Copper Miner’s Stock Glistens, but Challenges Remain
Chilean Miner Antofagasta will continue to focus on controlling its costs, including power and labor charges, as falling demand from China could lead to a further drop in copper prices, its chief executive told CNBC on Tuesday.
Copper prices have fallen 9 percent over the past year, but the firm's focus on costs helped it to report a rise in revenue of almost 11 percent. The group paid a dividend that was more than double last year's payout, sending shares sharply higher on Tuesday.
"I don't see a surplus for a long period. But at least for a couple of years if China doesn't increase its demand as expected," Hernandez said.
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"Times are changing and we should be looking at our operating costs and our growth projects to control our capital expenditure. Projects have been increasing in costs and we need to take care of that. We are [also] looking at our power and labor cost to see if we can do more with the same people," Hernandez said after the results on Tuesday.
Hernandez predicted that copper prices would continue their flat trend into 2013: "In terms of production, I think that the first half of this year, supply and demand will continue to be tight, not too different from last year. In the second half of the year we could additional copper coming into the market as some mines are normalizing their production and there is new copper coming from new projects…We could eventually see a small surplus," Hernandez added.
Development at the Chilean Antucoya mine was temporarily suspended by the company in December as concerns grew over rising costs.
"In the next couple of months we need to decide if we want to resume the project or stop for a longer period," Hernandez said. "The main reason to have stopped the project is we wanted to check our CAPEX (capital expenditure) and ensure that if we go ahead we can deliver according to our budget… We have been renegotiating the contracts with suppliers and with engineering companies in away that we don't have overruns if we go ahead."
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However,the Esperanza mine, also in Chile, has ramped up production in the past year and reached 92 percent of its nominal capacity. Hernandez hopes more progress will made in the year ahead as the mine represents more than a quarter of the company's earnings.