Codelco's pre-tax profit down 22% on prices, Anglo American JV helps production

Chilean state copper producer Codelco saw its pre-tax profit for the first nine months of 2013 fall 21.9% to US$2.67bn compared to US$3.42bn, despite reporting a production boost thanks to its JV with Anglo American Sur (AAS) and El Abra.

When including the one-off US$3.52bn transaction of 49% in AAS, Codelco's pre-tax profits were down 61.5% from US$6.94bn.

The lower copper price also contributed to the fall, CFO Iván Arriagada said in a press conference to present the results. The average copper price in Jan-Sep was US$3.347/lb compared with US$3.612/lb year-on-year.

The price of other by-products was also down. Molybdenum was down by 21% year-on-year in the first nine months from US$29.3/kg to US$23.2/kg, sulfuric acid was down 39% to US$90/t, while gold and silver prices saw a decrease of 12% and 19% to US$1.457/oz and US$25/oz, respectively..

As a state company that gives all its earnings to the treasury, Codelco puts emphasis on pre-tax earnings. For comparison purposes, it also calculates what its profits would be if it were subject to the same tax conditions as a publicly traded company.

Comparable net income fell to US$2.099bn from US$5.36bn year-on-year when including the AAS transaction, while revenues from copper sales were down 4.8% at US$8.81bn.

PRODUCTION

Copper production from Codelco's own mines in the first nine months was down 0.33% to 1.184Mt.

Including the company's 49% stake in the El Abra mine and its interest in AAS, output was up to 1.31Mt, a 4.5% increase year-on-year. AAS, which operates the Los Bronces and El Soldado mines, contributed 69,000t in the Jan-Sep period, Arriagada said.

The El Teniente and Radomiro Tomic divisions were the top two producing units in the first nine months, with 327,000t and 292,000t, respectively, followed by the Chuquicamata, Andina, Gabriela Mistral and Salvador divisions.

The company's newest division, Ministro Hales, reported its first production, with 20,000t.

El Teniente and Gabriela Mistral were the only two divisions that saw growth in production, up 7% and 3%, respectively. Radomiro Tomic, Andina, Chuquicamata and Salvador saw their production fall by 7%, 4%, 5% and 18%, respectively.

Codelco's total copper output was 1.76Mt last year.

COSTS, SAVINGS

Codelco continued to make significant progress in cost containment and costs have fallen in comparison to 2Q12, the CFO said.

Total cash costs and expenses came in at US$2.338/lb in Jan-Sep, which was 12% less than the 2012 average of US$2.645/lb, Arriagada said, thanks to lower costs for electricity, supplies and services.

The company saw C1 costs increase 1% to US$1.652/lb in Jan-Sep from US$1.635/lb in the year-ago period.

Some of the cost saving measures include a US$20mn reduction in the number of consultancy and external services during the year, lower consumption of sulfuric acid and explosives, and an increase in the molybdenum recovery rate from 60% to 68.6%.

Codelco is the world's largest copper producer. For the full results sent to local securities and insurance regulator SVS, in Spanish, click here