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Financial instruments and risk management (Tables)
 12 Months Ended
Dec. 31, 2023
Disclosure of detailed information about financial instruments [abstract]  
Summary of notional aluminium forward sales contracts embedded in power contracts We held the following notional aluminium forward sales contracts embedded in the power contracts as at 31 December:
2023
Total
Within 1 year
Between 1
and 5 years
Between 5
and 10 years
Notional amount (in tonnes)
428,686
72,617
289,801
66,268
Notional amount (in US$ millions)
1,050
169
711
170
Average hedged rate (in US$ per tonne)
2,449
2,331
2,452
2,564
2022
Total
Within 1 year
Between 1
and 5 years
Between 5
and 10 years
Notional amount (in tonnes)
501,498
72,812
289,868
138,818
Notional amount (in US$ millions)
1,216
166
697
353
Average hedged rate (in US$ per tonne)
2,425
2,282
2,404
2,542
Summary of impact of hedging instrument on statement of financial position The impact on our financial statements of these hedging instruments and hedging items are:
Aluminium embedded derivatives separated
from the power contract
(Hedging instrument)(a)
Highly probable forecast aluminium sales (Hedged item)
Nominal
US$m
Carrying
amount
US$m
Change in fair
value in the
period
US$m
Cash flow
hedge
reserve(b)
US$m
Change in fair
value in
the period
US$m
Total hedging
losses
recognised
in reserves
US$m
Hedge
ineffective-
ness in the
period gains/
(losses)(c)
US$m
Losses
reclassified
from reserves
to income
statement(d)
US$m
2023
1,050
(174)
3
(91)
(16)
(1)
4
(2)
2022
1,216
(189)
(119)
(87)
133
(110)
(9)
34
(a)Aluminium embedded derivatives (forward contracts and options) are contained within certain aluminium smelter electricity purchase contracts. The carrying amount of US$174 million (2022:
US$189 million) is shown within “Other financial assets and liabilities”.
(b)The difference between this amount and the total cash flow hedge reserve of the Group (shown in note 35) relates to our cash flow hedge on the sterling bond (refer to interest rate risk section).
(c)Hedge ineffectiveness is included in “net operating costs” (within “raw materials, consumables, repairs and maintenance” - refer to note 7) in the income statement.
(d)On realisation of the hedge, realised amounts are reclassified from reserves to consolidated sales revenue in the income statement.
Summary of market price relevant to the aluminum purchase price swaps outstanding Our commodity derivatives are impacted by changes in market prices. The table below summarises the impact that changes in aluminium market
prices have on aluminium forward and option contracts embedded in power supply agreements outstanding at 31 December 2023. Any change in
price will result in an offsetting change in our future earnings.
Change in
market prices
2023
US$m
2022
US$m
Effect on net earnings
+10%
(52)
(57)
(10)%
67
83
Effect on equity
+10%
(81)
(90)
(10)%
70
65
Disclosure of effect of changes in foreign exchange rates on earnings The table below shows the estimated retranslation effect on financial assets and financial liabilities at 31 December, including intragroup balances,
of a 10% strengthening in the closing exchange rate of the USD against significant currencies. We deem 10% to be the annual exchange rate
movement that is reasonably probable (on an annual basis over the long run) for any of our significant currencies and therefore an appropriate
representation for the sensitivity analysis.
2023
2022
Currency exposure
Closing exchange
rate
US cents
Effect on net
earnings
US$m
Impact directly on
equity
US$m
Closing exchange
rate
US cents
Effect on net
earnings
US$m
Impact directly on
equity
US$m
Australian dollar
69
228
(1,036)
68
(319)
(986)
Canadian dollar
76
(361)
—
74
(219)
—
Summary of fair value of financial instruments The table below shows the classifications of our financial instruments by valuation method in accordance with IFRS 13 “Fair Value Measurement” at
31 December.
All instruments shown as being held at fair value have been classified as fair value through the profit and loss unless specifically footnoted.
2023
2022
Held at fair value
Held at
amortised
cost
US$m
Total
US$m
Held at fair value
Held at
amortised
cost
US$m
Total
US$m
Note
Level 1(a)
US$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$m
Assets
Cash and cash equivalents(d)
22
2,722
—
—
6,951
9,673
2,725
—
—
4,050
6,775
Investments in equity shares and funds(e)
23
85
—
96
—
181
147
—
75
—
222
Other investments, including loans(f)
23
896
—
228
153
1,277
2,018
—
229
28
2,275
Trade and other financial receivables(g)
17
9
1,383
—
1,851
3,243
18
1,306
—
1,441
2,765
Forward, option and embedded derivatives
contracts, not designated as hedges(h)
23
—
28
26
—
54
—
16
51
—
67
Derivatives related to net debt(i)
23
—
87
—
—
87
—
2
—
—
2
Liabilities
Trade and other financial payables(j)
18
—
(47)
—
(6,277)
(6,324)
—
(30)
—
(6,455)
(6,485)
Forward, option and embedded derivatives
contracts, designated as hedges(h)
23
—
—
(174)
—
(174)
—
—
(189)
—
(189)
Forward, option and embedded derivatives
contracts, not designated as hedges(h)
23
—
(63)
(29)
—
(92)
—
(57)
(35)
—
(92)
Derivatives related to net debt(i)
23
—
(516)
—
—
(516)
—
(692)
—
—
(692)
Valuation is based on unadjusted quoted prices in active markets for identical financial instruments.
