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Antofogasta Profit Falls, Predicts Rising Costs

London-listed Chilean miner Antofagasta posted a below-forecast dip in annual pretax profit on Tuesday after weaker output and cautioned that costs were expected to rise this year.

"Industry-wide pressures are expected to persist through 2008, particularly as a result of higher energy costs and sulphuric acid prices in Chile," the miner said in a statement.

Metals prices were expected to remain strong into next year, but volatility would continue, it added.

The shares, which have shed 15 percent since hitting a peak last month, fell 0.6 percent to 7.24 pounds.

The firm said profit before tax last year declined to $2.75 billion, down from $2.86 billion in 2006.

Antofagasta had been expected to post pretax profit of $2.79 billion, according to the average forecast of 12 analysts polled by Reuters Estimates. Their forecasts ranged from $2.52 billion to $3.02 billion.

Group turnover slipped 1.1 percent to $3.83 billion while group copper output fell 8 percent to 428,100 tonnes, mainly due to lower ore grades at its key Los Pelambres mine.

In 2008, copper production was expected to rebound, rising 8 percent to around 463,000 tonnes, but molybdenum output was due to tumble by a third to 6,800 tonnes due to lower ore grades at Los Pelambres, the firm said.

The firm's weighted averaged cash costs are expected to rise by about 13 percent to 125 cents per lb.

Cazenove, which reiterated its "underperform" rating, said it would cut profit forecasts due to the cost guidance.

"All else being equal, we would downgrade our 2008 EPS by 14 percent as a result, although our cost assumptions were clearly optimistic," a note said.

"We continue to prefer cheaper, higher growth at First quantum for pure play copper exposure."

Antofagasta declared a final dividend of 43.4 cents versus 43 cents last year. The dividend is made up of an ordinary dividend of 5.4 cents and a special dividend of 38 cents.

It said that exploration results at its Reko Diq joint venture in Pakistan yielded a 136 percent increase in contained copper and 157 percent boost in contained gold. Reko Diq is held through the Tethyan Copper, a 50-50 joint venture with Canada's Barrick Gold.

Feasibility studies will be launched this year for Reko Diq as well as the group's Antucoya project in Chile.

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