Antofagasta confirms focus on margin preservation

Chilean copper colossus Antofagasta reiterated its plans for a 'three-pillar’ strategy and confirmed that two major development projects have been slowed to preserve cash.

Ahead of the FTSE 100 company's annual shareholder meeting, a statement from chairman Jean-Paul Luksic was published that confirmed the three-pillar strategy for growth remained unchanged, focusing on optimising existing operations to find quick returns from investment; looking for sustainable and organic growth in the areas around existing operations; and searching for special opportunities for growth beyond core businesses both in Chile and abroad.

"As we continue to respond to low commodity prices, we are focussed on ensuring our continued financial resilience by working hard to ensure discipline in our allocation of capital, reducing costs, improving operational efficiencies and lowering our overheads," he said.

"We remain focused on cash flow generation and margin protection through sustainable cost reductions and productivity improvements that help compensate for the impact of lower commodity prices."

As had been revealed recently, Luksic said the development projects Encuentro Oxides and the new molybdenum plant at Centinela, which were originally to have been completed by end 2016 and early 2017 respectively, had both been slowed by around eight months to preserve cash.

Meanwhile, he said the feasibility studies for the Pelambres expansion and the first phase of the Centinela expansion are to be completed by end 2017.

Six months after acquiring Zaldívar from Barrick Gold, he said some synergies had already been achieved and different ways of improving copper recoveries were being investigated that could help increase production from current levels.

"We believe that Zaldívar has been the best quality copper acquisition that has come available for some time and that it complements our existing portfolio of assets in the north of Chile."

At its first quarter results last month, the company reiterated its full-year 2016 target of 710-740kt copper, plus 245-275koz of gold and 8-9kt molybdenum at a net cash cost of US$1.35/lb.

Analyst Yuen Low at Shore Capital said there were "no major surprises" in the AGM script.