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Derivative financial instruments

12 Months Ended

Dec. 31, 2023

Disclosure Of Embedded derivatives [Line Items]

Derivative financial instruments

34. Derivative financial instruments

See related accounting policies in Note 2.4(b).

(a)

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 2023, 2022 and 2021, the effect of hedge derivative financial instruments in profit or loss was a gain of US$6,056,000, gain of US$12,774,000, loss of US$51,952,000, respectively (and it is show in the “Sales of goods” caption, note 20(b)).

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 ton.

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 and 2021, the Group recorded an unrealized gain of US$15,171,000 and US$9,472,000, respectively (unrealized gain of US$10,696,000 and US$6,678,000 net of income tax, respectively).

For the year 2023, the Group recognized an unrealized loss of US$9,047,000 (unrealized loss of US$6,232,000 net of income taxes, respectively).

As of December 31, 2023, the Group does not maintain a contract for derivative instruments to hedge copper and zinc prices.

(b)

Interest rate hedge -

As of December 31, 2023 and 2022, the Company did not have hedging derivative instruments. For the years 2022 and 2021, the effect on results was a gain of US$818,000 and a loss of US$1,547,000, 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 and 2021, the Company recorded an unrealized gain of US$644,000 and US$1,991,000, respectively (unrealized gain of US$454,000 and US$1,403,000 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, 2023 and 2022, information about the Company’s embedded derivatives is as follows:


						As of December 31, 2023
		Pounds				Provisional
		payable		Maturity		pricing		Forward pricing		Fair value
		(000)				US$/Pound		US$/Pound		US$(000)

Copper Concentrate		231,774		January to May 2024		Between 3.588 and 3.840		Between 3.850 and 3.897		34,581
Copper Cathode		5,072		January 2024		3.869		3.850		(95)
Molybdenum		2,173		January to February 2024		Between 15.251 and 17.803		17.395		2,384
Silver		757		January to May 2024		Between 21.568 and 24.910		Between 23.910 and 24.370		565	(a)

										37,435	(b)


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

Copper Concentrate		320,095		January 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 to February 2023		Between 16.677 y 16.935		28.267		27,737

										91,011	(a)

(a) Beginning January 1, 2023, the Company records the impact of the embedded derivatives related to variation in the price of silver contained in the sale of copper concentrate. As of December 31, 2022 and 2021, the impact of the embedded derivatives related to the variation in the price of silver was immaterial to the financial statements.

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