Antofagasta joins fellow mining firms in cutting half-year dividends

Antofagasta has become the latest mining giant to slash its interim dividend payments following a deterioration in profits.

Investors in the London-listed Chilean miner will receive a payout of 9.2 cents per share compared to a record 23.6 cents last year when the commodities sector was riding high amid soaring prices and demand.

This year, however, common metal prices have plummeted from their steep heights as demand has begun to wane and fears of a recession have become more acute. 

Falling value: Common metal prices has plummeted from their steep heights this year as demand has begun to wane and fears of a recession have become more acute

Towards the end of July, Rio Tinto and Anglo American published half-year results that announced they were cutting shareholder rewards because of a significant decline in earnings.

Rio Tinto reduced its half-year dividend from $5.61 per share to $2.67 a share, although that means it still intends to hand $4.3billion to investors, its second-highest interim payout in history.

A day later, Anglo American cut its equivalent dividend by 27 per cent to $1.27 per share as it revealed lower underlying profits, which it attributed to weaker production levels, rising costs and supply chain problems.

These same issues have affected Antofagasta, whose pre-tax profits slumped by 61.9 per cent to $679.6million during the first half of the year.

The FTSE 100 group’s copper production has been dramatically impacted by a 13-year drought in Chile, the temporary closure of a concentrate pipeline following a leak, and lower ore grades at its Centinela mine.

Trouble has been compounded by a plunge in copper prices – a major international economic bellwether – on the back of increasing fears of downturns in the US and Europe and uncertainty over China’s economic recovery.

Pessimism: ‘While miners were seen as a good post-Covid reopening play, they have lost their shine with investors as hopes of a strong recovery have given way for fears of recession,’ said Mark Crouch, an analyst at trading platform eToro

Antofagasta’s copper concentrate and cathode sales slid by just under a third to $2.13billion during the first half, with the firm blaming most of the decline on worsening production volumes.

By-product revenues also fell by a quarter due to lower production of gold and molybdenum – a trace mineral used to make alloys.

Mark Crouch, an analyst at trading platform eToro, said the move by Antofagasta to reduce dividends might encourage some shareholders to withdraw their holdings from the firm.

He added: ‘While miners were seen as a good post-Covid reopening play, they have lost their shine with investors as hopes of a strong recovery have given way for fears of recession.’

Antofagasta’s profit surged to its highest ever in 2021 when copper prices reached record levels, allowing it to make a record shareholder payout of $1.4billion for the year.

It said it remains on track to produce its revised guidance of 640,000-660,000 tonnes of copper for the full year.

‘We expect the remainder of the year to look very different from the first half – as production improves quarter-on-quarter,’ Chief Executive Ivan Arriagada said.

The FTSE 100 company operates four copper mines in Chile, the world’s number one producer accounting for 30 per cent of global output, and the number two producer of battery metal lithium.

Antofagasta shares closed trading 2.1 per cent down at £11.67 on Friday, meaning their value has fallen by around 22 per cent in the past 12 months.