Chilean mining giant Antofagasta has reported a 5% increase in its half-year profit, driven by higher copper prices that offset a decline in sales. The company, which is primarily owned by Chile’s influential Luksic family, revealed that its earnings before interest, tax, depreciation, and amortization (EBITDA) for the first six months of the year rose to $1.39 billion, up from $1.33 billion in the same period last year.
The profit increase highlights the crucial role that copper prices play in the mining industry, especially for companies like Antofagasta that are heavily reliant on the metal. Copper is a key material used in various industries, including power and construction. It is also expected to see a surge in demand due to the ongoing green energy transition, which includes the rise of electric vehicles and other environmentally friendly technologies.
Despite the profit boost, Antofagasta announced a lower interim dividend for its shareholders. The company will distribute 7.9 cents per share, down from the 11.7 cents per share paid out last year. This reduction in dividends may reflect the company’s cautious approach to managing its cash flow amid a fluctuating global market.
Antofagasta’s shares reacted positively to the profit news, opening 0.4% higher in London. However, some analysts remain cautious about the company’s future performance. Marina Calero, an analyst at RBC Capital Markets, noted that while the results are positive, other opportunities in the European mining sector may offer better prospects. She pointed out that Antofagasta’s premium valuation and limited cash flow generation in the near term could be potential drawbacks for investors.
One of the company’s key projects, the construction of a second concentrator at its Centinela mine, is progressing ahead of schedule. This development is crucial for Antofagasta as it seeks to increase its production capacity. Additionally, expansion work is underway at the Los Pelambres desalination plant, another significant project that aims to support the company’s operations in the water-scarce region of Chile.
Despite these advancements, Antofagasta recently adjusted its full-year copper output forecast. The company now expects production from its four copper mines in Chile to be at the lower end of its previous guidance range of 670,000 to 710,000 metric tons. This revision is due to lower ore grades, which have impacted the amount of copper extracted from the mines.
In terms of costs, Antofagasta anticipates its net cash costs to remain around $1.70 per pound of copper for the year. These costs are a critical factor for the company as it navigates the challenges of maintaining profitability in a competitive and often volatile market.
The copper market has experienced significant fluctuations this year. Prices for the metal on the London Metal Exchange (LME) reached a record high of over $11,100 per metric ton in May. This surge was driven by strong demand, particularly from sectors related to the green energy transition. However, the market has since cooled, with prices dropping nearly 20% due to weak manufacturing activity.
