Antofagasta ends year on ‘strong footing’ as copper prices swell
Chilean based mining firm Antofagasta ended the year on a “strong footing”, generating revenues of $7.5bn (£5.5bn), reflecting the high copper prices throughout.
Antofagasta chief executive Iván Arriagada said: “These results illustrate our performance as a reliable and responsible copper producer with the operational and financial strength and balance sheet to deliver on our promises.”
Due to strong copper demand growth in 2021 and the limited capacity of copper supply to respond quickly, exchange stocks have dropped to their lowest level since 2008, ending the year at less than 0.6 weeks of consumption.
This has consolidated the price at historically high levels and moved the copper forward curve into backwardation, where the uncertainty of having enough copper for prompt delivery leads to the cash price being higher than the forward price, reflecting exceptionally tight availability.
Antofagasta has said that it expects this situation to ease during the second half of 2022, when several major greenfield and brownfield projects are scheduled to come into production.
However, this morning’s update added: “We expect part, or all of the additional production will be offset by continued falling grades, COVID, political instability, water restrictions, communities’ unrest, and logistical and supply constraints.”
In terms of meeting those demands, The Zaldívar Chloride Leach project was completed in January 2022 and the Los Pelambres desalination plant and Esperanza Sur will be completed in 2022, said Antofagasta. The concentrator expansion at Los Pelambres will be completed in early 2023.
Looking further ahead, the overall outlook for copper remains positive, thanks to the continued decarbonisation of industrial activity and the growth of the clean energy sector and electromobility.
Demand is expected to grow more slowly during 2022 than in 2021, but still at a high rate of about 2.5-3.0 per cent, requiring an additional 600 to 700,000 tonnes of refined copper per year.
Following the successful performance and “robust balance sheet”, the firm declared a final dividend of 118.9 cents per share. This brings the total dividend for the year to 142.5 cents per share, equivalent to a pay-out ratio of 100 per cent and an increase of 161 per cent on 2020.