heading Plan of Distribution, insofar as such statements purport to summarize certain provisions of this Agreement, provide a fair summary of such provisions; (ii) this Agreement has been duly executed and delivered by the Company under the law of the State of New York;
(111) the statements made in each of the Time of Sale Memorandum and the Final Memorandum under the heading Taxation- U.S. Federal Income Taxation, insofar as such statements purport to summarize certain federal income tax laws of the United States, constitute a fair summary of the principal U.S.
federal income tax consequences of an investment in the Securities by a U.S.
Holder (as defined in each of the Time of Sale Memorandum and the Final Memorandum); (iv) the issuance and the sale of the Securities to the Initial Purchasers pursuant to this Agreement and the execution and delivery of this Agreement and the Indenture do not, and the performance by the Company of its obligations under this Agreement, the Indenture and the Securities will not, (A) require any consent, approval, authorization, registration or qualification of or with any governmental authority of the United States or the State of New York that in such counsels experience normally would be applicable to general business entities with respect to such issuance, sale or performance (but such counsel need express no opinion relating to United States federal securities laws or any state securities or blue sky laws other than as set forth in (v) below); or (B) result in a violation of any United States federal or New York State law or published rule or regulation that in such counsels experience normally would be applicable to general business entities with respect to such issuance, sale or performance (but such counsel need not express any opinion relating to the United States federal securities laws or any state securities or blue sky laws, except as set forth in (v) below); (v) noregistration of the Securities under the Act, and no qualification of the Indenture under the Trust Indenture Act, are required for the offer and sale of the Securities by the Company to the Initial Purchasers pursuant to and in the manner contemplated by this Agreement or by the Initial Purchasers as contemplated by this Agreement, the Time of Sale Memorandum and the Final Memorandum;
18 (vi) no registration of the Company under the Investment Company Act is required for the offer and sale of the Securities by the Company in the manner contemplated herein and by each of the Time of Sale Memorandum and the Final Memorandum; and (vii) under the laws of the State of New York relating to submission to jurisdiction, the Company, pursuant to Section 14 of this Agreement, Section 1.12 of the Indenture and the provisions of the Securities, has (a) validly and irrevocably submitted to the non-exclusive personal jurisdiction of any New York state or U.S. federal court located in the Borough of Manhattan, the City of New York, in any action arising out of or related to this Agreement that is brought by an Initial Purchaser or by any person who controls any Initial Purchaser, or in any action arising out of or related to the Indenture or the Securities that is brought by the holder of any Securities; (b) to the fullest extent permitted by law, validly and irrevocably waived any objection to the venue of a proceeding in any such court and (c) validly appointed Cogency Global Inc., as its authorized representative in the United States, and as its authorized agent for the purpose described in Section 14 hereof, the Indenture and the Securities; and service of process upon such agent in a manner permitted by applicable law will be effective to confer valid personal jurisdiction over the Company in any action arising under this Agreement, the Indenture or the Securities.
(b) The Company shall have requested and caused Cleary Gottlieb Steen $ Hamilton LLP, U.S. counsel for the Company, to furnish to the Representatives its letter, dated the Closing Date and addressed to the Representatives, substantially to the effect that no information has come to such counsel’s attention that causes it to believe that: (i) the Time of Sale Memorandum (except the financial statements and schedules and other financial and statistical data included therein, the information therein relating to the Companys ore reserves, as to which such counsel expresses no view), as of the Execution Time, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (ii) the Final Memorandum (except the financial statements and schedules and other financial and statistical data included therein, the information therein relating to the Companys ore reserves, as to which such counsel expresses no view), as of the Closing Date and the Execution Time, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
In rendering its opinion under Section 6(a) hereof and furnishing its letter under Section 6(b) hereof, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of New York or federal laws of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good
19 standing whom they believe to be reliable and who are satisfactory to counsel for the Initial Purchasers; and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Final Memorandum in Section 6(a) and Section 6(b) include any amendment or supplement thereto at the Closing Date.
(c) The Company shall have requested and caused Carey y Cía. Ltda., Chilean counsel for the Company, to furnish to the Representatives its opinion, dated the Closing Date and addressed to the Representatives, substantially to the effect that: (i) the Company has been duly created and is validly existing as a state- owned company under the laws of Chile, with full corporate power and authority to own or lease, as the case may be, and to operate its properties, exercise its mining concessions, mining rights and water rights, and conduct its business as described in each of the Time of Sale Memorandum and the Final Memorandum, and is duly qualified to do business under the laws of each jurisdiction which requires such qualification; (ii) the Indenture has been duly authorized, executed and delivered, and constitutes a legal, valid and binding instrument enforceable against the Company in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, liquidation, reorganization, insolvency, moratorium or other laws affecting creditors rights generally and general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law)); and the Securities have been duly and validly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchasers under this Agreement, will have been duly executed and delivered by the Company and will constitute legal, valid, binding and enforceable obligations of the Company entitled to the benefits of the Indenture (subject, as to the enforcement of remedies, to applicable bankruptcy, liquidation, reorganization, insolvency, moratorium or other laws affecting creditors rights generally and general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law));
(111) the statements in each of the Time of Sale Memorandum and the Final Memorandum under the captions Presentation of Financial and Statistical Information, Enforceability of Civil Liabilities, Exchange Rates, Risk Factors-Risks Relating to CODELCOs Operations-CODELCO”s compliance with environmental, health and safety laws may require increased costs, including capital commitments, and non-compliance may subject it to significant penalties, Risk Factors-Risks Relating to CODELCOs Operations -Future compliance with a changing and complex regulation scheme may require changes in CODELCOS*s business, Risk Factors-Risks Relating to CODELCOs Operations-Labor disruptions involving CODELCOs employees or the employees of its independent contractors could affect CODELCO”s production
20 levels and costs, Risk Factors-Risks Relating to CODELCOs Operations- CODELCO is subject to an extensive labor reform law -in effect since 2017- promulgated by the Government of Chile that could affect its business and operating results, Risk Factors-Risks Relating to CODELCO”s Relationship with the Government of Chile, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations for the Three Years Ended December 31, 2021 -Other expenses, Management’s Discussion and Analysis of Financial Condition and Results of Operations- Results of Operations for the Nine-Month Periods Ended September 30, 2021 and
2022-Foreign exchange differences, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations for the Nine-Month Periods Ended September 30, 2021 and 2022-Income tax expense, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations for the Three Years Ended December 31,
2021-Other expenses, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations for the Three Years Ended December 31, 2021 -Income tax expense, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Distributions to the Chilean Treasury, Regulatory Framework, Management, Related Party Transactions, Foreign Investment and Exchange Controls in Chile and Taxation-Chilean Taxation, insofar as such statements constitute summaries of Chilean legal matters, documents or proceedings referred to therein, fairly summarize the matters therein; (iv) such counsel has no reason to believe that (A) at the Execution Time, the Time of Sale Memorandum contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or (B) at the Execution Time and on the Closing Date, the Final Memorandum contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (in each case, other than the financial statements and other financial information contained therein, as to which such counsel need express no opinion); (v) this Agreement has been duly authorized, executed and delivered by the Company; (vi) the Company has all requisite corporate power and authority, has taken all requisite corporate action and has received and is in compliance with all governmental, judicial and other authorizations, approvals and orders necessary to enter into and perform its obligations under this Agreement and the Indenture and to issue and perform its obligations under the Securities, and no consent, approval, authorization, filing with or order of any Chilean court or governmental agency or body is required in connection with the transactions contemplated herein, in the Indenture or in the Securities, except (i) such as may be required under the blue sky or securities laws of any jurisdiction in connection with the
