Derivative financial instruments

12 Months Ended

Dec. 31, 2017

Disclosure Of Embedded derivatives [Line Items]

Disclosure of derivative financial instruments [text block]

31.

Derivative financial instruments

Hedge derivative financial instruments -

(a)

The volatility of copper prices during the last years has caused the Management of the subsidiary El Brocal to enter into future contracts which are recorded under cash flow accounting, see note 2.4(v). These contracts managed during 2017 are intended to reduce the volatility of the cash flows attributable to the fluctuations in the cooper price, from January to December 2018, in accordance with existing copper concentrate sales commitments, which are related to 50 percent of the annual production of copper according to the risk strategy approved by the Board of Directors of this subsidiary.

The counterpart fair value as of December 31, 2017, net of deferred income tax, amounts to a liability balance of US$19,602,000 (US$2,723,000 as of December 31, 2016), and it is shown in the caption "Other reserves of equity".

The table below presents the composition of open transactions included in the hedge derivative financial instruments as of December 31, 2017:

			Quotations
Period of settlement	MT		Fixed	Futures		Fair value
						US$(000)
January 2018		3,000	5,972 – 6,050		7,275		(3,788)
February 2018		3,000	5,972 – 6,050		7,260		(3,736)
March 2018		3,000	5,972 – 6,050		7,247		(3,693)
April 2018		3,000	5,805 – 6,050		7,259		(3,973)
May 2018		3,000	5,900 – 6,300		7,269		(3,484)
June 2018		3,000	5,900 – 6,325		7,277		(3,468)
July 2018		3,000	5,960 - 6,350		7,285		(3,359)
August 2018		3,000	6,520		7,290		(2,288)
September 2018		3,000	7,100		7,296		(580)
October 2018		3,000	7,200		7,300		(296)
November 2018		3,000	7,300		7,305		(13)
December 2018		3,000	7,300		7,309		(27)

		36,000					(28,705)

The table below presents the composition of open transactions included in the hedge derivative financial instruments as of December 31, 2016:

			Quotations
Period of settlement	MT		Fixed		Futures		Fair value
							US$(000)
January 2017		2,542		4,917		5,526		(1,548)
February 2017		2,270		5,001		5,530		(1,199)
March 2017		1,795		4,860		5,535		(1,208)
April 2017		500		5,720		5,536		92
		7,107						(3,863)

(b)

Embedded derivative of commercial contracts -

The Group’s sales of concentrates are based on commercial contracts, under which a provisional sales value is determined based on future quotations (forward). The adjustment to sales is considered an embedded derivative, which is required to be separated from the host contract. Commercial contracts are linked to market prices (London Metal Exchange) at the dates of the expected settlements of the open positions as of December 31, 2017 and 2016. The embedded derivative does not qualify for hedge accounting; therefore, changes in the fair value are recorded as an adjustment to net sales.

Embedded derivatives held by the Group as of December 31, 2017 are:

Quotations

Metal

Quantity

Period of
quotations

Provisional

Future

Fair value

2018

US$

US$(000)

Copper

24,846 DMT

January – March

6,645.36 – 6,841.95

7,112.50 – 7,275.00

2,508

Gold

64,898 DMT

January – March

1,256.45 – 1,317.67

1,258.00 – 1,317.10

1,066

Silver

326,095 Oz

January – April

16.02 – 18.00

16.07 – 17.21

1,815

Lead

22,735 DMT

January – April

2,333.23 – 3,110.69

2,488 – 2,579.75

229

Zinc

54,603 DMT

January – April

3,103.72 – 3,275.47

3,226.50 – 3,343.50

1,806

Total asset, net

7,424

Embedded derivatives held by the Group as of December 31, 2016 are:

Quotations

Metal

Quantity

Period of
quotations

Provisional

Future

Fair value

2017

US$

US$(000)

Copper

29,121 DMT

January - April

2,985.28 – 5,824.00

5,535.76 – 5,642.25

397

Gold

15,370 DMT

January – February

1,139.75 – 1,145.90

1,151.00 – 1,179.40

481

Silver

17,124 Oz

January - April

16.32 – 19.35

16.42 – 16.66

(1,825)

Lead

23,636 DMT

January - April

1,871.58 – 2,380.60

2,017.00 – 2,080.00

(801)

Zinc

29,407 DMT

January – March

2,291.08 – 2,732.10

2,578.00 – 2,612.50

(172)

Other

15,082 Oz

396

Total liability, net

(1,524)

Sociedad Minera Cerro Verde S.A.A. [Member]

Disclosure Of Embedded derivatives [Line Items]

Disclosure of derivative financial instruments [text block]

22.

Embedded derivatives

As discussed in Note 2(d), the Company’s sales create exposure to changes in the market prices of copper and molybdenum which are considered embedded derivatives. As of December 31, 2017 and 2016, information about the Company’s embedded derivatives is as follows:

As of December 31, 2017

Pounds

payable

Maturity

Provisional pricing

Forward pricing

Fair value provision

(000)

US$

US$(000)

Copper Concentrate

252,830

January 2018 to May 2018

Between 2.903 and 3.166

Between 3.274 and 3.297

62,870

Copper Cathode

2,756

January 2018

Between 2.970 and 3.246

3.274

179

Molybdenum

3,340

January 2018 to February 2018

Between 7.229 and 7.231

8.950

5,687

68,736

As of December 31, 2016

Pounds

payable

Maturity

Provisional pricing

Forward pricing

Fair value provision

(000)

US$

US$(000)

Copper Concentrate

344,787

January 2017 to May 2017

Between 2.091 and 2.656

Between 2.507 and 2.512

68,130

Copper Cathode

7,936

January 2017

Between 2.488 and 2.678

2.507

(1,000)

Molybdenum

3,455

January 2017 to February 2017

Between 5.431 and 5.484

5.542

319

67,449