Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Antofagasta (LON: ANTO) saw profits surge to the highest ever last year on soaring copper and molybdenum prices, allowing it to pay the biggest dividend in the Chilean miner’s 134-year history.
The company, which has all its operations in the home country, said earnings before interest, tax, depreciation and amortization (EBITDA,) increased about 80% to $4.8 billion in the year to December on revenues of $7.4 billion, up 46%.
The results will let Antofagasta, majority-owned by Chile’s Luksic family, one of the country’s wealthiest, pay a final dividend of 118.9 cents per share. The figure takes the total annual return to shareholders to 142.5 cents per share, or $1.4 billion.
The bumper payout comes as a special assembly in Chile has begun debating motions for a new Constitution to replace a market-focused one dating back to the dictatorship of General Augusto Pinochet.
Politicians at the world’s top copper-producing nation are also fine-tuning a new mining royalty bill, which will raise tariffs on firms based on gross sales and profitability.
Antofagasta, which has been very vocal about the negative effects higher royalties could have on Chile’s economy, seemed more positive on the potential outcome.
The company said the Senate had already published a plan that was “less onerous than the original proposal made by the lower house”. It also noted there were still “several further legislative steps” required before a final bill could be approved.
Antofagasta said its capital expenditure climbed 36% to $1.77 billion in 2021 due to the expansion of its flagship mines Los Pelambres and Centinela and inflation.
This year, it expects capex to rise by $1.7 billion-$1.9 billion on expansion costs and water shortages, which has already forced it to cut production guidance.
It also booked a $178 million impairment after its proposed copper and nickel mine Twin Metals in Minnesota was blocked by the US Department of the Interior’s January decision to cancel two mineral leases on domestic conservation concerns.
The company said last month output this year will be below 2021 levels, as operations continue to be impacted by the home country’s longest drought in decades.
The Santiago-based miner, which already saw 2021 copper production drop by 1.7% to 721,500 tonnes, anticipates churning out between 660,000 to 690,000 tonnes of the metal this year.
Prices for the red metal, used in everything from construction to electric vehicles and wind turbines, has more than doubled from pandemic lows of early 2020, climbing 26% in 2021 alone.
It is now trading close to $10,000 a tonne.
