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Antofagasta’s improved copper and gold production had a beneficial impact on cash costs
In its recently released Q3 2011 result, miner Antofagasta’s improved copper and gold production had a beneficial impact on cash costs. Thanks to the successful ramp-up of the company’s Esperanza operation as well as the higher grade ore from Los Pelambres – both in Chile - copper production for the quarter came in at 165,000 tonnes a 4% rise when compared with Q2
Whilst Los Pelambres produced 105,000, copper production from Esperanza rose by 15%, to 25,000 tonnes. For the former, opening up access to higher grade ore over the quarter was the primary driver behind the improvement and for the latter the ramp-up toward its nameplate capacity of between 80,000 to 100,000 tonnes of copper per annum continues.
The company has two other smaller copper operations being El Tesoro and Michilla, which produced 24,500 tonnes and 10,300 tonnes of copper respectively. And overall the company remains on track to produce 620,000 to 640,000 tonnes of copper to 31 December 2011 (the financial year end).
Q3 gold production reached just over 54,000 ounces, up 11.7% on the prior quarter. The ramp-up of the Esperanza was the primary drive behind the improved number for as output from the mine came in 20% higher at 45,500 ounces. Los Pelambres meanwhile produced 8,800 ounces and overall gold production for 2011 is forecast to be around 200,000 ounces.
Despite mining deleting reserves, the company continues through its exploration efforts and success to grow its resource base. The ability of the company to continually increase its resource base is a result of the prospective nature of the company’s key operations in Los Pelambres and Esperanza.
Total cash costs in Q3 improved by 3.2% over the prior quarter, to US$1.005 (net of by-product credits) per pound of copper. There was a favourable trend in costs as a result of the high production levels of copper and gold.
On the exploration and development front, the company will spend some US$200 million in the 2011 calendar year, with the bulk being some US$117m to be spent in current half.
Capital expenditure looks set to rise over the coming years as these projects push toward completion. It is however, the growth potential that these projects will deliver which is of interest to shareholders.
As at the end of September, the company had an attributable cash equivalent amount of US$2.9 billion, with the total group cash equivalent amount standing at US$3.2 billion. Attributable debt in the balance sheet at the same date was US$1.6 billion, while total group debt stood at US$2.3 billion. Robust cash flows and a sound balance sheet will help Antofagasta deliver future growth.
This report was produced by Senior Research Analyst, Aamer Nawid