(b) Valuation is based on inputs that are observable for the financial instruments, which include quoted prices for similar instruments or identical instruments in markets which are not considered to
be active, or inputs, either directly or indirectly based on observable market data.
(c)Valuation is based on inputs that cannot be observed using market data (unobservable inputs). The change in valuation of our level 3 instruments for the year to 31 December is as follows:
2023
2022
Level 3 financial assets and liabilities
US$m
US$m
Opening balance
131
177
Currency translation adjustments
(2)
(4)
Total realised gains/(losses) included in:
– consolidated sales revenue
12
16
– net operating costs
(18)
365
Total unrealised gains included in:
– net operating costs
43
124
Total unrealised losses transferred into other comprehensive income through cash flow hedges
(1)
(110)
Additions to financial assets
29
41
Disposals/maturity of financial instruments
(47)
(478)
Closing balance
147
131
Net gains included in the income statement for assets and liabilities held at year end
31
103
(d)Our "cash and cash equivalents" of US$9,673 million (2022: US$6,775 million), includes US$2,722 million (2022: US$2,725 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)Investments in equity shares and funds include US$157 million (2022: US$153 million) of equity shares, not held for trading, where we have irrevocably elected to present fair value gains and
losses on revaluation in other comprehensive income (FVOCI). The election is made at an individual investment level.
(f)Other investments, including loans, covers cash deposits in rehabilitation funds, government bonds, managed investment funds and royalty receivables.
(g)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 31 December 2023, US$1,362 million (2022: US$1,234 million) of provisionally priced receivables were recognised.
(h)Level 3 derivatives mainly consist of derivatives embedded in electricity purchase contracts linked to the LME, midwest premium and billet premium with terms expiring between 2025 and 2036
(2022: 2025 and 2036).
(i)Net debt derivatives include interest rate swaps and cross-currency swaps. As part of the ISDA Fallbacks Protocol, on 1 July 2023 we completed the transition of our US LIBOR derivatives to
SOFR on cessation of US LIBOR at 30 June 2023. There has been no impact on our hedging arrangements after taking into account the IFRS 9 LIBOR reform reliefs.
(j)Trade and other financial payables comprise trade payables, other financial payables, accruals and amounts due to equity accounted units within note 18.
The following table shows the carrying amounts and fair values of our borrowings including those which are not carried at an amount which
approximates their fair value at 31 December. The fair values of some of our financial instruments approximate their carrying values because of their
short maturity, or because they carry floating rates of interest.
2023
2022
Carrying
value
US$m
Fair
value
US$m
Carrying
value
US$m
Fair
value
US$m
Listed bonds
8,607
8,672
6,631
6,649
Oyu Tolgoi project finance
3,850
4,090
3,770
3,928
Other
544
494
670
615
Total borrowings (including overdrafts)
13,001
13,256
11,071
11,192
Summary of changes in the fair value of Level 3 financial assets and financial liabilities Valuation is based on inputs that cannot be observed using market data (unobservable inputs). The change in valuation of our level 3 instruments for the year to 31 December is as follows:
2023
2022
Level 3 financial assets and liabilities
US$m
US$m
Opening balance
131
177
Currency translation adjustments
(2)
(4)
Total realised gains/(losses) included in:
– consolidated sales revenue
12
16
– net operating costs
(18)
365
Total unrealised gains included in:
– net operating costs
43
124
Total unrealised losses transferred into other comprehensive income through cash flow hedges
(1)
(110)
Additions to financial assets
29
41
Disposals/maturity of financial instruments
(47)
(478)
Closing balance
147
131
Net gains included in the income statement for assets and liabilities held at year end
31
103
Summary of techniques to value significant fair value assets/(liabilities) categorised under level 2 and 3 The techniques used to value our more significant fair value assets/(liabilities) categorised under level 2 and level 3 are summarised below:
2023
2022
Description
Fair value
US$m
Fair value
US$
Valuation technique
Significant Inputs
Level 2
Interest rate swaps
(163)
(356)
Discounted cash flows
–Applicable market quoted swap yield
curves
–Credit default spread
Cross currency interest rate swaps
(266)
(334)
Discounted cash flows
–Applicable market quoted swap yield
curves
–Credit default spread
–Market quoted FX rate
Provisionally priced receivables
1,362
1,234
Closely related listed product
–Applicable forward quoted metal price
Level 3
Derivatives embedded in electricity contracts
(186)
(208)
Option pricing model
–LME forward aluminium price
–Midwest premium and billet premium
Royalty receivables
214
209
Discounted cash flows
–Forward commodity price
–Mine production