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Antofagasta cuts 2021 production guidance on anticipated lack of rainfall in Chile

Published: 10:00 19 Aug 2021 BST

Antofagasta PLC -
Los Pelambres

Antofagasta PLC (LSE:ANTO) (LSE:ANTO) reported record interim earnings helped by strong copper prices, but was forced to reduce its production guidance for the year due to anticipated low levels of rainfall in Chile.

The FTSE-100 miner revised its copper production guidance to 710-740,000 tonnes from the previous 730-760,000 tonnes.

"The weather in central Chile during H1 saw unprecedentedly dry conditions, with almost no rainfall,” said chief executive Iván Arriagada. “We have now had 12 years of drought, and the precipitation in 2021 has so far been less than in 2019, which itself was one of the driest years on record.”

Water is essential to the operation of Los Pelambres's concentrator plant. There has been no precipitation at Los Pelambres since the company released its quarterly production report on 21 July and temperatures have been unseasonably high.

“Given the traditional rainy season runs from June to September, it is looking increasingly likely that the low levels of precipitation will continue until at least the Southern Hemisphere winter next year,” the copper producer said.

It warned that if there is no precipitation until the next rainy season and when the desalination plant comes into operation in the second half of 2022, preliminary estimates are that as much as 50,000 tonnes of production could be at risk at Los Pelambres next year.

On the positive side, EBITDA for the six months to end June jumped to a record US$2.36bn, 132.7% higher than in the same period last year, as revenue growth outweighed higher operating costs due to the stronger Chilean peso, and higher energy and diesel prices.

First-half revenue rose 68% to US$3.59bn as higher copper prices more than offset a decrease in the volume of copper sales.

“The copper, gold and molybdenum markets have been strong throughout the first half of the year, with copper trading two-thirds higher than last year at well over $4.00/lb and this strength has continued into the second half of the year,” Antofagasta said.

“As vaccination levels increase around the world, the global economy is expected to continue to recover strongly from the pandemic providing further support for the copper market.”

It declared an interim dividend of 23.6 cents per share, up from 6.2 cents in the year-earlier period.

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