21 purchase and sale of the Securities by the Initial Purchasers in the manner contemplated in this Agreement, the Time of Sale Memorandum and the Final Memorandum, and (ii) the following authorizations and registrations required by Chilean law, which have been obtained and remain in full force and effect: (A) authorization granted by the President of Chile and by Decree of the Minister of Finance, whether general or specific, pursuant to Article 4 of Decree Law
No. 2,349 of 1978 and pursuant to Decree No. 1,009 issued by the Ministry of Finance, published in the Official Gazette on December 23, 1978, as renewed by Decree No. 2,327 dated December 22, 2022 and published in the Official Gazette on January 28, 2023; (B) authorization granted by the Minister of Finance to the Company to enter into negotiations relating to the issue of the Securities, pursuant to Decree Law No. 1,350 of 1976, as amended and pursuant to Ordinary Resolution No. 1,978 issued by the Ministry of Finance on November 9, 2022; (C) authorization granted by the Minister of Finance to the Company to issue the Securities, pursuant to Decree Law No. 1,350 of 1976, as amended and pursuant to Ordinary Resolution No. 221 issued by the Ministry of Finance on January 27, 2023; and (D) the delivery to the Ministry of Finance and the Ministry of Mining for approval and possible review of the proposed annual budget and a debt amortization budget pursuant to Decree Law No. 1,350 of 1976, as amended; (vii) neither the execution and delivery of the Indenture or this Agreement, the issue and sale of the Securities, nor the consummation of any other of the transactions herein or therein contemplated, nor the fulfillment of the terms hereof, thereof or of the Securities will conflict with, or result in, a default, breach or violation of, or imposition of any lien, charge or encumbrance upon any property or asset of the Company or its subsidiaries pursuant to, (i) any provision of applicable Chilean law; (1i) Decree Law No. 1,350 of 1976, as amended from time to time, and the Companys by-laws, as restated in Decree No. 3 of January 13, 2012 and published in the Official Gazette on July 4, 2012, or the Estatutos of the Company; or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any Chilean court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company, any of its subsidiaries or any of their respective properties; (viii) pursuant to Article 52 of the Organic Law of the Central Bank of Chile and Decree Law No. 1,350 of 1976, as amended, the Company is exempt from the Central Bank of Chiles regulations in connection with the issuance, placement and payments upon the Securities. The Company is entitled to make payments under the Securities with its own available foreign currency obtained from its export operations and deposited with the Central Bank of Chile; (ix) except as disclosed in each of the Time of Sale Memorandum and the Final Memorandum, there are no transaction, stamp or other issuance or transfer taxes or duties or other similar fees or withholdings or charges required to be paid in connection with the execution and delivery of this Agreement, the Indenture, the issuance or sale by the Company of the Securities or the
22 enforcement of the Securities, other than (i) a 0.8% stamp tax on the incurrence of the indebtedness evidenced by the Securities, (11) a 4% withholding tax on interest payments, and all other payments deemed to be interest payments, with respect to the Securities to the extent paid to a person domiciled or residing outside of Chile, and (iii) the value added tax (impuesto al valor agregado or VAT) that may be payable on fees and commissions paid or to be paid to non-domiciled andor non- resident individuals or entities. If thin capitalization rules apply, as described in the Time of Sale Memorandum and the Final Memorandum, such interest payments would be subject to a 35% penalty tax that would be payable by the Company. The withholding tax applicable to the interest payments made by the Company can be credited against such 35% penalty tax. Payments of fees, compensations and reimbursement of costs contemplated in this Agreement or in the Indenture, made to persons domiciled or residing outside of Chile are (or may be, in the case of reimbursement of costs) subject to a withholding tax at a rate of up to 35%; provided, however, that any such payment (A) is exempted from withholding tax if it is deemed a comisión mercantil pursuant to the Commercial Code of Chile and the interpretation of the Chilean Internal Revenue Service (Servicio de Impuestos Internos, or the SID) or (B) subject to a 15% withholding tax if it is deemed payment for a professional or technical assistance service, provided that the payment is not made to a party organized, domiciled or resident in one of the countries which falls under the scope of article 41H of the Chilean Income Tax Law, in which case the withholding tax rate would be 20%.
The withholding tax rate applicable to payments of fees, compensation, services and reimbursement of costs to a person not domiciled in, or resident of, Chile may be reduced or may be exempted if there is a double taxation treaty in force between Chile and the country of such persons residency that contemplates a reduced or exempt regime applicable to such payments. Capital gains arising from the sale or other dispositions of the Securities made by a person domiciled or residing outside of Chile will not be deemed as Chilean source income, and therefore not subject to withholding tax in Chile.
(x) except for the Chilean value added tax (impuesto al valor agregado or VAT) that may be payable by the Company on fees and commissions paid or to be paid to non-domiciled andor non-resident individuals or entities, none of the holders of the Securities, the Initial Purchasers or the Trustee will be deemed resident, domiciled, carrying on business or subject to any tax liability in Chile solely by reason of the holding of the Securities or the execution, delivery, performance or enforcement of this Agreement, the Indenture or the Securities, assuming that none of such persons is domiciled or is a resident of Chile or has a permanent establishment in Chile; (xi) the choice of law provisions set forth in Section 15 hereof, in the Indenture and in the Securities are legal, valid and binding under the laws of Chile and such counsel knows of no reason why the courts of Chile would not give effect to the choice of New York law as the proper law of this Agreement, of the Indenture and of the Securities; the Company has the legal capacity to sue and be sued in its own name under the laws of Chile; the Company has been empowered
23 by Decree No. 1,009 issued by the Ministry of Finance, published in the Official Gazette on December 23, 1978, as renewed by Decree No. 2,327 dated December 22, 2022 and published in the Official Gazette on January 27, 2023, to submit, and has irrevocably submitted, to the non-exclusive jurisdiction of the New York courts and has validly and irrevocably appointed Cogency Global Inc. as its authorized agent for the purpose described in Section 14 hereof, in the Indenture and in the Securities under the laws of Chile; the irrevocable submission of the Company to the non-exclusive jurisdiction of the New York courts and the waivers by the Company of any objection to the venue of the proceeding in a New York court herein, in the Indenture and in the Securities are legal, valid and binding under the laws of Chile and such counsel knows of no reason why the courts of Chile would not give effect to such submission and waivers; service of process in the manner set forth in Section 14 hereof, in the Indenture and in the Securities will be effective to confer valid personal jurisdiction over the Company under the laws of Chile; and the courts in Chile will recognize as valid and final, and will enforce, any final and conclusive judgment against the Company obtained in a New York court arising out of or in relation to the obligations of the Company under this Agreement, the Indenture or the Securities, subject only to the conditions and qualifications described in each of the Time of Sale Memorandum and the Final Memorandum under the caption Enforceability of Civil Liabilities; (xii) the Company has validly and irrevocably waived, pursuant to Section 17 hereof and to the provisions of the Indenture and the Securities for itself and its revenues and assets, to the full extent permitted by Chilean law, any immunity from suit, jurisdiction, attachment in aid or execution of a judgment or prior to a judgment, execution of a judgment or any other legal process with respect to its obligations, respectively, under this Agreement, the Indenture and the Securities to which it may be entitled or become entitled whether or not claimed, including sovereign immunity, except that (1) for the attachment and judicial sale of mining concessions and installations and other goods permanently dedicated to exploration or extraction of minerals relating to such mining concessions, except with respect to mortgages, the consent of the Company will be required and shall be given in the same judicial proceeding in which the attachment and sale is sought (as set forth in Article 226 of the Mining Code of Chile); and (ii) pursuant to the Chilean Constitution, the mining concessions corresponding to mining deposits exploited by the Company upon its creation in 1976 cannot be subject to attachment nor to any act of disposition by the Company. Each such waiver is binding under Chilean law and remains in full force and effect; and (xiii) this Agreement, the Indenture and the Securities are in proper legal form under the laws of Chile for the enforcement thereof against the Company in Chile without the need to obtain any other consent, approval or authorization, to file any notification or to take any further action on the part of the Initial Purchasers or the Trustee and to ensure the legality, validity, enforceability or admissibility in evidence of any of this Agreement, the Indenture and the
24
Securities, and except for their translation into Spanish for their presentation to a Chilean court and subject to the payment of the applicable stamp tax, if any (and applicable readjustments and penalties, if any), it is not necessary that any other document be filed or recorded with any court or other authority in Chile or that any stamp or similar tax be paid on or in respect of any such document or the Securities.
