Antofagasta reaps $1.1bn as Chinese market calls for copper
By Aaron Patrick (Filed: 16/03/2005)
Chief executive Jean-Paul Luksic
The global commodities boom has produced another profit bonanza for a FTSE miner, with Antofagasta being forced to pay a special dividend because it is generating so much cash. The Chilean copper producer increased pre-tax earnings 226pc last year to $1.16billion (£600m) as the price of the metal surged on heavy demand from
China's fast-growing economy. It was the last of the four biggest miners on the London Stock Exchange to reveal 2004 earnings, in what was an exceptionally good year for the industry. Combined net earnings from BHP Billiton, Rio Tinto, Xstrata and Antofagasta last year were $9.2billion. They paid $3.2billion in dividends. Antofagasta, which is 65pc-owned by the Luksic family, announced it would pay a 40c special dividend in addition to a 24c final dividend, which
will be paid to shareholders registered on May 13. The Luksics, one of richest families in South America, will receive £53m in dividends for the year. Antofagasta executives said they were interested in making acquisitions - the company owns only three mines - and had retained earnings to do that.
Alejandro Rivera, vice president for finance and development, said he had never seen the commodities market as buoyant as this, and predicted the long lead time for new mining projects would keep prices high.
"The growth of the company [began in] 1997, and over the past five or six years no real new mines have entered into the market," he said. "That means the increasing demand we are seeing from China and the US will not be satisfied.
The large profit increase was made despite costs rising by almost 20pc. Shipping charges were up because of the high oil price, the strong Chilean peso reduced returns, and less copper was obtained per tonne of ore mined.
The company forecast copper production would fall this year from 498,000 tonnes to 470,000 tonnes as the copper seam in its main Los Pelambres mine became less rich. It expects copper prices to trade between 100c and 110c per pound, down from an average 130c last year and 80c in 2003. Merrill Lynch analyst Jason Fairclough said in a note that copper supplies would move into surplus in the second half of this year and prices over the long term
would fall below the company's target. He advised investors to sell the stock. Antofagasta shares fell 8 to £13.19 after the result, as most mining shares moved lower. Copper is used in electrical work and piping, while molybdenum, the company's other product, is used to toughen steel alloys and found in fertilizers, dyes,
enamel and reagents.