Copper rally lifts Antofagasta’s profits — up 88% in first half of 2017

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

Chile-focused copper miner Antofagasta Plc. (LON:ANTO) posted Tuesday an impressive 88% jump in earnings during the six months to June 30, thanks to a sustained rally in prices for the metal, which has surged 19% so far this year, as well as cost savings.

The miner, one of the oldest companies listed in London, said earnings before interest, tax, depreciation and amortization, or Ebitda, increased to $1.1 billion in the period, as revenues grew by 42% to $2 billion.

Chief executive Iván Arriagada, who has been at the helm for less than a year and a half, said the improved performance will allow the company to pay an interim dividend of 10.3 US cents a share, up from 3.1 a year ago. This is in line with Antofagasta’s policy of paying out a minimum of 35% of underlying net earnings to investors, he said.

Company’s margins have returned to a level not seen since 2012, helped by the stronger copper price and cost savings.

The copper market is moving to a “tighter demand-supply position” with a small deficit expected this year and next, Arriagada said in the statement.

“However, volatility is anticipated as demand expectations are continually reassessed although supply has stabilised following the spate of disruptions earlier in the year,” he added.

The executive highlighted that the company’s margins have now returned to a level not seen since 2012. This came despite a strengthening in the Chilean peso versus the dollar, which weighed on Antofagasta’s costs.

Copper prices hit a fresh three-year high on the news, which together with other companies positive results, buoyed sentiment towards the sector. The industrial metal also found support from robust gains in steel material prices in China.

London copper rose to $6,642.50 a tonne in London, the highest since Nov 2014, before trading at $6,622 a tonne by 03:12AM ET, a 0.6% gain. Copper had already jumped 1.5% in the previous session, spurred partly by troubles at Freeport’s copper mine in Indonesia and large-scale speculators positioning themselves for a continued run in prices.

Antofagasta has majority stakes in four Chilean copper mines — Los Pelambres (60%), El Tesoro (70%), Michilla (74.2%) and Esperanza (74.2%). At two of them, Los Pelambres in central Chile and Centinela in the north, the company is currently expanding operations to feed growing demand.

The miner is also conducting exploration activities in Peru, while its majority owner — the billionaire Luksic family — holds exploration and mining ventures in Europe, Turkey, Australia, Africa and across the Americas.

Copper rally lift Antofagasta’s profits — up 88% in first half

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