Anglo American Annual Report 2008
7. Special items and remeasurements
'Special items' are those items of financial performance that the Group believes should be separately disclosed on the face of the income statement to assist in the understanding of the underlying financial performance achieved by the Group. Such items are material by nature or amount to the year's results and require separate disclosure in accordance with IAS 1 paragraph 86. Special items that relate to the operating performance of the Group are classified as operating special items and include impairment charges and reversals and other exceptional items, including significant legal provisions. Non-operating special items include profits and losses on disposals of investments and businesses.
Remeasurements comprise other items which the Group believes should be reported separately to aid an understanding of the underlying financial performance of the Group. This category includes:
- (i)
- unrealised gains and losses on 'non-hedge' derivative instruments open at year end (in respect of future transactions) and the reversal of the historical marked to market value of such instruments settled in the year. The full realised gains or losses are recorded in underlying earnings in the same year as the underlying transaction for which such instruments provide an economic, but not formally designated, hedge (if the underlying transaction is recorded in the balance sheet, e.g. capital expenditure, the realised amount remains in remeasurements on settlement of the derivative). Such amounts are classified in the income statement as financing when the underlying exposure is in respect of net debt and otherwise as operating.
- (ii)
- foreign exchange gains and losses arising on the retranslation of dollar denominated De Beers preference shares held by a rand functional currency subsidiary of the Group. This is classified as financing.
- (iii)
- foreign exchange impact arising in US dollar functional currency entities where tax calculations are generated based on local currency financial information (and hence deferred tax is susceptible to currency fluctuations). Such amounts are included within income tax expense.
Subsidiaries and joint ventures' special items and remeasurements
Operating special items
| US$ million | 2008 | 2007 |
|---|---|---|
| Impairment of Tarmac assets and restructuring costs | (91) | (43) |
| Impairment of Lisheen | (78) | – |
| Impairment of Black Mountain | (62) | – |
| Impairment of Coal Australia assets | (40) | (153) |
| Reversal of impairment of Silangan exploration asset | 45 | – |
| Costs associated with 'One Anglo' initiatives | (72) | – |
| Provisions for onerous contracts | (39) | – |
| Costs associated with proposed sale of Tarmac | (3) | (55) |
| Other | (12) | – |
| Total operating special items – continuing operations | (352) | (251) |
| Tax | 42 | 60 |
| Minority interests | 1 | – |
| Net total attributable to equity shareholders of the Company – continuing operations |
(309) | (191) |
Following structural review of the Industrial Minerals business by management and as a result of trading conditions in the building industry, restructuring and impairment charges totalling $91 million have been recorded. The impairment brings the carrying value in line with fair value (less costs to sell).
Impairments have been recorded at Black Mountain and Lisheen resulting from a reduction in the near term zinc and lead prices. These charges were based on a value in use assessment of recoverable amount using a pre-tax, risk free discount rate which equated to a post tax rate of 6%.
Costs associated with 'One Anglo' initiatives principally comprise advisory costs associated with procurement, shared services and information systems.
Operating remeasurements
| US$ million | 2008 | 2007 |
|---|---|---|
| Net (loss)/gain on non-hedge derivatives | (659) | 5 |
| Realised loss on derivatives relating to capital expenditure | (120) | – |
| Total operating remeasurements – continuing operations | (779) | 5 |
| Tax | 252 | (1) |
| Minority interests | 135 | – |
| Net total attributable to equity shareholders of the Company – continuing operations |
(392) | 4 |
The net loss on non-hedge derivatives principally related to a net unrealised loss on derivatives relating to capital expenditure held by Anglo Ferrous Brazil and Los Bronces and an unrealised loss on an embedded derivative at Minera Loma de Níquel. Realised losses on derivatives relating to capital expenditure were principally incurred on foreign currency instruments held by Anglo Ferrous Brazil and Los Bronces.
Profits and (losses) on disposals
| US$ million | 2008 | 2007 |
|---|---|---|
| Disposal of interest in China Shenhua Energy | 551 | – |
| Disposal of interest in Minera Santa Rosa SCM | 142 | – |
| Disposal of Northam Platinum Limited | 101 | – |
| Copebrás property compensation | 96 | – |
| Disposal of Tarmac Iberia | 65 | – |
| Disposal of Namakwa Sands(1) | 49 | – |
| Part disposal of Exxaro (formerly Kumba Resources) | – | 234 |
| Disposal of remaining interest in Highveld(1) | – | 140 |
| Part disposal of AngloGold Ashanti | – | 67 |
| Tongaat-Hulett and Hulamin BBBEE transactions(1) | – | (68) |
| Tarmac land sales | – | 25 |
| Disposal of Boschendal Phase II | – | 21 |
| Other | 5 | 41 |
| Net profit on disposals – continuing operations(2) | 1,009 | 460 |
| Tax | (47) | (71) |
| Minority interests | (43) | 34 |
| Net total attributable to equity shareholders of the Company – continuing operations |
919 | 423 |
- (1)
- See Disposals and demerger of subsidiaries and businesses note 33.
