Antofagasta's first-half profit beats forecasts thanks to strong copper prices

Antofagasta's share price rose after the South American mining company reported pre-tax profit for the six months to June that slightly beat City estimates.

The FTSE 100 company was last trading 0.5 percent higher at £18.90 per share on Tuesday.

Due to strong copper prices at the beginning of the year, the Chilean mining company's revenues rose by 2.3 percent to three billion dollars in the first half of the year.

Higher commodity prices offset a 4% year-on-year decline in copper production to 284,700 tonnes, reflecting lower production volumes at the Centinela project. Gold production, meanwhile, fell 22% to 66,900 ounces due to lower grades at the project.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 5% year-on-year to $1.4 billion, driven by a 1.1% improvement in EBITDA margins to 47.2%.

However, profit before tax fell 6.8% to $712.6 million over the same period. Antofagasta said this was due to “higher depreciation and amortization, mainly due to the commencement of depreciation of the assets of the Los Pelambres Phase One expansion project, which is now in operation.”

The FTSE 100 mining company's interim dividend fell to 7.9 cents per share from 11.7 cents over the same period in 2023. This is in line with the company's target payout ratio of 35% of underlying net profit.

Production target confirmed

For the full year, Antofagasta reiterated the expectation that total production in 2024 will be at the “lower end” of a forecast range of 670,000 to 710,000.

Higher production at Los Pelambres was overshadowed by operational problems at Centinela, which in turn prompted Antofagasta to lower its full-year forecasts in July.

In other news, the copper mining company said its “growth program remains on track. Construction of the second Centinela concentrator is currently ahead of schedule and initial earthworks have commenced for the Los Pelambres desalination plant expansion, concentrate pipeline and El Mauro fencing.”

“Resilient” first

CEO Iván Arriagada commented: “Antofagasta demonstrated its resilience in the first half of the year, maintaining EBITDA margins, delivering savings and productivity improvements of US$130 million and advancing key projects that provide a strong platform for future growth.”

He added: “Importantly, our growth plan remains on schedule. The second Centinela concentrator is progressing ahead of schedule and initial work is beginning on the new Los Pelambres projects.”

Short-term uncertainty

eToro analyst Mark Crouch commented: “Antofagasta shareholders may be wondering: is the bull market for copper over or is this just the end of the beginning? A leading economic indicator, Dr Copper, as the industrial metal is often called, may be diagnosing an impending period of turmoil for markets following the recent sell-off in copper.”

He noted that copper stocks in China are currently at their highest level since 2020.

However, Crouch added: “If inflation eases and central banks around the world cut interest rates, we could likely see a rebound in economic activity, after which demand for copper will certainly rise again.”