Antofagasta more than doubles dividend on strong copper prices

Los Pelambres, located 200km north of Chile’s capital Santiago, is the company’s flagship mine. (Image courtesy of Antofagasta plc.)

Shares in Chilean miner Antofagasta Plc. (LON:ANTO) spiked Tuesday after it posted a 59% increase in profits to almost $2.6 billion last year, thanks to strong copper prices and cost-cutting measures that helped offset a slight decline in production.

Net profit for the year ended Dec. 31 climbed to $750.6 million from $158 million a year earlier, a more than four-fold increase, which allowed the company to pay out a bumper dividend to shareholders.

Raising copper prices helped the company achieve the favourable results. The red metal climbed 27% last year on the London Metal Exchange. 

Antofagasta, which has a policy of a minimum 35% return, is handing shareholders 67% of its underlying net earnings per share. This equates to a final dividend of 40.60 US cents per share, taking the total to 50.90 cents. In 2016, the miner paid a total of just 18.40 cents.

Raising copper prices helped the company achieve the favourable results. The average price for the metal on the London Metal Exchange stood at $2.80 per pound in 2017, an increase of 27% compared with 2016.

The company, majority-owned by Chile’s Luksic family, one of the country’s wealthiest, has now more than enough cash from its four mines in Chile to — in addition to the impressive dividend boost — reduce its debt to just $42 million.

The miner’s stock price reflected the positive news by climbing as much as 3.5% to 918.80p at 9:54AM London time.

“We’ve always had a strong balance sheet and we’ve gone further in that direction,” Iván Arriagada, chief executive, said in the statement.

The Chile-focused miner said it would seek board approval later this year for the expansion of its flagship Los Pelambres mine, expected to cost $1.3 billion, slightly more than previously forecast.

The project will add 55,000 tonnes of copper a year once in full operation, Antofagasta said.

The company reiterated copper production guidance for this year of between 705,000 and 740,000 tonnes, compared to 704,300 tonnes produced in 2017.

It also said it expected the copper market to tighten in the second half of 2018 and to be in balance or in a slight deficit for the full year.

“From 2019 the likelihood of the market being in deficit is expected to increase,” Antofagasta said, warning that stronger copper prices will raise employee expectations, which could result in some supply disruptions in Peru and Chile, given the “unusually” large number of labour negotiations taking place in both copper producing countries.

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