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Derivative financial instruments

12 Months Ended

Dec. 31, 2022

Disclosure Of Embedded derivatives [Line Items]

Derivative financial instruments

34. Derivative financial instruments

(a)

This caption is made up as follows:


		2022		2021
		US$(000)		US$(000)
Copper and Zinc prices hedge (b)		8,839		(6,332)
Interest rate hedge (c)		—		(644)
		8,839		(6,976)

(b)

Copper and Zinc price hedges -

The volatility of copper prices during 2022 and 2021 has caused management to enter into forward contracts. These 2022 and 2021 contracts are intended to reduce the volatility of the cash flows attributable to the fluctuations in copper and zinc prices in accordance with existing copper concentrate sales commitments, which are related to 50% of the annual production of copper and 25% of the production of two years of zinc, according to the risk strategy approved by the Board of Directors.

During 2022, 2021 and 2020, the effect of hedge derivative financial instruments in profit or loss was a gain of US$12,774,000, loss of US$51,952,000, and loss of US$6,464,000, respectively (and it is show in the “Sales of goods” caption, note 20(b)).

The balance receivable of US$2.5 million as of December 31, 2022 is shown in the “Trade and other receivables” caption, note 4(a), while, as of December 31, 2021, it represented a balance payable of US$1.2 million shown in the “Trade and other payables” caption.

The table below presents the composition of open transactions designated as hedging derivative financial instruments as of December 31, 2022:


						Quotations
Quotation period		Concentrate		Metric tons		Fixed		Futures		Fair value
						US$/DMT(*)		US$/DMT(*)		US$(000)
January 2023		Copper		2,000		10,185		8,344		4,332
February 2023		Copper		1,500		10,109		8,350		1,867
March 2023		Copper		1,500		10,153		8,353		2,640
				5,000						8,839

(*) DMT= Dry metric tonne.

The table below presents the composition of open transactions designated as hedging derivative financial instruments as of December 31, 2021:


						Quotations
Quotation period		Concentrate		Metric tons		Fixed		Futures		Fair value
						US$/DMT(*)		US$ DMT(*)		US$(000)
January 2022		Copper		3,250		9,405		9,748		(1,112)
January 2022		Zinc		500		3,450		9,748		(65)
February 2022		Copper		2,000		9,444		9,740		(591)
March 2022		Copper		2,000		9,525		9,732		(413)
April 2022		Copper		2,700		9,103		9,719		(1,661)
May 2022		Copper		3,050		9,175		9,701		(1,601)
June 2022		Copper		1,000		9,425		9,686		(260)
July 2022		Copper		3,000		9,442		9,676		(701)
October 2022		Copper		1,500		9,762		9,631		196
December 2022		Copper		1,000		9,475		9,600		(124)
				20,000						(6,332)

(*) DMT= Dry metric tonne.

Changes in “Hedge derivative financial instruments” is included in “unrealized gain (loss) on hedge derivative financial instruments of copper and zinc prices hedge” in the consolidated statements of other comprehensive income. For the year 2022, 2021 and 2020, the Group recorded an unrealized gain of US$15,171,000, unrealized gain of US$9,472,000 and unrealized loss of US$15,804,000, respectively (unrealized gain of US$10,696,000, unrealized gain of US$6,678,000 and unrealized loss of US$11,142,000 net of income tax, respectively).

(c)

Interest rate hedge -

In order to mitigate the exposure to the risk of changes in the interest rate related to its financial obligations, on April 2, 2020, the Company’s management decided to enter into forward contracts in relation to three-month LIBOR with BBVA Banco Continental, Banco de Credito del Peru, Banco Internacional del Peru and Itaú, which are designated as cash flow hedges.

As of December 31, 2022, the Company did not have hedginge derivative instruments. The following is the composition of the operations to be settled that are part of the liability for hedging derivative instrument as of December 31, 2021:


				LIBOR three months
Maturity		Amount		Fixed		Forwards		Fair value
		US$(000)						US$(000)
October 2022		81,666		2.632	%	2.06% - 2.14	%	(191)
October 2022		74,167		2.632	%	2.06% - 2.14	%	(174)
October 2022		74,167		0.732	%	0.16% - 0.24	%	(174)
July 2022		45,000		2.632	%	2.06% - 2.14	%	(105)
		275,000						(644)

For the years 2022, 2021 and 2020, the effect on results was a gain of US$818,000, a loss of US$1,547,000 and a loss of US$146,000, respectively and is presented in the caption of “Financial costs” see note 29(a).

Changes in “Hedge derivative financial instruments” is included in “Unrealized gain (loss) on hedge derivative financial instruments of interest rate hedge, net of income tax” in consolidated statements of other comprehensive income. For the years 2022, 2021 and 2020, the Company recorded an unrealized gain of US$644,000, unrealized gain of US$1,991,000 and unrealized loss of US$2,635,000, respectively (unrealized gain of US$454,000, unrealized gain of US$1,404,000 and unrealized loss of US$1,858,000 net of income tax, respectively).

Sociedad Minera Cerro Verde S.A.A.

Disclosure Of Embedded derivatives [Line Items]

Derivative financial instruments

21. 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, 2022 and 2021, information about the Company’s embedded derivatives is as follows:


						As of December 31, 2022
		Pounds				Provisional
		payable		Maturity		pricing		Forward pricing		Fair value
		(000)				US$/Pound		US$/Pound		US$(000)

Copper Concentrate		320,095		January 2023 to May 2023		Between 3.448 and 3.807		Between 3.798 and 3.799		63,335
Copper Cathode		4,187		January 2023		Between 3.808 and 3.817		3.798		(61)
Molybdenum		2,425		January 2023 to February 2023		Between 16.677 y 16.935		28.267		27,737

										91,011	(a)


						As of December 31, 2021
		Pounds
		payable		Maturity		Provisional pricing		Forward pricing		Fair value
		(000)				US$/Pound		US$/Pound		US$(000)

Copper Concentrate		284,566		January 2022 to May 2022		Between 4.174 and 4.584		Between 4.400 and 4.421		13,335
Copper Cathode		3,087		January 2022		4.318		4.421		318
Molybdenum		4,035		January 2022 to February 2022		Between 16.659 and 16.773		16.456		(860)

										12,793	(a)

(a) Embedded derivative adjustments are recorded on the statement of financial position in “Trade account receivable – related parties”.