In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than Chile, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Initial Purchasers; and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Final Memorandum in this Section 6(c) include any amendment or supplement thereto at the Closing Date.
(d) The Company shall have requested and caused María Susana Rioseco, General Counsel of the Company, to furnish to the Representatives her opinion, dated the Closing Date and addressed to the Representatives, substantially to the effect that: (i) the Company has been duly created and is validly existing as a state- owned company under the laws of Chile, with full corporate power and authority to own or lease, as the case may be, and to operate its properties, exercise its mining concessions, mining rights and water rights, and conduct its business as described in each of the Time of Sale Memorandum and the Final Memorandum, and is duly qualified to do business under the laws of each jurisdiction which requires such qualification; (ii) the Indenture has been duly authorized, executed and delivered, and constitutes a legal, valid and binding instrument enforceable against the Company in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, liquidation, reorganization, insolvency, moratorium or other laws affecting creditors rights generally and general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law)); and the Securities have been duly and validly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchasers under this Agreement, will have been duly executed and delivered by the Company and will constitute legal, valid, binding and enforceable obligations of the Company entitled to the benefits of the Indenture (subject, as to the enforcement of remedies, to applicable bankruptcy, liquidation, reorganization, insolvency, moratorium or other laws affecting creditors rights generally and general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law)); (iii) to the knowledge of such counsel, there is no pending or threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its
25 subsidiaries or its or their property that is not set forth in or contemplated by each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto), except for such proceedings that, if the subject of an unfavorable decision, ruling or finding, would not, singly or in the aggregate, have a current or prospective material adverse effect (1) on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, or (1i) on the power or ability of the Company to perform its obligations under this Agreement, the Indenture or the Securities or to consummate the transactions contemplated in each of the Time of Sale Memorandum and the Final Memorandum, (iv) the Company has an authorized capitalization as set forth in each of the Time of Sale Memorandum and the Final Memorandum under the heading Capitalization; and all the outstanding shares of capital stock or other equity interests of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party; (v) such counsel has no reason to believe that (1) at the Execution Time, the Time of Sale Memorandum contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (ii) at the Execution Time and on the Closing Date, the Final Memorandum contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (in each case, other than the financial statements and other financial information contained therein, as to which such counsel need express no opinion); (vi) this Agreement has been duly authorized, executed and delivered by the Company; (vii) the Company has all requisite corporate power and authority, has taken all requisite corporate action and has received and is in compliance with all governmental, judicial and other authorizations, approvals and orders necessary to enter into and perform its obligations under this Agreement and the Indenture and to issue and perform its obligations under the Securities, and no consent, approval, authorization, filing with or order of any Chilean court or governmental agency or body is required in connection with the transactions contemplated herein, in the Indenture or in the Securities, except (i) such as may be required under the blue sky or securities laws of any jurisdiction in connection with the purchase and sale of the Securities by the Initial Purchasers in the manner contemplated in this Agreement, the Time of Sale Memorandum and the Final Memorandum, and (ii) the following authorizations and registrations required by
26
Chilean law, which have been obtained and remain in full force and effect: (A) authorization granted by the President of Chile and by Decree of the Minister of Finance, whether general or specific, pursuant to Article 4 of Decree Law
No. 2,349 of 1978, and pursuant to Decree No. 1,009 issued by the Ministry of Finance, published in the Official Gazette on December 23, 1978, as renewed by Decree No. 2,327 dated December 22, 2022 and published in the Official Gazette on January 27, 2023; (B) authorization granted by the Minister of Finance to the Company to enter into negotiations relating to the issue of the Securities, pursuant to Decree Law No. 1,350 of 1976, as amended and pursuant to Ordinary Resolution No. 1978 issued by the Ministry of Finance on November 9, 2022; (C) authorization granted by the Minister of Finance to the Company to issue the Securities, pursuant to Decree Law No. 1,350 of 1976, as amended and pursuant to Ordinary Resolution No. 221 issued by the Ministry of Finance on January 27, 2023; and (D) the delivery to the Ministry of Finance and the Ministry of Mining for approval and possible review of the proposed annual budget and a debt amortization budget pursuant to Decree Law No. 1,350 of 1976, as amended (viii) pursuant to Article 52 of the Organic Law of the Central Bank of Chile and Decree Law No. 1,350 of 1976, as amended, the Company is exempt from the Central Bank of Chiles regulations in connection with the issuance, placement and payments upon the Securities. The Company is entitled to make payments under the Securities with its own available foreign currency obtained from its export operations and deposited with the Central Bank of Chile; (ix) neither the execution and delivery of the Indenture or this Agreement, the issue and sale of the Securities, nor the consummation of any other of the transactions herein or therein contemplated, nor the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or asset of the Company or any of its subsidiaries pursuant to: (i) any provision of applicable law; (ii) Decree Law No. 1,350 of 1976, as amended from time to time, and the Companys by-laws, as restated in Decree No. 3 of January 13, 2012, or the Estatutos of the Company, (iii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which its respective property is subject; or (iv) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company, any of its subsidiaries or any of their respective properties; (x) the statements in each of the Time of Sale Memorandum and the Final Memorandum under the captions Presentation of Financial and Statistical Information, Enforceability of Civil Liabilities, Exchange Rates, Risk Factors-Risks Relating to CODELCOs Operations-CODELCO”s compliance with environmental, health and safety laws may require increased costs, including capital commitments, and non-compliance may subject it to significant penalties,
27
Risk Factors-Risks Relating to CODELCOs Operations -Future compliance with a changing and complex regulation scheme may require changes in CODELCOS*s business, Risk Factors-Risks Relating to CODELCOs Operations-Labor disruptions involving CODELCOs employees or the employees of its independent contractors could affect CODELCO”s production levels and costs, Risk Factors-Risks Relating to CODELCOs Operations- CODELCO is subject to an extensive labor reform law -in effect since 2017- promulgated by the Government of Chile that could affect its business and operating results, Risk Factors-Risks Relating to CODELCO”s Relationship with the Government of Chile, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations for the Three Years Ended December 31, 2021 -Other expenses, Management’s Discussion and Analysis of Financial Condition and Results of Operations- Results of Operations for the Nine-Month Periods Ended September 30, 2021 and
