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Antofagasta Profit Down On Higher Costs, Lower Copper Prices

Antofagasta Plc (ANTO.L,ANFGY.PK) reported Wednesday a decline in the first-half profit as higher operating costs offset the benefit of increased revenues. Production of copper and gold climbed from last year with strong performance from Esperanza mine, while realized copper price was lower. The Chile-based copper miner, however, announced higher dividend and backed its fiscal 2012 production forecast.

For the first half, pre-tax profit fell 7.6 percent to $1.56 billion from last year's $1.69 billion. Earnings per share, including exceptional items, were 65.5 cents, 7.2 percent lower than last year partly reflecting higher depreciation and exploration and evaluation expenditure.

However, revenue for the six months grew 3.5 percent to $3.16 billion from $3.05 billion a year ago, chiefly on the impact of increased copper and gold volumes.

EBITDA, a key earnings metric, dropped 5.4 percent to $1.84 billion mainly due to the increase in operating costs at the mining and transport division.

In the six months, average LME copper price dropped 13.8 percent to 367.3 cents per pounds.

Copper production climbed 16.5 percent to 336 thousand tonnes and Gold production surged 92.5 percent to 136,100 ounces, predominantly due to increased production from Esperanza, which had commenced operation at the start of 2011. Copper sales volumes rose 11.3 percent to 322.2 thousand tonnes. Molybdenum production was up 35.4 percent.

The newly appointed Chief Executive Officer of Antofagasta Minerals S.A Diego Hernandez said, "We have continued to deliver strong volume growth... This increase in low-cost production from Esperanza has also allowed us to maintain a relatively stable cash cost position, within the context of an industry environment which remains tight."

Net cash costs declined 6.3 percent to 98.9 cents per pound in the first half.

Further, the company announced an interim ordinary dividend of 8.5 cents, representing a 6.3 percent increase on 2011.

Looking ahead, Antofagasta continues to project 2012 full year production at about 700 thousand tonnes of copper, 280 thousand ounces of gold as well as 11 thousand tonnes of molybdenum.

In the year 2011, copper production was 640.5 thousand tonnes and gold production was 196.8 ounces.

The copper price has declined by more than 10 percent since the end of April, but it has found good support at around the 330 - 340 cents per pound level, indicating relatively robust demand to provide support for the price at levels well above the current industry marginal cost of production, the company said.

Antofagasta now projects that production at Esperanza would be at the lower end of the original forecast range, but this is expected to be offset by production at Los Pelambres and El Tesoro being marginally higher than originally forecast.

In London, Antofagasta shares lost 18 pence or 1.59 percent in the morning trade, and are currently trading at 1,114 pence.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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