Antofagasta's First-Half Profit Falls 49% on Copper Slump

  • Revenue fell 31% to $1.8 billion in six months through June
  • Copper prices at a six-year low are hurting miners' profits

Antofagasta Plc, the copper miner controlled by Chile’s Luksic family, reported a 49 percent drop in first-half profit as metal prices slid.

Earnings before interest, taxes, depreciation and amortization for the six months through June fell to $561.6 million from $1.09 billion a year earlier, Santiago-based Antofagasta said in a statement on Tuesday. Revenue fell 31 percent to $1.8 billion and the miner cut its interim dividend to 3.1 cents a share from 11.7 cents last year.

Antofagasta is among the worst performers this year on the U.K.’s benchmark stock index, joining other mining companies hurting from lower commodity prices. Copper has plunged to a six-year low on concern a slowing economy in top-buyer China will reduce demand and exacerbate a global glut.

“The current price doesn’t reflect the supply and demand equation,” Chief Executive Officer Diego Hernandez said on a conference call. “Everybody is worried about everything, and each time that we have news about China, or the U.S., or Europe, Greece or whatever, it affects the copper price. Supply and demand is the one that affects the price with a more long-term trend."

Copper Output

The $8.3 billion miner is targeting 665,000 metric tons of copper production this year after cutting the outlook last month. It expects the copper market to be in a small surplus in the second half and “much tighter” next year. In the medium to longer term, demand from emerging markets, especially China, should lead to a shortage in supply and a recovery in prices, it said.

Antofagasta gained 8.7 percent to close at 579.5 pence in London on Tuesday, cutting this year’s decline to 23 percent. While the stock jumped on Tuesday along with miners BHP Billiton Ltd. and Glencore Plc, it’s still the eighth-worst performer this year in the U.K.’s FTSE 100 index. The FTSE 350 Mining Index of 14 producers declined 32 percent in 2015.

Glencore Plc, the world’s largest listed commodity supplier, said last week that aggressive, synchronized short selling, especially from leveraged Chinese hedge funds, has pushed copper prices too low.

Antofagasta has been looking to add mines to help boost its output of the metal used in wires and pipes. The firm last month agreed to buy a 50 percent stake in Barrick Gold Corp.’s Zaldivar copper mine in Chile for $1.01 billion. There are no other acquisition targets for the time being, Hernandez said on the call.

Net earnings from continuing operations were $86.3 million and Antofagasta is on track to make $160 million in savings in 2015, according to the statement.

Profit from discontinued operations was $619.5 million after the company completed the sale of its water division in June. The improved cash position following that sale will reverse when the purchase of the Zaldivar stake is completed, Sanford C. Bernstein & Co. said in an e-mailed note Tuesday.

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