Antofagasta profit jumps despite lower copper prices, boosts dividend

Chilean miner Antofagasta (LSE: ANTO) posted on Thursday a 7.5% increase in half-year profit as higher copper sales more than offset lower prices for the metal, considered essential for the world’s transition to a greener economy.

Earnings before interest, tax, depreciation and amortization (EBITDA) for the first six months of 2023 rose to US$1.33 billion from US$1.24 billion in the same period last year.

The surge in revenue was achieved despite climbing operating costs due to persistent inflation and a stronger Chilean currency.

Productivity improvements during the period, such as the ongoing commissioning of a desalination plant at its flagship Los Pelambres mine, also helped the company save US$60 million in cash.

Antofagasta said the positive results would benefit shareholders as it would increase its interim dividend to 11.7 cents per share from 9.2 cents last year.

The miner had revised down in July its full-year guidance for copper production to 640,000-670,000 tonnes on water shortages, due to a decade-long drought in Chile. The company maintained the updated production figures and said that capital expenditure also remains set at US$1.9 billion for the year.

“With the gradual ramp up of the desalination plant at Los Pelambres in the second half of the year, we expect to see incremental increases in copper production quarter-on-quarter,” CEO Ivan Arriagada said in a presentation.

Arriagada noted there were some projects that could be brought forward, including a US$3.7 billion improvement plan for its Centinela mine and the replacement of the concentrate pipeline at Los Pelambres.

The Santiago-based company applied in June for an environmental permit to extend operations at its Zaldivar copper mine through 2051. The extension would involve a projected investment of US$1.2 billion, Arriagada said.

The mine’s current environmental impact study permit, or EIA, will expire in 2025.

Bullish copper output

Looking at the copper market in the short-term, the company said it sees uncertainty in China’s economic outlook and growth targets, but expects Beijing to announce further stimulus measures soon.

Antofagasta believes the long term outlook for copper’s supply and demand fundamentals is supportive of its growth strategy.

The company sees demand growing significantly from the current 25 million tonnes by 2035, driven by China, the U.S. and Europe’s switch to electric vehicles and clean sources of electricity. 

On the supply side, Antofagasta expects copper mines to keep experiencing technical challenges in the form of grade decline, longer haul distances and harder ore types. 

The miner said it’s starting to see an emerging trend with governments and regulators expressing an intent to review and expedite permitting processes for energy transition metals, which in the past has seen approval periods exceed a decade.