Chilean miner Antofagasta (LON: ANTO) said on Thursday that water shortage in the home country, which has been hit by a decade-long drought exacerbated by climate change, had forced it to cut its copper production target for the year.
The miner now expects to produce between 710,000 tonnes and 740,000 tonnes of copper this year, down from its previous forecast of 730,000 tonnes to 760,000 tonnes.
The redesigning of a desalination plant at its flagship Los Pelambres mine, slated to begin operating in the second half of 2022, could also be affected, the company said, adding a delay would put 50,000 tonnes copper production at risk.
Los Pelambres, located in Chile’s Coquimbo region, 240 km north-east of Santiago, is one of the company’s operations affected by the drought. The country’s central region alone, where most people live and which hosts key copper mines, has seen rainfall decreased by almost 30% over the last 20 years.
Despite the weather-related challenges, Antofagasta saw its half-year earnings jump to a record $2.4 billion on the back of strong copper prices that boosted its bottom line. Soaring metal prices also allow the company to announce an interim dividend of 23.6 cents per share, more than triple its payout a year ago.
While average copper prices increased in the first half of the year, the metal hit on Thursday a more than four-month low on the London Metal Exchange, as a stronger dollar weighed on investor sentiment.
Three-month copper on the LME fell by 0.4% to $9,009 a tonne, its lowest since April 14 before rebounding to trade almost flat at $9,045 a tonne.
Drought not only is impacting miners, but also farmers and wine makers, which has led the authorities to reform Chile’s water code.
“The weather in central Chile during the first half saw unprecedentedly dry conditions, with almost no rainfall,” Chief Executive Iván Arriagada said in a statement.
“We have now had 12 years of drought, and the precipitation in 2021 has so far been less than in 2019, which itself was one of the driest years on record.”
Antofagasta’s key growth projects, however, are on track and Arriagada said the company remained focused on operating discipline and cost control.