Antofagasta churns out strong fourth quarter production and costs

Chilean copper and gold miner Antofagasta enjoyed a strong fourth quarter performance and kept cash costs for the year below its guided level.

The final quarter of 2016 saw copper production 205,500 tonnes, up 13.8% versus the previous quarter to lift production for the full year to just under 710,000 tonnes, 12.5% higher than the prior year.

Net cash costs for the year fell by 20.0% to $1.20/lb, below the $1.25/lb expectations from October and $1.30/lb at the half-year stage, which chief executive Iván Arriagada said was down to rigorous cost control, increased production and lower input prices.

With gold production up 29.7% quarter-on-quarter due to continued improvements in grades and throughput at the Centinela mine, full year production hit 270,900 ounces, a 26.6% gain on 2015.

Roughly 2,000 tonnes of molybdenum were produced from the Los Pelambres mine in the quarter to make 7,100 tonnes for the full year, a small increase for the quarter and a 3,000 tonne decrease for the full year as grades and recoveries fell.

Arriagada said the new Antucoya mine and latest acquisition Zaldívar were now fully integrated and operating well.

"Looking ahead into 2017 we remain focused on operating and cost efficiencies, and achieving our production targets. Although we believe the industry has passed the low point in this commodity cycle, uncertainty persists and we need to build carefully on the solid foundations of our existing operations."

Production guidance for 2017 was reiterated as a range of 685-720,000 tonnes of copper, 185-205,000 oz of gold and 8,500-9,500 tonnes of molybdenum.

Net cash cost are expected to be approximately $1.30/lb, which was better than expected.

ANTO shares initially spiked above 884p, around a three-year high, before coming back to 845p after 1000 GMT, a 2.6% rise on the day.

Broker Peel Hunt said the production numbers were a small beat to forecasts while the 2017 cost guidance was "well under" its estimates.

"The main driver here appears to be lower guided costs at the Centinela and Zaldivar operations. This suggests there is potential for more cost cutting impact at these operations than we presently give credit for," analysts said.

They noted management have not mentioned any impairment to the Alto Maipo value, suggesting that the disposal of the stake for a lower power price in the 20 year offtake has not resulted in an impairment.