Antofagasta seeks higher volumes

The group benefited from a strong recovery in commodity prices that saw copper prices rebound from under 130¢ (87p) per pound at the start of 2009 to 333¢ per pound at year-end. This recovery came sooner than many predicted following the sharp fall in the second half of 2008, and was driven mainly by strong Chinese consumption. The outlook for Chinese demand remains encouraging and the group has seen "tentative signs of recovery in demand from Europe and the US", although it concedes prices could remain volatile this year, particularly given increased levels of financial investment in commodity markets.

Capital expenditure rose to $1.32bn as the group aims to add low cost growth to existing operations. Management expects to lift copper production by 23 per cent to 543,000 tonnes in the current year, mainly from expansion of the plant at Los Pelambres. When Esperanza comes into production in 2011, annual production is expected to increase to 700,000 tonnes.

Two major financings raised $1.8bn: $1.05bn for the Esperanza development and $750m for the Los Pelambres mine. Operating cash flow, though down 52 per cent due to significant working capital movements, added a further $1.17bn. This leaves the group well financed to continue developing a significant pipeline of opportunities around its existing assets, and to acquire new opportunities as they arise, in Chile and internationally. Exploration results continue to encourage, with significant resources and long-term prospects in both the Sierra Gorda and Pelambres districts.

Average cash costs were reduced by 7 per cent, reflecting the group's cost reduction programme and general easing of input prices, although some costs have started to rise again in recent months. Prior to these results, broker Evolution Securities was forecasting 2010 pre-tax profits of $1.95bn and EPS of 96¢. (2009 Profits $1.34bn, EPS 65.9c)

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