News Column

Antofagasta On Track For 2014 Production

May 21, 2014

Alice Attwood

LONDON (Alliance News) - Antofagasta PLC said Wednesday that it remains on track to meet its January-issued 2014 production guidance of 700,000 tonnes of copper.

In a statement released ahead of the Chile-based copper miner's annual general meeting Wednesday, Chairman Jean-Paul Luksic said that the company continues to work on reducing costs and further on enhancing the longer term prospects of the business.

Antofagasta said 2013 was a challenging year for the the company and mining sector as a whole, with the Chile-focused company facing pricing challenges from a more vulnerable market as a result of lower demand growth and weaker confidence in China as well as new mine supply coming on-stream, as a consequence of investment decisions made several years ago when the sector was still growing strongly.

Despite these challenges, 2013 was the company's strongest production year to date, it said, producing 721,200 tonnes of copper, up 1.6% in 2012, though the year was one of adjustment on a cost basis for the firm after making some structural changes to costings across the business.

Antofagasta is now in a period of consolidation following several years of growth and will focus more on its internal structures and costs and to prepare for the next growth phase, which the company expects in the next two to three years.

The company is also bringing its largest development, the Antucoya copper project, into production. Antofagasta said that following resumption of the project last year after a temporary suspension while the cost escalation and viability of the project was reviewed, Antucoya has progressed well and is on-time and on-track to meet its new USD1.9 billion capital budget.

In the AGM statement Luksic commented on the proposed tax changes in Chile; the two main proposed changes that will impact Antofagasta are to corporation tax and withholding tax. The proposed changes to corporation tax would increase the current rate of 20% in increments to 25% by 2017 and for withholding tax the proposal is to keep the rate unchanged at 35%, but to move it to an accruals based system so that from 2017 onwards the effective withholdings tax rate would be an additional 10% on top of corporation tax bringing the total tax rate to 35%.

The tax reform bill is not expected to become law before September this year at the earliest,said the firm, however, certain aspects of it, such as the first stage of the increase in corporation tax, will be retrospectively applied from January 1, 2014. It is possible that changes will be made that will have an impact on Antofagasta, it said, stating that if this is the case the company will inform stakeholders.

Earlier this year, following the presidential elections, Michelle Bachelet, was sworn back into government. The key focus of Bachelet's government is education. This requires funding and this is expected to come from the collection of increased taxes.

Looking ahead, the company said its strategy remains unchanged and that it will continue to invest in projects that generate good returns, irrespective of the stage of the commodity cycle, and will continue to work on reducing costs and further enhancing the longer term prospects of the business. "We remain on track to meet our formal production guidance that we issued in January of this year of 700,000 tonnes of copper," said Luksic.

Shares in Antofagasta were trading 1.53% lower at 771.5 pence per share Wednesday morning, one of the biggest decliners on the FTSE 100.

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Source: Alliance News

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