2022-Foreign exchange differences, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations for the Nine-Month Periods Ended September 30, 2021 and 2022-Income tax expense, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations for the Three Years Ended December 31,
2021-Other expenses, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations for the Three Years Ended December 31, 2021 -Income tax expense, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Distributions to the Chilean Treasury, Regulatory Framework, Management, Related Party Transactions, Foreign Investment and Exchange Controls in Chile and Taxation-Chilean Taxation, insofar as such statements constitute summaries of Chilean legal matters, documents or proceedings referred to therein, fairly summarized the matters therein; (xi) no subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiarys capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiarys property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto); (xii) the Company and its subsidiaries possess all concessions, licenses, certificates, permits and other authorizations issued by the appropriate government and other regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such concession, certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a current or prospective material adverse effect on the condition (financial or otherwise),
28 earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business; (xiii) the Company and its subsidiaries have good and marketable title to all real property owned by them and good title to all other properties owned by them, including the Companys mining concessions, mining rights and water rights, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except (i) such as are set forth in or contemplated by each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto) or (ii) where the failure to have good title would not have a current or prospective material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business; all of the leases and subleases material to the business of the Company and its subsidiaries, taken as a whole, and under which the Company or any of its subsidiaries holds properties described in each of the Time of Sale Memorandum and the Final Memorandum, are in full force and effect, except (1) where the failure to be in full force and effect would not have a current or prospective material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, or (ii) such as are set forth in or contemplated by each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto); and none of the Company or its subsidiaries has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or any of its subsidiaries to the continued possession of the leased or subleased premises under any such lease or sublease, except (i) claims which are being contested by the Company or its subsidiaries in good faith and which would not have a current or prospective material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, or (ii) such as are set forth in or contemplated by each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto); (xiv) the choice of law provisions set forth in Section 15 hereof, in the Indenture and in the Securities are legal, valid and binding under the laws of Chile and such counsel knows of no reason why the courts of Chile would not give effect to the choice of New York law as the proper law of this Agreement, of the Indenture and of the Securities; the Company has the legal capacity to sue and be sued in its own name under the laws of Chile; the Company has been empowered by Decree No. 1,009 issued by the Ministry of Finance, published in the Official Gazette on December 23, 1978, as renewed by Decree No. 2,327 dated December 22, 2022 and published in the Official Gazette on January 27, 2023, to submit, and has irrevocably submitted, to the non-exclusive jurisdiction of the New York
29 courts and has validly and irrevocably appointed Cogency Global Inc. as its authorized agent for the purpose described in Section 14 hereof, in the Indenture and in the Securities under the laws of Chile; the irrevocable submission of the Company to the non-exclusive jurisdiction of the New York courts and the waivers by the Company of any objection to the venue of the proceeding in a New York court herein, in the Indenture and in the Securities are legal, valid and binding under the laws of Chile and such counsel knows of no reason why the courts of Chile would not give effect to such submission and waivers; service of process in the manner set forth in Section 14 hereof, in the Indenture and in the Securities will be effective to confer valid personal jurisdiction over the Company under the laws of Chile; and the courts in Chile will recognize as valid and final, and will enforce, any final and conclusive judgment against the Company obtained in a New York court arising out of or in relation to the obligations of the Company under this Agreement, the Indenture or the Securities, subject only to the conditions and qualifications described in each of the Time of Sale Memorandum and the Final Memorandum under the caption Enforceability of Civil Liabilities; (xv) to the knowledge of such counsel, the Company and its subsidiaries (i) are in compliance with any and all Environmental Laws, (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business; (xvi) except as disclosed in each of the Time of Sale Memorandum and the Final Memorandum, there are no transaction, stamp or other issuance or transfer taxes or duties or other similar fees or withholdings or charges required to be paid in connection with the execution and delivery of this Agreement, the Indenture, the issuance or sale by the Company of the Securities or the enforcement of the Securities, other than (i) a 0.8% stamp tax on the incurrence of the indebtedness evidenced by the Securities, which will be paid by the Company upon the issuance of the Securities, (11) a 4% withholding tax on interest payments, and all other payments deemed to be interest payments, with respect to the Securities to the extent paid to a person domiciled or residing outside of Chile, and (iii) the value added tax (impuesto al valor agregado or VAT) that may be payable on fees and commissions paid or to be paid to non-domiciled andor non- resident individuals or entities. If thin capitalization rules apply, as described in the Time of Sale Memorandum and the Final Memorandum, such interest payments would be subject to a 35% penalty tax that would be payable by the Company. The withholding tax applicable to the interest payments made by the Company can be credited against such 35% penalty tax. Payments of fees,
30 compensations and reimbursement of costs contemplated in this Agreement or in the Indenture, made to persons domiciled or residing outside of Chile are (or may be, in the case of reimbursement of costs) subject to a withholding tax at a rate of up to 35%; provided, however, that any such payment (A) is exempted from withholding tax if it is deemed a comisión mercantil pursuant to the Commercial Code of Chile and the interpretation of the SII or (B) subject to a 15% withholding tax if it is deemed payment for a professional or technical assistance service, provided that the payment is not made to a party organized, domiciled or resident in one of the countries which falls under the scope of article 41H of the Chilean Income Tax Law in which case the withholding tax rate would be 20%. The withholding tax rate applicable to payments of fees, compensation, services and reimbursement of costs to a person not domiciled in, or resident of, Chile may be reduced or may be exempted if there is a double taxation treaty in force between Chile and the country of such persons residency that contemplates a reduced or exempt regime applicable to such payments. Capital gains arising from the sale or other dispositions of the Securities made by a person domiciled or residing outside of Chile will not be deemed as Chilean source income, and therefore not subject to withholding tax in Chile.
