UPDATE 2-Antofagasta’s Q3 costs rise, output target on track

* Nine-month copper output up 20 pct at 393,600 tonnes

* Data puts company on target to meet annual target

* Q3 costs up 11 pct vs Q2, higher than expected

* Shares fall 2.1 pct

(Adds analyst’s comment, share price reaction, more details

By Eric Onstad

LONDON, Nov 3 (BestGrowthStock) – London-listed Chilean miner
Antofagasta (ANTO.L: ) posted higher third-quarter costs than
expected on Wednesday, overshadowing an expected rise in copper
output that put it on track to meet its reduced annual target.

The company’s shares were down 2.1 percent at 1355 pence by
1104 GMT, compared with a 0.6 percent dip before the results
were released and a flat London mining sector index
(.FTNMX1770: ).

“Production was very much in line, but costs were up fairly
significantly quarter-on-quarter. Some of that was expected, but
overall costs were a surprise to the upside,” said a
London-based analyst who declined to be named.

Cash costs in the third quarter climbed 11 percent to 138.3
cents per pound compared with the second quarter, Antofagasta
said in a statement.

This was partially due to suspending operations at the
Tesoro North East pit mine and replacing that material with
lower grade stockpiles, it added.

Antofagasta’s share price has risen by about 80 percent
since touching a low in early July and has outperformed the
London mining index by 20 percent so far this year.

Credit Suisse downgraded its rating on Antofagasta on Monday
to “underperform” from “neutral” with a price target of 1,300
pence. The bank said it liked the firm’s asset base and
management but cut its rating because it saw better value
elsewhere in the sector since Antofagasta shares traded at a 44
percent premium to rivals.


Despite the disapointment on costs, production for the first
nine months of the year climbed 20 percent to 393,600 tonnes
compared with the same period last year, mainly due to an
expansion at its flagship Los Pelambres mine.

If fourth-quarter output matches that of the third quarter,
full-year output will be 534,300 tonnes.

In August the company trimmed its annual production target
to 530,000 tonnes and posted a near doubling in first-half
earnings per share on higher production and a rebound in prices.

Even with the reduced forecast, 2010 output is due to rise
20 percent from last year due to the Los Pelambres expansion.

Next year is due to see further growth in output as the
group’s new Esperanza mine, due to launch production this month,
together with the Los Pelambres expansion, boosts annual output
by a third, to 700,000 tonnes in 2011.

The rise in output together with strong copper prices is
expected to drive hefty gains in annual profits. Full-year
earnings per shares are expected to jump 72 percent to 117 cents
from 68 cents last year, according to Thomson Reuters I/B/E/S
Estimates, based on forecasts from 25 analysts.

Average copper prices on the London Metal Exchange (CMCU3: )
have surged by 28 percent over the past 12 months as the sector
rebounded from the global economic downturn.

Antofagasta also produces molybdenum as a by-product and
said that production of that metal rose 15.5 percent over the
first nine months to 6,700 tonnes due to the Los Pelambres plant
(Editing by Hans Peters, Greg Mahlich)

UPDATE 2-Antofagasta’s Q3 costs rise, output target on track