- (2)
- Includes charges associated with IFRS 2 on broad based black economic empowerment (BBBEE) and BEE transactions of nil (2007: $68 million).
In April 2008 the Group sold its investment in China Shenhua Energy for $704 million, generating a profit on disposal of $551 million.
On 20 August 2008 the Group sold its 22.4% interest in Northam Platinum Limited for cash proceeds of $205 million. This interest was transferred to a disposal group in September 2007, where it was held until sale.
The sale of the Group's 40% interest in Minera Santa Rosa SCM was completed in December 2008 for consideration of $140 million. This investment had a nominal carrying value.
Financing remeasurements
| US$ million | 2008 | 2007 |
|---|---|---|
| Foreign exchange gain/(loss) on De Beers preference shares | 28 | (3) |
| Unrealised net gain on non-hedge derivatives related to net debt | 23 | 32 |
| Total financing remeasurements – continuing operations | 51 | 29 |
| Tax | – | (5) |
| Net total attributable to equity shareholders of the Company – continuing operations |
51 | 24 |
The unrealised net gain on non-hedge derivatives related to net debt principally comprises an unrealised gain on an embedded interest rate derivative.
Tax remeasurements
| US$ million | 2008 | 2007 |
|---|---|---|
| Foreign currency translation of deferred tax balances | (153) | – |
| Minority interests | 52 | – |
| Net total attributable to equity shareholders of the Company – continuing operations |
(101) | – |
Total special items and remeasurements – continuing operations
| US$ million | 2008 | 2007 |
|---|---|---|
| Total special items and remeasurements before tax and minority interests – continuing operations |
(71) | 243 |
| Tax remeasurements | (153) | – |
| Tax on special items and remeasurements | 247 | (17) |
| Minority interests | 145 | 34 |
| Net total special items and remeasurements attributable to equity shareholders of the Company – continuing operations |
168 | 260 |
Associates' special items and remeasurements
Associates' operating special items and remeasurements
| US$ million | 2008 | 2007 |
|---|---|---|
| Impairment of De Beers' businesses | (79) | – |
| Impairment of De Beers' Canadian assets | – | (434) |
| Share of De Beers' restructuring costs | (37) | (15) |
| Share of De Beers' class action payment and related costs | (3) | (5) |
| Unrealised net loss on non-hedge derivatives | (101) | (3) |
| Other impairments | (6) | (8) |
| Total associates' operating special items and remeasurements – continuing operations |
(226) | (465) |
| Tax | 17 | 2 |
| Minority interests | 16 | – |
| Net total associates' operating special items and remeasurements – continuing operations |
(193) | (463) |
Due to current trading conditions De Beers has recorded an impairment of $176 million (attributable share $79 million) in respect of certain of its businesses. The impairment brings the carrying value of these assets in line with fair value (less costs to sell), determined using discounted cash flow techniques.
Associates' profits on disposals
| US$ million | 2008 | 2007 |
|---|---|---|
| Disposal of interests in Williamson, Cullinan and Koffiefontein | 15 | – |
| Disposal of interests in Acerinox | – | 12 |
| Disposal of interest in Gope Exploration Company | – | 8 |
| Other | 3 | 4 |
| Associates' net profit on disposals – continuing operations | 18 | 24 |
Associates' financing remeasurements
| US$ million | 2008 | 2007 |
|---|---|---|
| Unrealised net loss on non-hedge derivatives related to net debt | (15) | (4) |
| Total associates' financing remeasurements – continuing operations |
(15) | (4) |
Total associates' special items and remeasurements – continuing operations
| US$ million | 2008 | 2007 |
|---|---|---|
| Total associates' special items and remeasurements before tax and minority interests – continuing operations |
(223) | (445) |
| Tax | 17 | 2 |
| Minority interests | 16 | – |
| Net total associates' special items and remeasurements – continuing operations |
(190) | (443) |
Operating special items and remeasurements – continuing operations
| US$ million | 2008 | 2007 |
|---|---|---|
| Operating special items | (352) | (251) |
| Operating remeasurements | (779) | 5 |
| Total operating special items and remeasurements (excluding associates) – continuing operations |
(1,131) | (246) |
Associates' operating special items |
(125) | (462) |
| Associates' operating remeasurements | (101) | (3) |
| Total associates' operating special items and remeasurements – continuing operations |
(226) | (465) |
| Total operating special items and remeasurements (including associates) – continuing operations |
(1,357) | (711) |
Operating special items (including associates) |
(477) | (713) |
| Operating remeasurements (including associates) | (880) | 2 |
| Total operating special items and remeasurements (including associates) – continuing operations |
(1,357) | (711) |