(xvii) none of the holders of the Securities, the Initial Purchasers or the Trustee will be deemed resident, domiciled, carrying on business or subject to any tax liability in Chile solely by reason of the holding of the Securities or the execution, delivery, performance or enforcement of this Agreement, the Indenture or the Securities, assuming that none of such persons is domiciled or is a resident of Chile or has a permanent establishment in Chile; (xviii) the Company has validly and irrevocably waived pursuant to Section 17 hereof and to the provisions of the Indenture and the Securities for itself and its revenues and assets, to the full extent permitted by Chilean law, any immunity from suit, jurisdiction, attachment in aid or execution of a judgment or prior to a judgment, execution of a judgment or any other legal process with respect to its obligations, respectively, under this Agreement, the Indenture and the Securities that it may be entitled or become entitled whether or not claimed, including sovereign immunity, except that (i) for the attachment and judicial sale of mining concessions and installations and other goods permanently dedicated to exploration or extraction of minerals relating to such mining concessions, except with respect to mortgages, the consent of the Company will be required and shall be given in the same judicial proceeding in which the attachment and sale is sought (as set forth in Article 226 of the Mining Code of Chile); and (ii) pursuant to the Chilean Constitution, the mining concessions corresponding to mining deposits exploited by the Company upon its creation in 1976 cannot be subject to attachment nor to any act of disposition by the Company. Each such waiver is binding under Chilean law and remains in full force and effect; and (xix) this Agreement, the Indenture and the Securities are in proper legal form under the laws of Chile for the enforcement thereof against the Company in Chile without the need to obtain any other consent, approval or authorization, to
31 file any notification or to take any further action on the part of the Initial Purchasers or the Trustee and to ensure the legality, validity, enforceability or admissibility in evidence of any of this Agreement, the Indenture and the Securities, and except for their translation into Spanish for their presentation to a Chilean court and subject to the payment of the applicable stamp tax, if any (and applicable readjustments and penalties, if any), it is not necessary that any other document be filed or recorded with any court or other authority in Chile or that any stamp or similar tax be paid on or in respect of any such document or the Securities.
In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than Chile, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Initial Purchasers; and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Final Memorandum in this Section 6(d) include any amendment or supplement thereto at the Closing Date.
(e) The Representatives shall have received from Linklaters LLP, U.S. counsel for the Representatives, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Indenture, the Time of Sale Memorandum and the Final Memorandum (as amended or supplemented at the Closing Date) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.
(f) The Representatives shall have received from Garrigues Chile SpA, special Chilean counsel for the Representatives, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Indenture, the Time of Sale Memorandum, the Final Memorandum (as amended or supplemented at the Closing Date) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.
(2) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Head of Finance of the Company, dated the Closing Date, to the effect that the signatory of such certificate has carefully examined each of the Time of Sale Memorandum, the Final Memorandum, any amendment or supplement to the Final Memorandum and this Agreement and that: (i) the representations and warranties of the Company in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and
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(11) since the date of the most recent financial statements included in each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto), there has been no development giving rise to a current or prospective material adverse change in the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated by each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto).
(h) At the Execution Time and at the Closing Date, the Company shall have requested and caused (i) Deloitte Auditores y Consultores Ltda., independent audit firm with respect to the Company, to furnish to the Representatives letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives, containing statements and information of the type ordinarily included in accountants comfort letters to underwriters with respect to the full-year 2019 and 2020 financial statements, and certain financial and other information contained in each of the Preliminary Memorandum and the Final Memorandum; provided that the letter delivered on the Closing Date shall use a cut-off date not earlier than three business days prior to the date thereof; and (ii) PricewaterhouseCoopers Consultores Auditores SpA, independent audit firm with respect to the Company, to furnish to the Representatives letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives, containing statements and information of the type ordinarily included in accountants comfort letters to underwriters with respect to the full-year 2021, the interim unaudited consolidated financial statements as of and for the nine months ended September 30, 2022 and 2021, and certain financial and other information contained in each of the Preliminary Memorandum and the Final Memorandum; provided that the letter delivered on the Closing Date shall use a cut-off date not earlier than three business days prior to the date thereof.
References to the Final Memorandum in this Section Error! Reference source not found. include any amendment or supplement thereto at the date of the applicable letter.
(i) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in each of the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph Error! Reference source not found. of this Section 6; or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth or contemplated in the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the reasonable judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering, sale or delivery of the Securities as contemplated by the Time
33 of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto).
() Subsequent to the Execution Time, there shall not have been any decrease in the rating accorded the Company or any of the Companys foreign-currency denominated debt securities by any nationally recognized statistical rating organization (as such term is defined in Section 3(a)(62) of the Exchange Act) or any notice given of any intended or potential decrease in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change.
(k) At the Execution Time and on the Closing Date, the Representatives shall have received a written certificate executed by the Chief Financial Officer of the Company, in form and substance reasonably satisfactory to the Representatives, with respect to certain financial information contained in the Offering Memorandum.
(1) Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request.
Tf any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not have been delivered in form and substance reasonably satisfactory to the Representatives and counsel for the Initial Purchasers, this Agreement and all obligations of the Initial Purchasers hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 will be delivered at the office of counsel for the Initial Purchasers, Linklaters LLP, at 1290 Avenue of the Americas, New York, New York 10104, on the Closing Date.
7. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Initial Purchaser, the directors, officers, employees, affiliates and agents of each Initial Purchaser and each person who controls any Initial Purchaser within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or any other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Time of Sale Memorandum, any Additional Written Offering Communication prepared by or on behalf of, used by, or referred to by the Company, any road show as defined in Rule 433(h) under the Act (a road show), or the Final Memorandum or any information provided by the Company to any holder or prospective purchaser of Securities pursuant to Section 5(j), or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and agrees to reimburse each such indemnified party, for any legal or other expenses reasonably
34 incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in the Time of Sale Memorandum or the Final Memorandum, or in any amendment thereof or supplement thereto, or in any Additional Written Offering Communication, in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Initial Purchasers through the Representatives specifically for inclusion therein.
(b) Each Initial Purchaser severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers, and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Initial Purchaser, but only with reference to information relating to such Initial Purchaser furnished to the Company in writing by or on behalf of such Initial Purchaser through the Representatives specifically for inclusion in the Time of Sale Memorandum, road show or the Final Memorandum (or in any amendment or supplement thereto). The indemnity agreement under this Section 7 will be in addition to any liability which any Initial Purchaser may otherwise have. The Company acknowledges that (i) the names of the Representatives set forth on the cover page, (ii) the statements set forth in the last paragraph of the cover page regarding delivery of the Securities and (111) under the heading Plan of Distribution: (A) the names of the Representatives and the amounts in the table, (B) the single sentence following the second full paragraph regarding the purchase price, (C) the fifth sentence of the eighth paragraph regarding market making activities, (D) the ninth paragraph related to stabilization and syndicate covering transactions and (E) the third sentence of the eleventh paragraph regarding hedging activity, constitute the only information furnished in writing by or on behalf of the Initial Purchasers for inclusion in the Time of Sale Memorandum or the Final Memorandum (or in any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (1) will not relieve it from liability under paragraphs (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantive rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraphs (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying partys choice at the indemnifying partys expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel (including local counsel) retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying partys election to appoint
35 counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (1) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (11) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it andor other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. It is understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one such separate firm of attorneys (in addition to any local counsel) at any time for all such indemnified parties and controlling persons, which firm shall be designated in writing by the indemnified parties. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding; and (ii) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of an indemnified party.
