Bloomberg News

Antofagasta Falls After Miner Misses Profit, Dividend Estimates

March 13, 2012

Antofagasta Plc (ANTO), the copper company whose chief executive officer unexpectedly resigned last week, fell the most in a week in London trading after 2011 profit and dividend payments missed analyst estimates.

The shares declined as much as 3.9 percent to 1,220 pence, the biggest intraday loss since March 6. Net income rose 18 percent to $1.24 billion, missing the $1.26 billion average estimate of eight analysts surveyed by Bloomberg, it said today in a statement. The dividend fell to 44 cents a share, including a 24-cent special payment, from $1.16 with a $1 one-time component a year earlier.

“The big talking point will be the 24-cents-a-share special dividend, which is down 62 percent and comfortably below our 63 cents a share expectation,” Liberum Capital Ltd. said in a note today. “With Antofagasta entering a new phase of organic growth, we believe funds are being retained for project development with production in second half of this decade.”

Antofagasta, which last year increased copper output by 23 percent to 640,500 metric tons, plans to produce 700,000 tons in 2012. CEO Marcelo Awad resigned on March 7 after delays at the Esperanza project in Chile forced the company to cut its 2011 output forecast in June to 620,000 to 640,000 tons, from the 715,000 tons it projected last February.

“The company has entered a growth phase of implementing a pipeline of projects, and a change of leadership was needed,” group Chief Financial Officer Alejandro Rivera said in an interview in London today. “Marcelo also agreed with that and left. The board is actively looking for a new CEO and will consider candidates from within the company and outside.”

Esperanza Target

Output at Esperanza is targeted at 160,000 to 175,000 tons of copper this year, compared with 90,100 tons last year, according to the statement.

Antofagasta is studying the ore in Esperanza and will in the second quarter decide whether an additional investment is needed to adjust the milling process, Rivera said. Any such spending would cost no more than $260 million, he said.

“We are evaluating the next two to three years of ore body where we’ll be mining to check if the hardness of that ore is different to what we expected,” he said. “If that’s proved, the solution will probably be to start an additional pre- crushing facility in order to support the milling process.”

It may take a year to identify a solution and reach Esperanza’s designed capacity to process 97,000 tons of ore a day, Rivera said. “The difficulties we are facing are just mechanical and not complex to deal with, but we require some time and perhaps additional investments.”

Toronto Office

Antofagasta, which is seeking to increase its output by expanding mines and enter newly started projects in Chile and abroad, has opened an office in Toronto to seek opportunities with Canadian partners, Rivera said.

“The main purpose of that office is indeed to look for early stage projects in Toronto and Vancouver,” he said. “There’s a natural need for early-stage projects held by junior companies, so we are looking at those opportunities through that office. We are entering many joint ventures.”

Antofagasta, controlled by Chile’s Luksic family, failed to get a mining license in November for a $3.4 billion copper and gold venture with Barrick Gold Corp. (ABX) in Pakistan.

The company’s sales climbed 33 percent in 2011 to $6.08 billion, the miner said in today’s statement. Copper for three- month delivery on the London Metal Exchange climbed 17 percent to average $8,826 a ton.

Antofagasta expects copper to average about $8,400 this year, Gonzalo Sanchez, commercial vice president, said in London. He predicts a shortfall of about 200,000 tons in 2012 copper supplies that will support prices.

To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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