Antofagasta's copper-bottomed dividend

Net profits (attributable to equity holders) fell by over a third to $660m (£395m), as Antofagasta struggled with rising wage and power bills at its Chilean mines. Excluding gains from the sale of mine by-products, group cash costs for extracting copper were up by 10 per cent to $1.79 per pound. Presumably, costs would have been even higher but for improved processing at the Esperanza complex, which underpinned record annual production of 721,200 tonnes.

However, the positive effect of increased production of copper concentrate and cathode was undermined by an 11 per cent decline in the price Antofagasta received for its output to $3.27 per pound. The fall in the copper price, along with reduced by-product receipts, effectively wiped $769m off Antofagasta’s top line compared with 2012.

For 2014, copper output is expected to fall back to around 700,000 tonnes, but Antofagasta is targeting annual production of 900,000 tonnes by 2018. The Antucoya project is on track to begin production in the first part of 2015, ramping up to an annual rate of 85,000 tonnes in 2016. The development of this open-pit complex was the main reason why Antofagasta pushed up its capital expenditure bill up by $455m to $1.5bn last year.

However, much of the step-up in production is expected to come from existing mines. Antofagasta continues to drive efficiencies at Esperanza, while a feasibility study at the flagship Los Pelambres complex suggests it can increase annual production there by 40-45,000 tonnes.