(d) In the event that the indemnity provided in paragraphs (a) or (b) of this Section 7 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Initial Purchasers agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively Losses) to which the Company and one or more of the Initial Purchasers may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Initial Purchasers on the other from the offering of the Securities; provided, however, that in no case shall any Initial Purchaser (except as may be provided in any agreement among the Initial Purchasers relating to the offering of the Securities) be responsible for any amount in excess of the purchase discount or commission applicable to the Securities purchased by such Initial Purchaser hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Initial Purchasers shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Initial Purchasers on the other in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and
36 benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions in each case set forth on the cover of the Final Memorandum. Relative fault shall be determined by reference to, among other things, (1) whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Initial Purchasers on the other, (ii) the intent of the parties and (iii) their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person who controls an Initial Purchaser within the meaning of either the Act or the Exchange Act and each director, officer, employee, affiliate and agent of an Initial Purchaser shall have the same rights to contribution as such Initial Purchaser, and each person who controls the Company within the meaning of either the Act or the Exchange Act and each officer and director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). Notwithstanding the provisions of this Section 7, no Initial Purchaser shall be required to contribute any amount in excess of the discounts received by such Initial Purchaser in connection with the Securities distributed by it. The Initial Purchasers obligations to contribute pursuant to this Section 7 are several, and not joint, in proportion to their respective commitments as set forth opposite their names in SCHEDULE I.
8. Default by an Initial Purchaser. If any one or more Initial Purchasers shall fail to purchase and pay for any of the Securities agreed to be purchased by such Initial Purchaser hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Initial Purchasers shall be obligated severally to take up and pay for (in the respective proportions which the principal amount of Securities set forth opposite their names in SCHEDULE TI hereto bears to the aggregate principal amount of Securities set forth opposite the names of all the remaining Initial Purchasers) the Securities which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase; provided, however, that in the event that the aggregate principal amount of Securities which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase shall exceed 10% of the aggregate principal amount of Securities set forth in SCHEDULE TI hereto, the remaining Initial Purchasers shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Initial Purchasers do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Initial Purchaser or the Company. In the event of a default by any Initial Purchaser as set forth in this Section 8, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Final Memorandum or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Initial Purchaser of its liability, if any, to the Company or any nondefaulting Initial Purchaser for damages occasioned by its default hereunder.
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9. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if at any time prior to such time (i) trading in securities generally on the Santiago Stock Exchange, the New York Stock Exchange or the Nasdaq National Market shall have been suspended or limited or minimum prices shall have been established on either such exchange or the Nasdaq National Market; (ii) trading of any securities issued or guaranteed by the Company shall have been suspended on any exchange or in any over-the-counter market; (iii) a banking moratorium shall have been declared in New York either by federal or New York state authorities or in Chile by the Chilean Central Bank or other competent government regulator; or (iv) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the reasonable judgment of the Representatives, impracticable or inadvisable to proceed with the offering, sale or delivery of the Securities as contemplated by this Agreement, the Time of Sale Memorandum and the Final Memorandum (exclusive of any amendment or supplement thereto).
10. Representations, Covenants and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Initial Purchasers or the Company or any of the officers, directors or controlling persons referred to in Section 7 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 5(p) and 7 hereof shall survive the termination or cancellation of this Agreement.
11. Recognition of the U.S. Special Resolution Regimes.
(a) In the event that any Initial Purchaser that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Initial Purchaser of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S.
Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(b) In the event that any Initial Purchaser that is a Covered Entity or a BHC Act Affiliate of such Initial Purchaser becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Initial Purchaser are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
12. Notices. All communications hereunder will be in writing and effective only upon receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to BofA Securities, Inc., 114 W 47th Street NY8-114-07-01, New York, New York 10036, Facsimile:
(646) 855-5958, Attention: High Grade Transaction ManagementLegal, Email: dg.hg_ua_noticesObofa.com; BNP Paribas Securities Corp., 787 Seventh Avenue, New York, New York 10019; Attention: Debt Syndicate Desk (email: dl.newyorksyndicateigcorporates Ous.bnpparibas.com); Santander Investment Securities Inc., at
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437 Madison Avenue, New York, NY 10022, Attention: Debt Capital Markets; E-mail: DCMAmericas Osantander.us; Facsimile: 212-407-0930; Scotia Capital (USA) Inc., 250 Vesey Street, New York, New York 10281, Attention: Debt Capital Markets, Email: US.Legal Escotiabank.com; TAGOscotiabank.com and, or, if sent to the Company, will be mailed or delivered to the Corporación Nacional del Cobre de Chile, co María Susana Rioseco as Acting General Counsel (No.: 56 22 3922091 email: mriosecoOcodelco.cl ; CodelcoIR Ecodelco.cl) Huérfanos 1270, Santiago, Región Metropolitana, Chile, Attention: Legal Department.
13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 7 hereof, and, except as expressly set forth in Section 5(¡) hereof, no other person will have any right or obligation hereunder.
14. Jurisdiction. The Company agrees that any suit, action or proceeding against the Company brought by any Initial Purchaser, the directors, officers, employees, affiliates and agents of any Initial Purchaser, or by any person who controls any Initial Purchaser, arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in any New York state or U.S. federal court located in the Borough of Manhattan, the City of New York, New York, and waives, to the extent legally permitted, any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non- exclusive jurisdiction of such courts in any suit, action or proceeding. The Company has appointed Cogency Global Inc. as its authorized agent (the Authorized Agent) upon whom process may be served in any suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated herein which may be instituted in any state or federal court in the City of New York, New York, by any Initial Purchaser, the directors, officers, employees, affiliates and agents of any Initial Purchaser, or by any person who controls any Initial Purchaser, and expressly accepts the non-exclusive jurisdiction of any such court in respect of any such suit, action or proceeding. The Company hereby represents and warrants that the Authorized Agent has accepted such appointment and has agreed to act as said agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents that may be necessary to continue such appointment in full force and effect as aforesaid. Service of process upon the Authorized Agent shall be deemed, in every respect, effective service of process upon the Company. Notwithstanding the foregoing, any action arising out of or based upon this Agreement may be instituted by any Initial Purchaser, the directors, officers, employees, affiliates and agents of any Initial Purchaser, or by any person who controls any Initial Purchaser, in any court of competent jurisdiction in Chile. The Company hereby irrevocably waives trial by jury in any legal action or proceeding relating to this Agreement and for any counterclaim relating thereto. The Company acknowledges that each Initial Purchaser is entering into this Agreement in reliance upon such waiver.
15. Applicable Law. This Agreement and any claim, controversy or dispute arising under or related to this Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York.
16. Currency. Each reference in this Agreement to U.S. dollars (the relevant currency) is of the essence. To the fullest extent permitted by law, the obligation of the
39
Company in respect of any amount due under this Agreement will, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in the relevant currency that the party entitled to receive such payment may, in accordance with its normal procedures, purchase with the sum paid in such other currency (after any premium and costs of exchange) on the Business Day immediately following the day on which such party receives such payment. If the amount in the relevant currency that may be so purchased for any reason falls short of the amount originally due, the Company will pay such additional amounts, in the relevant currency, as may be necessary to compensate for the shortfall.
Any obligation of the Company not discharged by such payment will, to the fullest extent permitted by applicable law, be due as a separate and independent obligation and, until discharged as provided herein, will continue in full force and effect.
