Antofagasta earnings leap on copper price recovery

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Chilean copper miner Antofagasta said its earnings jumped by 79 per cent last year due to cost cutting and a recovery in copper prices.

The FTSE 100 miner said earnings before interest, tax, depreciationn and amortisation rose to $1.63bn as revenues rose by 12.3 per cent to $3.62bn. It raised its dividend to shareholders to 18.4 cents a share, from 3.1 cents the previous year.

Copper pries rallied in the second half of 2016 on the back of optimism about demand in China and expectations for less supply of the red metal. This year they have got a further boost from a strike at the world’s largest copper mine in Chile, and a halt to exports from Indonesia.

The company said it does not forecast copper returning to its levels hit in early 2016 due to the mine disruptions.

Ivan Arriagada, Antofagasta’s chief executive, said he expected to see the copper market move into deficit over the medium term, “leading to a further improvement in prices.”

The company, which is owned by Chile’s Luksic family, said copper production rose 12.5 per cent to 709,400 tonnes in 2016, below the company’s target of between 710,000 to 740,000 tonnes. That included output from the Zaldivar copper mine, in which Antofagasta bought a 50 per cent stake for $1bn from Barrick Gold in 2015.

The company is targeting copper production of between 685,000 to 720,000 tonnes for this year. In the next few years it hopes to produce a further 200,000 tonnes of copper through expansions at its Los Pelambres project and after building a second concentrator at Centinela.

Antofagasta said it cut costs and capital expenditure during the year, which helped boost margins. Operating cash flow rose 69.8 per cent during the year to $1.46bn, it said.

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