Antofagasta production falls as expected in first quarter

Antofagasta reported first quarter copper production of 138,800 tonnes on Thursday, in line with guidance, but still a serious decline on both the prior quarter and year.

The FTSE 100 miner said the production figure was 24.2% lower than the same quarter in 2021, and 22.4% lower than in the fourth quarter, mainly due to the expected temporary reduction in throughput at Los Pelambres due to drought, and lower grades at Centinela Concentrates.

Throughput at Los Pelambres was 39.9% lower year-on-year and 27.7% lower quarter-on-quarter, and the grades at Centinela Concentrates were 26.7% and 25.4% lower, respectively.

Gold production totalled 38,400 ounces in the first quarter - 35.0% lower than at the same time in 2021 and 40.8% lower than the prior quarter, mainly due to expected lower grades at Centinela.

Molybdenum production totalled 2,000 tonnes, which was a decrease of 1,000 tonnes compared to the same period in 2021 due to lower grades and throughput at Los Pelambres, and 100 tonnes lower than in the fourth quarter.

Antofagasta said its cash costs before by-product credits were $2.34 per pound in the period, in line with expectations and 66 cents higher per pound than in the same period last year - mainly due to the temporary decrease in production.

Higher input prices, particularly for diesel and sulphuric acid, and general inflation were largely offset by a weaker Chilean peso.

Compared to the previous quarter, costs increased by 21.9% on lower copper production, due to lower grades and throughput

Net cash costs totalled $1.75 per pound in the first quarter, compared to $1.16 a year earlier and $1.35 in the prior quarter, which the board put down to the increase in cash costs before by-product credits, slightly offset by higher by-product credits.

Antofagasta left its guidance for the year unchanged, with group copper production expected to be between 660,000 and 690,000 tonnes, reflecting lower expected grades at Centinela Concentrates and the temporarily reduced throughput at Los Pelambres.

It said its guidance assumed no precipitation until the rainy season, and the desalination plant at Los Pelambres began operations in the second half.

As it had previously said, copper production during the year was expected to be lowest in the first quarter, increasing quarter-on-quarter thereafter.

The company said the drought had continued at Los Pelambres, with no precipitation during the quarter.

Strict water management protocols were in place to optimise water usage and mitigate the impact of low water availability.

Antofagasta left its cash cost guidance before and after by-product credits unchanged as well, at $2.00 and $1.55 per pound, respectively.

The company said it had completed its review of the Los Pelambres expansion project, with group capital expenditure for the year expected to be $1.9bn.

That was at the top end of the original guidance range of $1.7bn to $1.9bn.

“Antofagasta’s copper production of 138,800 tonnes and net cash costs of $1.75 per pound in the first quarter was in line with plan for the period and is consistent with annual guidance as copper production is expected to increase quarter-on-quarter during the year,” said chief executive officer Iván Arriagada.

“Production reflected the impact of the ongoing drought at Los Pelambres and the expected lower grades at Centinela Concentrates.

“The copper, gold and molybdenum markets have been strong throughout the quarter, and we expect this to continue as structural supply and demand dynamics support a tight physical market.”

In the meantime, Arriagada said the company would maintain its focus on the safety and health of employees and contractors, and on cost control and “disciplined” capital allocation.

“With completion of the Los Pelambres desalination plant expected in the second half and no precipitation until the rainy season, full year guidance is retained at 660,000 to 690,000 tonnes of copper at a net cash cost of $1.55 per pound.

“Following the completion of the review of the Los Pelambres Expansion project, total capital expenditure for the full year is expected to be $1.9bn, at the top end of the previously guided range.”

At 0910 BST, shares in Antofagasta were down 7.55% at 1,512.5p