Copper miner Antofagasta optimistic despite challenging short-term market conditions
Chilean copper giant Antofagasta Minerals (LON:ANTO) remains on target to meet its guidance of 700,000 tons of copper this year, but says it faces a "more challenging short-term environment," the group told investors at its annual general meeting on Wednesday.
Chairman Jean-Paul Luksic said that following a difficult 2013, the group was now in a period of consolidation, but warned it will continue to focus on reducing costs.
“We seek only to invest in projects that we expect to offer strong returns,” he said, adding that Los Pelambres remains Antofagasta’s flagship mine, producing over 55% of the total group output.
The London-listed firm said expansion of the vast open-pit mine, located in Chile’s in the central-northern area, is currently at the feasibility study stage. If the project goes ahead, this would increase the mine's processing capacity to 205,000 tons of ore per day. Los Pelambres has already been expanded three times, increasing production from 85,000 tons since commissioning in 2000 to 175,000 tons currently.
Luksic added the group was currently focused on brownfields projects, which help control the growth of unit costs across its operations.
What’s coming up
Looking ahead, the group said its largest development, the Antucoya copper project, which was momentarily suspended last year while the company reviewed the cost escalation and viability of the project, has progressed well and is on-time and on-track to meet its new $1.9bn capital budget.
The company, property of the Luksic family —one of Chile’s richest— said the most advanced of its brownfield projects, the Esperanza mine, is on track for ramp up in the second half of 2015. Its key brownfield projects are expected to support increasing production over the next five years to nearly 900,000 tonnes, approximately 25% above current levels.
Discussing possible tax changes in Chile, the company said that higher levies would have an impact on the company’s balance sheet.
Newly re-elected Chilean president Michelle Bachelet promised during her campaign to increase taxes by $8.2 billion in order to increase government spending on education.
In a bill put to congress in April, Bachelet's government proposed rising corporation taxes to 25% by 2017, a 5% hike, while moving withholding tax to an accruals-based system. The latest would mean that from 2017 onwards the effective withholdings tax rate would be an additional 10% on top of corporation tax bringing the total tax rate to 35%.
The tax reform bill is not expected to become law before September this year at the earliest, said the firm, however, certain aspects of it, such as the first stage of the increase in corporation tax, will be retrospectively applied from January 1, 2014.
Images courtesy of Antofagasta Minerals.