Antofagasta improves copper production, reduces costs

Antofagasta posted its second quarter production update on Wednesday, with the company reporting a 5.8% increase in copper production over the first quarter at 166,200 tonnes.

The FTSE 100 firm said this was a result of production increases at Los Pelambres, Zaldivar and Antucoya, with the integration of Zaldívar into the group being completed during the period and commercial production at Antucoya achieved at the beginning of the quarter.

Group copper production for the first six months of the year was 323,300 tonnes, 6.6% higher than in the same period last year

Antofagasta said gold production was 52,800 ounces over the quarter, a 6.9% decrease on Q1 2016 largely due to lower production at Centinela

Molybdenum production at Los Pelambres was 1,600 tonnes, compared to 1,700 tonnes in Q1 2016 principally due to lower grades, partially offset by higher recoveries and throughput

The board said cash costs before by-product credits in Q2 2016 were $1.57/lb, 3.7% lower than in Q1 2016, with the decrease mainly related to lower cash costs across the operations as cost efficiencies and productivity improvements were delivered

Cash costs before by-product credits for the first six months of the year were $1.60/lb, $0.28/lb lower than the same period last year due primarily to higher production, improved cost performance and the weaker Chilean peso.

Antofagasta’s net cash costs were $1.25/lb in Q2, a 2.3% decrease compared with the previous quarter primarily due to lower cash costs before by-product credits, supported by a significantly higher realised molybdenum price

The board also announced that group copper production for the full year is expected to be at the lower end of the 710-740,000 tonnes guided in January, with production for the year weighted to the second half.

Installation of the tailings thickeners at Centinela and the ramp-up of Antucoya are proceeding within their planned ranges, it said,, but inherent risks will persist until both projects are completed

The group also revised its estimation of deferred stripping costs at Los Pelambres in 2016 compared with the original guidance announced in January 2016.

Changes introduced in the estimation method impacted Los Pelambres accounting for $0.08/lb of the reduction in costs for the group for the first six months of the year compared with the same period last year.

Group cash costs before by-product credits and net cash costs for the full year are now expected to be $1.60/lb and $1.30/lb respectively

The board said that the corresponding increase in group capital expenditure as mine development for the year is equal to the reduction in operating costs so total cash expenditure for the year, operating and capital, is expected to be unchanged

“Our decision to concentrate the group's efforts in 2016 on operational and capital cost control, improved productivity and enhanced operational efficiencies has begun to bear fruit,” said Antofagasta CEO Ivan Arriagada.

“For the first half of the year, cash costs before by-product credits and net cash costs were $1.60/lb and $1.26/lb respectively, below the respective levels of the previous year.

“Although we now expect production for the full year to be at the lower end of the range announced in January, we remain confident that we will continue to deliver on our cost control and operational efficiency objectives for the full year,” Arriagada added.