UPDATE 1-Antofagasta says Esperanza spend to rise as profit dips
LONDON Aug 29 (Reuters) - Chilean copper miner Antofagasta posted a drop of more than 7 percent in first-half profit, as falling prices and higher exploration costs dented the impact of increased production from its challenging Esperanza project.
Esperanza, a flagship growth project but also a trouble spot since its ramp-up began, was hit by fresh operational woes at the start of this year and the miner said on Wednesday would spend an additional $200 to $250 million over 2013 and 2014 to improve processes at the copper-gold mine and bring it up to full design capacity.
Posting a more modest drop in earnings than its diversified peers and copper rivals, Antofagasta said net income dropped 7.2 percent to $646.1 million for the six-month period, compared with a consensus analyst forecast of $653 million, according to Thomson Reuters I/B/E/S.
Antofagasta, which had already reported increased first-half production in line with its 2012 target, said revenues rose 3.5 percent to $3.16 billion. Antofagasta also said it remained on track to hit copper output of 700,000 tonnes this year.
But, as exploration costs rose over the period, it was cautious with a dividend it doubled last year, lifting the payout 6.3 percent to 8.5 cents per share.
Copper prices have fallen some 25 percent from highs touched in February 2011. Antofagasta said the average LME copper price per pound fell almost 14 percent on the same period a year ago.
In a statement, the company said it saw "relatively robust" demand for copper providing support for the price "well above" the marginal cost of production. Tight copper supply, it said, should help over the medium term.
Antofagasta last month appointed Diego Hernandez, the former head of state miner Codelco as its new chief executive, scooping up one of the biggest names in copper as it battles operational challenges.
Antofagasta had surprised the market in March with the abrupt departure of its long-serving chief executive Marcelo Awad. Hernandez had been touted as a possible replacement since he stepped down from Codelco in May, after two years.
Antofagasta said its focus for future growth remained on the Centinela Mining District in Chile, where it will phase development, in tune with a sector that has cut back spending amid uncertain markets and questions over Chinese demand.
Its initial focus will be on the Esperanza Sur, formerly Telegrafo, and Encuentro, formerly Caracoles.
Group cash costs, a focus for the sector but already published by Antofagasta, were higher in the second quarter than in the first but over the half they were down on last year, as increased gold production at Esperanza and molybdenum at Los Pelambres meant more by-product credits.