17. Waiver of Immunity. To the extent that the Company may be entitled in any jurisdiction in which judicial proceedings may at any time be commenced hereunder, to claim for itself or its revenues or assets any immunity, including sovereign immunity, from suit, jurisdiction, attachment in aid of execution of a judgment or prior to a judgment, execution of a judgment or any other legal process with respect to its obligations hereunder, and to the extent that in any such jurisdiction there may be attributed to the Company such an immunity (whether or not claimed), the Company hereby irrevocably agrees not to claim and irrevocably waives such immunity to the maximum extent permitted by law, except that (1) for the attachment and judicial sale of mining concessions and installations and other goods permanently dedicated to exploration or extraction of minerals relating to such mining concessions, except with respect to mortgages, the consent of the Company will be required and shall be given in the same judicial proceeding in which the attachment and sale is sought (as set forth in Article 226 of the Mining Code of Chile); and (ii) pursuant to the Chilean Constitution, the mining concessions corresponding to mining deposits exploited by the Company upon its creation in 1976 cannot be subject to attachment nor to any act of disposition by the Company. Each such waiver is binding under Chilean law and remains in full force and effect. Notwithstanding the foregoing, any action based on this Agreement may be instituted by the Initial Purchasers in any competent court in Chile.
18. Payment Free and Clear. All payments to be made by the Company under this Agreement shall be paid free and clear of, and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature (including any amounts that result from the payment of fees, compensation or reimbursement of costs contemplated in this Agreement or in the Indenture), imposed by Chile, or by any department, agency or other political subdivision or taxing authority thereof, and all interest, penalties or similar liabilities with respect thereto (collectively, Chilean Taxes). If any Chilean Taxes are required by law to be deducted or withheld in connection with such payments, the Company will pay such additional amounts as may be necessary so that the full amount of such payment is received by the Initial Purchasers, except that no additional amounts shall be paid with respect to any such taxes, levies, imposts, duties, fees, assessments or charges
(1) imposed by reason of an Initial Purchaser or a current holder of any of the Securities having some connection with the jurisdiction imposing the tax other than solely as a result of its participation as an Initial Purchaser hereunder or (ii) imposed by the failure of an Initial Purchaser or a current holder of any of the Securities to comply with any certification, identification or other reporting requirement, if such compliance is required under applicable law
40 as a precondition to relief or exemption from such taxes, levies, imposts, duties, fees, assessments or charges.
19. -Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
20. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof.
21. Definitions. The terms which follow, when used in this Agreement, shall have the meanings indicated.
Act shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
Affiliate shall have the meaning specified in Rule 501(b) of Regulation D.
Business Day shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in the City of New York, New York, U.S.A. or Santiago, Chile.
BHC Act Affiliate has the meaning assigned to the term affiliate in, and shall be interpreted in accordance with, 12 U.S.C. $ 1841(k).
Chile shall mean the Republic of Chile.
Commission shall mean the Securities and Exchange Commission.
Covered Entity means any of the following: (i) a covered entity as that term is defined in, and interpreted in accordance with, 12 C.F.R. $ 252.82(b); (ii) a covered bank as that term is defined in, and interpreted in accordance with, 12 C.F.R. $ 47.3(b); or (iii) a covered FST as that term is defined in, and interpreted in accordance with, 12 C.F.R. $ 382.2(b).
Default Right has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. $$ 252.81, 47.2 or 382.1, as applicable.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
Execution Time shall mean 3:05 P.M., New York City time, on January 30,
2023.
41
Investment Company Act shall mean the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission promulgated thereunder.
Regulation D shall mean Regulation D under the Act.
Regulation S shall mean Regulation S under the Act.
Trust Indenture Act shall mean the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission promulgated thereunder.
U.S. Special Resolution Regime means each of (1) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
42
Tf the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this Agreement and your acceptance shall represent a binding agreement between the Company and the several Initial Purchasers.
Very truly yours, Corporación Nacional del Cobre de Chile
Name: Alejandro Sanhueza Diaz Title: Head of Finance [Signature Page to Purchase Agreement]
The foregoing Agreement is hereby confirmed and accepted as of the date first above written.
BofA Securities, Inc.
ay Ml
Name: Maxim Volkov Title: Managing Director
BNP Paribas Securities Corp.
By: Name: Title:
Santander Investment Securities Inc.
By: Name: Title:
By: Name: Title:
Scotia Capital (USA) Inc.
By: Name: Title:
For themselves and the other several Initial Purchasers named in Schedule 1 to the foregoing Agreement.
[Signature Page to Purchase Agreement]
The foregoing Agreement is hereby confirmed and accepted as of the date first above written.
BofA Securities, Inc.
By:
Name: Title:
BNP Paribas Securities Corp.
By: Name: Julien Pecoud-Bouvet Title: Director
Santander Investment Securities Inc.
By: Name: Title:
By: Name: Title:
Scotia Capital (USA) Inc.
By: Name: Title:
For themselves and the other several Initial Purchasers named in Schedule 1 to the foregoing Agreement.
[Signature page to Purchase Agreement]
The foregoing Agreement is hereby confirmed and accepted as of the date first above written.
BofA Securities, Inc.
By:
Name: Title:
BNP Paribas Securities Corp.
By: Name: Title:
Santander Investment Securities Inc.
Name: Richard Zobkiw Title: Executive Director py, Y preun Bao Name: Morgana Castro
Title: Vice President
Scotia Capital (USA) Inc.
By: Name: Title:
For themselves and the other several Initial Purchasers named in Schedule I to the foregoing Agreement.
[Signature Page to Purchase Agreement]
The foregoing Agreement is hereby confirmed and accepted as of the date first above written.
BofA Securities, Inc.
By:
Name: Title:
BNP Paribas Securities Corp.
By: Name: Title:
Santander Investment Securities Inc.
By: Name: Title:
By: Name:
Title:
Scotia Capital (USA) Inc.
By: Name: Elsa Wa Title: Managing Director
For themselves and the other several Initial Purchasers named in Schedule I to the foregoing Agreement.
[Signature Page to Purchase Agreement]
SCHEDULE I
Principal Amount of Securities
Tnitial Purchasers to be Purchased
BofA Securities, INC. ..oooonconninccionocnnoncoonconcnnnnnonn cnn nonncncnn non noo U.S.$ 225,000,000 BNP Paribas Securities COTP. cocoocnonocncnncnnnncconcnnoncnncnnoncnncnnonono U.S.$ 225,000,000 iti U.S.$ 225,000,000
Scotia Capital (USA) INC. coocoocicicnonocociconononocnonconononcnonnnnoncnnnns U.S.$ 225,000,000
Total cooooncnncnnnccnncnoninonnnnnncnonnnnnannco non on conan on ononnrncncnncncnono U.S.$ 900,000,000
SCHEDULE II
Time of Sale Memorandum
1. Preliminary Memorandum, dated January 30, 2023.
2. Pricing Term Sheet, dated January 30, 2023.
EXHIBIT A
Selling Restrictions for Offers and Sales outside the United States
(1) (a) The Securities have not been and will not be registered under the Act and may not be offered or sold within the United States or to, or for the account or benefit of,
U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Act. Each Initial Purchaser represents and agrees that, except as permitted by Section 4(a)(i) of the Agreement to which this is an exhibit, it has not offered or sold, and will not offer or sell, any Securities constituting part of its allotment to U.S. persons (which term shall not include dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners (other than an estate or trust)).
Accordingly, each Initial Purchaser represents and agrees that neither it, nor any of its Affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Securities. Terms used in this paragraph have the meanings given to them by Regulation S.
