Antofagasta's heavy cost cuts lift earnings above forecasts

Although first-half revenue was lower for Antofagasta, the Chilean copper mining colossus improved earnings and kept its dividend flat thanks to some heavy cost cutting.

Revenues of $1.45bn in the six months to 30 June were down 18.5% compared to the last year's due to lower copper prices and production levels, which are expected to be weighted to the second half and towards the lower end of January's guidance.

Nevertheless, management slashed $124m of operating costs, almost a quarter of the total, and were rewarded by earnings before interest, tax, depreciation and amortisation (EBITDA) edging 2.3% higher to $571.6m, beating analyst expectations that were on the other side of $500m.

Chief executive Iván Arriagada said: "Continued management actions to reduce costs and preserve cash contributed to our EBITDA margin strengthening to 39.5%, from 26.2% in the full year 2015. While reducing costs in absolute terms is important we are focused on achieving improved efficiencies in a sustainable manner to ensure long-term shareholder value."

Operating profit fell 3.4% to $293.8m, while earnings per share slipped 3.3% to 8.9 cents, which again was ahead of City forecasts of 5.4 cents.

Arriagada highlighted the resolution of the two outstanding court cases concerning Los Pelambres' Mauro tailings dam, with an agreement reached with the Caimanes community in April. Although an appeal is possible, he said it was unlikely to be accepted.

He said the board remained "cautious in our outlook and remain conservative in our approach to managing capital" given the current economic uncertainty.

Capital expenditure of $385.4m was $276.9m lower than in the first half of 2015 and for the full year is expected to be lower than original guidance.

Group copper production for the year is expected to be at the lower end of the 710-740,000 tonnes guided in January.

For the full year unit costs are expected to be $0.05/lb lower with cash costs before by-product credits of $1.60/lb and net cash costs of $1.30/lb.