(Writes through, adds chairman details)
By Silvia Antonioli
LONDON, May 21 (Reuters) - Chilean copper producer Antofagasta said on Wednesday market conditions were challenging in the short term due to diminished confidence in economic growth in top metals consumer China and additional copper supply coming on stream.
The producer, which like others is battling soaring production costs, falling ore grades and weaker metal prices, said it is in a period of consolidation and expects its next growth phase not to start for at least 2-3 years.
“There is no question that the fundamentals for copper remain strong in the medium term, however, we have to be careful in the more challenging short-term environment,” chairman Jean-Paul Luksic said in remarks prepared for the company’s annual general meeting.
“Periods of lower prices and less growth in demand allow us to rebalance, realign and set ourselves up in a good position to benefit fully from the next upturn in prices.”
Metals prices have been hit by slower demand growth from China and worries about the credit availability in the country.
Copper lost about 7 percent of its value in 2013 and an additional 7 percent so far this year.
Antofagasta, controlled by Chile’s Luksic family, paid out an unexpectedly large dividend for 2013, despite a drop in core profit, opting to distribute cash rather than hold it at low interest rates and reducing its cash balance to a much lower levels than in previous years.
“This decision reflects a change in attitude by the board and management about what we consider to be an appropriate cash balance,” Luksic said. “We feel it is right for shareholders to receive any excess cash that accumulates from time to time, rather than for the company to hold on to it.”
The London-listed producer said it was on track to meet its output target for 2014 of 700,000 tonnes of copper. The company hopes to increase production by a quarter to nearly 900,000 tonnes over the next five years through brownfield projects. (Editing by David Evans)