(b) Each Initial Purchaser also represents and agrees that it has not entered and will not enter into any contractual arrangement with any distributor (as that term is defined by Regulation S) with respect to the distribution of the Securities, except with its Affiliates or with the prior written consent of the Company.
(2) Each Initial Purchaser, severally and not jointly, represents, warrants and agrees that: (a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Securities which are the subject of the offering contemplated by the Offering Memorandum in circumstances in which Section 21(1) of the FSMA does not apply to the Company; (b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; (c) it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any notes to any retail investor in the European Economic Area. For the purposes of this provision:
A. the expression retail investor means a person who is one (or more) of the following:
(1) a retail client as defined in point (11) of Article 4(1) of Directive 201465EU (as amended, MiFID IT); or
(11) a customer within the meaning of Directive 200292EC (as amended, the Insurance Mediation Directive), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID IT; or (iii) nota qualified investor as defined in Directive 200371EC (as amended, the Prospectus Directive); and
B. the expression offer includes the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes; and (d) it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any notes to any retail investor in the United Kingdom.
For the purposes of this provision:
A. the expression retail investor means a person who is one (or more) of the following:
(1)
(11) (ii) a retail client as defined in point (8) of Article 2 of Regulation (EU) No 2017565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (EUWA); or a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (the FSMA) and any rules or regulations made under the FSMA to implement Directive (EU) 201697, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 6002014 as it forms part of domestic law by virtue of the EUWA; or not a qualified investor as defined in the Prospectus Regulation as it forms a part of UK domestic law by virtue of the EUWA.;
For purposes of this provision, the expression Prospectus Directive means
Directive 200371EC (including Directive 201073EU) and includes any relevant implementing measure in any Member State of the European Economic Area.
EXHIBIT B
Corporación Nacional del Cobre de Chile
U.S.$900,000,000 5.125% Notes due 2033
Pricing Term Sheet
Issuer:
Security Description: Type of Offering: Principal Amount: Maturity Date: Coupon:
Issue Price:
Yield to Maturity: Spread to Benchmark Treasury:
Benchmark Treasury:
Benchmark Treasury Price and Yield:
Gross Proceeds to Íssuer:
Interest Payment Dates:
Trade Date: Settlement Date:
Optional Redemption:
Corporación Nacional del Cobre de Chile
5.125% Notes due 2033 (the Notes) Rule 144A Regulation S
U.S.$900,000,000
February 2, 2033
5.125%
99.938% plus accrued interest, if any, from February 2, 2023
5.133%
+158 bps
4.125% due November 15, 2032
104-22; 3.553%
U.S.$899,442,000
February 2 and August 2 of each year, commencing August 2, 2023. Interest accrues from February 2, 2023.
January 30, 2023
February 2, 2023 (T+3)
Make-whole Call: Prior to November 2, 2032 (the date that is three months prior to the maturity date), at T+25
Par Call: On or after November 2, 2032 (the date that is three months prior to the maturity date)
Tax Redemption: The Notes are redeemable at the option of the Issuer in whole, but not in part, at any time at the principal amount thereof, plus accrued and unpaid interest and any additional amounts due thereon if, as a result of a change in the laws or regulations affecting Chilean taxation that is announced or becomes effective on or after the date of the agreement to purchase the Notes, the Issuer becomes obligated to pay additional amounts on interest payments on the Notes in respect of withholding or deduction of Chilean tax at a rate in excess of 4%.
Additional Amounts: In the event of withholding on account of certain taxes imposed by Chile, the Issuer will pay additional amounts.
Day Count Convention: 30 360
Minimum Denominations: U.S.$200,000 U.S.$1,000
Expected Listing: Luxembourg Euro MTF
Issuer Ratings*: A3, stable A, stable (Moodys S£-P) Issue Ratings*: A3 A (Moodys Sé:P)
Joint Book-Running Managers: BNP Paribas Securities Corp.
BofA Securities, Inc.
Santander Investment Securities Inc.
Scotia Capital (USA) Inc.
144A CUSIP ISIN: 21987B BF4 US21987BBF40 Regulation S CUSIP ISIN: P3143N BP8 USP3143NBP89
*A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.
This communication is intended for the sole use of the person to whom it is provided by the sender.
The Notes have not been registered under the U.S. Securities Act of 1933, as amended (the Securities Act), and are being offered only (i) to qualified institutional buyers under Rule 144A of the Securities Act and (ii) outside the United States in compliance with Regulation S under the Securities Act.
Delivery of the Notes is expected on or about February 2, 2023 which will be the third business day following the date of pricing of the Notes (this settlement cycle being referred to as T+3). Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Notes prior to the delivery of the Notes may be required, by virtue of the fact that the Notes initially will settle in T+3, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement.
Purchasers of the Notes who wish to trade Notes prior to their date of delivery hereunder should consult their own advisor.
The information in this term sheet supplements the Preliminary Offering Memorandum and supersedes the information in the Preliminary Offering Memorandum to the extent inconsistent with the information in the Preliminary Offering Memorandum. This term sheet should be read in conjunction with the Preliminary Offering Memorandum.
The Notes to which this pricing term sheet relates are not intended to be offered, sold, or otherwise made available to, and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (EEA). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 201465EU (as amended, MiFID II); (ii) a customer within the meaning of Directive 201697EU (as amended, the IDD), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID IT; or (iii) not a qualified investor as defined in Regulation (EU) 20171129 (as amended or superseded, the Prospectus Regulation). Consequently, no key information document required by Regulation No 12862014EU (as amended, the PRIIPs Regulation) for offering or selling any securities or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling any securities or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
This pricing term sheet is only being distributed to, and is only directed at, persons who are outside the United Kingdom or persons in the United Kingdom that are (1) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order, or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (each such person being referred to as a relevant person). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.
The Notes to which this pricing term sheet relates are not intended to be offered, sold, or otherwise made available to, and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 of
5
Regulation (EU) No 20175653 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (the EUWA); (11) a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (the FSMA) and any rules or regulations made under the FSMA to implement IDD, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 6002014 as it forms part of domestic law by virtue of the EUWA,; or (iii) not a qualified investor as defined in Article 2 of the Prospectus Regulation as it forms part of domestic law by virtue of the EUWA (the UK Prospectus Regulation). Consequently, no key information document required by the PRITPs Regulation as it forms part of domestic law by virtue of the EUWA (the UK PRIIPs Regulation) for offering or selling any securities or otherwise making them available to retail investors in the United Kingdom has been prepared and therefore offering or selling any securities or otherwise making them available to any retail investor in the United Kingdom may be unlawful under the UK PRIIPs Regulation.
ANY DISCLAIMER OR OTHER NOTICE THAT MAY APPEAR BELOW IS NOT APPLICABLE TO THIS COMMUNICATION AND SHOULD BE DISREGARDED.
SUCH DISCLAIMER OR NOTICE WAS AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT BY BLOOMBERG OR ANOTHER E-MAIL SYSTEM.
Link al archivo en CMFChile: https://www.cmfchile.cl/sitio/aplic/serdoc/ver_sgd.php?s567=b42a0a8a926069f499b41edfae041aaeVFdwQmVVMTZRWGxOUkVFeFRXcFJNazFSUFQwPQ==&secuencia=-1&t=1682376108
