Antofagasta Shares Up as Results Beat Expectations -- Update

By Alex MacDonald

LONDON--Shares in Antofagasta PLC (ANTO.LN) rose as the Chilean copper producer beat market expectations on first-half net profit by slashing costs faster-than-expected, while cautioning the copper market will remain volatile in the near term.

The U.K.-listed miner Tuesday reported a net profit of $88.1 million for the first six months of the year compared with $706 million in the same period a year earlier, when it benefited from a $620 million gain on proceeds from the sale of its water division.

Revenue fell 19% to $1.45 billion, reflecting lower copper prices and sale volume but earnings before interest, taxes, depreciation and amortization, a closely watched earnings metric, rose 2.3% to $572 million, thanks to a near-25% reduction in operating costs.

The Ebitda and net profit figure beat analysts expectations of $532 million and $62 million respectively, according to a company-complied consensus forecast of 12 analysts. This helped the stock to rise 5% to 539.5 pence a share by 0825 GMT, while the FTSE 350 mining index was up 2.6%.

Chief Executive Iván Arriagada said the company has already achieved $124 million of this year's forecast $160 million in cost-savings by lowering spending on contractors and energy consumption as well as by reorganizing its support infrastructure.

The company also said two longstanding cases relating to the Los Pelambres Mauro tailings dam and its impact on a local community's water-rights have been resolved. This helps pave the way for the company to take a decision on one or possibly two major expansion projects at Los Pelambres and Centinela at the end of 2017.

Mr. Arriagada said the company doesn't plan to return excess cash to shareholders by way of a special dividend or share buyback, given the need to maintain a strong balance sheet for potential investment in expansion projects.

Antofagasta's net debt was almost unchanged at $1.04 billion as of June-end compared with December-end.

Mr. Arriagada said the company remains interested in acquiring assets, notably in the Americas, but "we don't think that it is likey that significant new opportunities will come into the market," anytime soon. He declined to comment on whether Antofagasta would be interested in Glencore PLC's (GLEN.LN) Chilean Lomas Bayas copper mine, which is for sale. Antofagasta was sitting on a cash and liquid asset pile of $2.2 billion at June-end.

The company also reaffirmed it plans to meet the lower end of this year's 710,000 to 740,000 metric ton copper production guidance range, up from 630,000 tons a year earlier, reflecting a ramp-up at its Antucoya project and the purchase of a 50% stake in the Chiean Zaldivar mine last December.

The miner declared an interim dividend of $0.031 a share, unchanged from last year.

"Given the current economic uncertainty we are cautious in our outlook and remain conservative in our approach to managing capital," said Mr. Arriagada. He expects the global copper market will deliver a small surplus of around 300,000 tons of copper this year and then again next year before swinging to a 300,000 tons deficit in 2018.

"There are no new projects [in the pipeline]....That will put pressure on the market," he said.

Write to Alex MacDonald at [e-mail]

(END) Dow Jones Newswires

August 16, 2016 05:49 ET (09:49 GMT)

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