TOP NEWS: Antofagasta Cuts Payout 14% As Cost Send 2018 Earnings Lower

LONDON (Alliance News) - Chilean copper miner Antofagasta PLC on Tuesday said cost increases hurt its annual earnings, prompting a dividend cut.

Pretax profit for 2018 was USD1.25 billion, 32% lower than in 2017, while earnings before interest, tax, depreciation, and amortisation declined 14% to USD2.23 billion.

Net cash costs for the year rose 3.2% to USD1.29 per ounce, while cash costs before by-product credits rose 7.5% to USD1.72 per pound, due to lower grades at the Centinela mine and increased costs at other mines.

All of Antofagasta's producing mining operations are in Chile.

Antofagasta's revenue declined 0.3% to USD4.73 billion. This, the company said, reflects a 6.3% fall in the copper price, though this was "almost" offset by higher copper sales and increased revenue from molybdenum.

Copper sales in 2018 were 717,600 tonnes, 1.2% higher year-on-year, while molybdenum sales soared 46% to 14,000 tonnes.

The firm is paying a final dividend of 37 US cents, taking the year's figure to 43.8 cents, down 14% from 50.9 cents in 2017. However, the payout ratio is similar year-on-year at 67% of underlying earnings per share and well above its 35% minimum.

Antofagasta reported 2018 production in January, with copper at the top end of revised guidance and a record for the company at 725,300 tonnes, up 3.0% on 2017 and driven by improved production at the Los Pelambres and Centinela mines.

Annual gold production fell to 210,100 ounces from 212,4000 ounces, but the 2018 figure was at the top end of guidance.

Antofagasta's net debt at the end of 2018 was USD596.3 million, up from USD456.4 million a year before, while cash flow from operations fell 25% to USD1.88 billion.

Looking ahead, the miner has reiterated 2019 production guidance given in January of between 750,000 to 790,000 tonnes of copper and gold output of between 240,000 and 260,000 ounces.

Cash costs should fall slightly, while Antofagasta has identified USD100 million of cost savings, which is included in cash cost guidance. Capital expenditure is guided around USD1 billion, with construction already begun on the Los Pelambres expansion.

Commenting on the outlook for copper, Chief Executive Ivan Arriagada said: "As US-China trade negotiations have progressed during the first few months of this year the copper price has traded favourably.

"We expect price volatility to persist in the short term but consider the fundamentals of the copper market will remain positive and the supply deficit will increase during the year."

Shares were 2.5% higher in London early on Tuesday, at 962.60 pence each.