Antofagasta Sees Copper Output Rebounding as Costs Decline

  • Miner expects 2016 copper production to rise as much as 17%
  • Output fell 11% last year on lower ore grades and protests

Antofagasta Plc, the copper miner controlled by Chile’s richest family, plans to boost production of the metal this year by as much as 17 percent after missing its 2015 output target.

The Santiago-based miner produced 630,300 metric tons last year, down 11 percent from 2014, as lower grades and community protests curbed output from its mines, it said in a statement Wednesday. That compares with an October forecast of 635,000 tons. The company expects to produce 710,000 to 740,000 tons of copper this year.

Copper miners have been hurt by the metal’s slump to a six-year low after China’s economic slowdown curbed demand and added to a global supply glut. Antofagasta cut its dividend for the first half of last year by 73 percent after profits almost halved. Chief Executive Officer Diego Hernandez has been trying to rein in costs while boosting production to stem the slide in earnings.

“The continued deterioration of the macro-environment and associated falling commodity prices combined with several operational setbacks resulted in copper production declining,” Hernandez said in the statement. “Whilst we have finished the year on a good note, 2015 has been undeniably difficult.”

Share Price

Antofagasta shares have lost 20 percent in London trading this year, making it the second-worst performer on the U.K.’s benchmark stock index. The company declined 0.7 percent to close at 375.4 pence on Wednesday, valuing it at about $5.3 billion.

A weaker Chilean peso and falling energy and diesel prices helped Antofagasta make "significant" savings last year, it said. This year, it expects net cash costs to drop 10 percent to $1.35 a pound.

In the fourth quarter, output totaled 169,900 tons, 8.2 percent more than in the previous three months. That still missed the 174,000-ton estimate of eight analysts compiled by Bloomberg.

The miner said it expects its effective tax rate in 2015 to be 60 to 65 percent, significantly higher than in 2014, due to net deferred tax charges and non-deductible expenses such as international exploration and corporate costs.

"We would expect consensus earnings downgrades on the back of the weaker production and higher tax guidance," Ioannis Masvoulas, an analyst at RBC Capital Markets Ltd., said in an e-mailed note.

Lower ore grades at Antofagasta’s Centinela mine and community protests at Los Pelambres curbed output in 2015. Production this year should be boosted by supply from the Zaldivar mine and more ore from Antucoya and Centinela. In July, Antofagasta agreed to buy Barrick Gold Corp.’s 50 percent stake in Zaldivar for $1 billion, though the deal wasn’t completed until December.

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