Drought in Chile forces Antofagasta to lower its copper production target

Chilean miner Antofagasta (London Stock Exchange symbol: ANTO)) said on Thursday that Chile's water shortage forced it to cut its copper production target this year as climate change exacerbated a decade-long drought.

The miner now expects to produce 710000-740000 tonnes of copper this year, down from a previous forecast of 730000-760000 tonnes.

Antofagasta is building a desalination plant, which will begin operation in the second half of 2022 and is expected to reduce the risk of water shortages.

The company said the redesign of the desalination plant at its flagship Los Pelambres mine, which is scheduled to start operating in the second half of 2022, could also be affected, with delays putting 50000 tonnes of copper production at risk.

Los Pelambres, located in the Cojimbo region of Chile, 240km north-east of Santiago, is one of the company's businesses affected by drought. In the past 20 years, rainfall has been reduced by nearly 30% in the central part of the country alone, where most people live and have major copper mines.

Despite weather-related challenges, Antofagasta (Antofagasta) 's half-year earnings jumped to a record $2.4 billion as copper prices boosted its bottom line. Soaring metal prices also led the company to declare an interim dividend of 23.6 cents a share, more than triple the dividend paid a year ago.

Despite the rise in average copper prices in the first half of the year, the metal hit a more than four-month low on the London Metal Exchange on Thursday as a stronger dollar weighed on investor sentiment.

LME copper for delivery in three months fell 0.4 per cent to $9009 a tonne, its lowest level since April 14, before rebounding to almost flat at $9045 a tonne.

Chief executive Ivan Arriagada said in a statement that the weather in central Chile was unprecedentedly dry in the first half of the year and there was almost no rain. We have now experienced 12 years of drought, with less precipitation in 2021 than in 2019, which itself is one of the driest years on record.

However, Antofagasta's key growth projects are on track and Mr Arriaga says the company remains focused on operational discipline and cost control.