Poor copper price weakens Antofagasta´s earnings

Chile's Antofagasta kept its dividend and resumed its growth projects even after lower copper prices drove its earnings down 22% in the first half, it said on Thursday, pushing its stocks lower. Stocks listed on the London Stock Exchange fell 5.4% around 1257 MGZ, making them the worst performing on an index of their competitors. In the previous meeting, the share reached its highest level since June 2018. Due to the COVID-19 pandemic, the mines in Antofagastas were operated with around two-thirds of the usual workforce on site. The disruptions to mining operations in Chile, the largest copper producer in the world, were minimal, but they contributed to the delay of mining projects. Antofagasta said a six-month delay in his flagship Los Pelambres mine cost him $ 50 million. Work on all projects has been gradually resumed. Redesigning a desalination plant in Los Pelambres would cost an additional $ 150 million. However, other costs are lower due to cheaper fuel and a weaker local currency, and Antofagasta reiterated its targets for the full year in terms of production, costs and spending. Realized copper prices in the first half were 12.5% ​​lower than a year ago, while sales were down 2.2%, Antofagasta said. This weighed on miners earnings before interest, taxes, depreciation, and amortization (EBITDA), which declined 22% to $ 1.01 billion in the six months ended June 30. The prices of copper, used in the energy and construction industries, rose nearly 50% from their March lows to around $ 6,600 per ton, fueled by supply concerns and increased demand from top consumer China. Antofagasta, which cut its final dividend for 2019 by $ 70 million in May, announced an interim payout that was 6.2 cents per share, 42% lower than the same period last year. This remained in line with their policy of paying out at least 35% of underlying net income and was slightly above consensus. It (the interim dividend) indicates that the Antofagasta team is of the opinion that it has adapted itself and its business to the current situation and that the business is going well; said Peter Mallin-Jones, a Peel Hunt analyst. Antofagasta's larger London-listed rivals BHP, Anglo American and Rio Tinto also kept a dividend, but Glencore did not. In the longer term, a final investment decision will be made on a second concentrator at the Centinela Mine in early 2022, which is estimated to cost around $ 2 billion, up from the previously estimated $ 2.7 billion, CEO Iván Arriagada told Reuters.