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Financial instruments (Tables) | 6 Months Ended
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Jun. 30, 2022
Disclosure of detailed information about financial instruments [abstract] |
Summary of fair value of financial instruments | The table below shows the classifications of financial instruments carried at fair value by valuation method in accordance with IFRS 13 at 30 June 2022 and 31 December 2021:
|  | At 30 June 2022 |  | At 31 December 2021
|  | Held at fair value |  |  | Held at fair value |
|  | Level 1(a) US$m | Level 2(b) US$m | Level 3(c) US$m |  |  | Level 1(a) US$m | Level 2(b) US$m | Level 3(c) US$m |
Assets |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents(d) |  | 3,916 | — | — |  |  | 4,138 | — | — |
Investments in equity shares and funds |  | 76 | — | 63 |  |  | 64 | — | 53 |
Other investments, including loans(e) |  | 2,326 | — | 254 |  |  | 2,422 | — | 238 |
Trade and other financial receivables(f) |  | 3 | 1,365 | — |  |  | 1 | 1,163 | — |
Derivatives (net) |  |  |  |  |  |  |  |  |  |
Forward contracts and option contracts: designated as hedges(g) |  | — | — | (148) |  |  | — | — | (125) |
Forward contracts and option contracts, not designated as hedges(g) |  | — | 32 | 17 |  |  | — | (131) | 11 |
Derivatives related to net cash |  | — | (566) | — |  |  | — | (101) | — |
Liabilities |  |  |  |  |  |  |  |  |  |
Trade and other financial payables |  | — | (80) | — |  |  | — | (67) | — |
Total |  | 6,321 | 751 | 186 |  |  | 6,625 | 864 | 177 |
Valuation is based on unadjusted quoted prices in active markets for identical financial instruments. (b)Valuation is based on inputs that are observable for the financial instruments, which include quoted prices for similar instruments or identical instruments in markets which are not considered to be active, or inputs, either directly or indirectly based on observable market data. (c)Valuation is based on inputs that cannot be observed using market data (unobservable inputs). The change in valuation of our level 3 instruments for the six months to 30 June 2022 is below:
| 30 June 2022
Level 3 financial assets and liabilities | US$m
Opening balance | 177
Currency translation adjustments | (8)
Total realised gains/(losses) included in: |
– consolidated sales revenue | 11
– net operating costs | (31)
Total unrealised gains included in: |
– net operating costs | 32
Total unrealised losses transferred into other comprehensive income through cash flow hedges | (60)
Additions to financial instruments | 36
Disposals/maturity of financial instruments | 29
Closing balance | 186
Net gains included in the income statement for assets and liabilities held at period end | 20
(d)Our "cash and cash equivalents" of US$11,412 million, includes US$3,916 million relating to money market funds which are treated as fair value through profit or loss (FVPL) under IFRS 9 with the fair value movements going into finance income. (e)Other investments, including loans, comprise: cash deposits in rehabilitation funds, government bonds, managed investment funds and royalty receivables. (f)Trade receivables include provisionally priced invoices. The related revenue is initially based on forward market selling prices for the quotation periods stipulated in the contracts with changes between the provisional price and the final price recorded separately within “Other revenue”. The selling price can be measured reliably for the Group's products, as it operates in active and freely traded commodity markets. At 30 June 2022, US$1,155 million (31 December 2021: US$1,114 million) of provisionally priced receivables were recognised. (g)Level 3 derivatives consist of derivatives embedded in electricity purchase contracts linked to the LME, midwest premium and billet premium with terms expiring between 2025 and 2036 (31 December 2021: 2025 and 2036). The techniques used to value our material fair value assets/(liabilities) categorised under Level 2 and Level 3 are summarised below:
Description | Fair Value US$m | Valuation technique | Significant Inputs
Level 2
Interest rate swaps | (257) |  | Discounted cash flows | Applicable market quoted swap yield curves Credit default spread
Cross currency interest rate swaps | (309) |  | Discounted cash flows | Applicable market quoted swap yield curves Credit default spread Market quoted FX rate
Provisionally priced receivables | 1,155 |  | Closely related listed product | Applicable forward quoted metal price
Level 3
Derivatives embedded in electricity contracts | (178) |  | Discounted cash flows/option model | LME forward aluminium price Midwest premium and billet premium
Royalty receivables | 235 |  | Discounted cash flows | Forward commodity price Mine production
The following table shows the carrying amounts and fair values of our borrowings including those which are not carried at an amount which approximates their fair value at 30 June 2022 and 31 December 2021. The fair values of our remaining financial instruments approximate their carrying values because of their short maturity, or because they carry floating rates of interest.
| 30 June 2022 | 31 December 2021
| Carrying value US$m | Fair value US$m | Carrying value US$m | Fair value US$m
Borrowings (including overdrafts) | 11,587 | 11,997 | 12,168 | 13,904
Summary of changes in the fair value of Level 3 financial assets and financial liabilities | The change in valuation of our level 3 instruments for the six months to 30 June 2022 is below:
| 30 June 2022
Level 3 financial assets and liabilities | US$m
Opening balance | 177
Currency translation adjustments | (8)
Total realised gains/(losses) included in: |
– consolidated sales revenue | 11
– net operating costs | (31)
Total unrealised gains included in: |
– net operating costs | 32
Total unrealised losses transferred into other comprehensive income through cash flow hedges | (60)
Additions to financial instruments | 36
Disposals/maturity of financial instruments | 29
Closing balance | 186
Net gains included in the income statement for assets and liabilities held at period end | 20

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