Antofagasta (LSE: ANTO) bets on H2 grades and throughput at Los Pelambres

Antofagasta plc (LSE: ANTO), the Chile-focused copper miner, released its second-quarter 2026 production report on 15 July 2026, confirming that group copper production for the first half of the year totalled 285,000 tonnes, down 9.5 percent year-on-year, while maintaining unchanged full-year guidance of 650,000 to 700,000 tonnes. Second-quarter production of 142,000 tonnes was 1 percent lower on a quarterly basis, primarily reflecting lower output at Antucoya, and included approximately 7,000 tonnes of copper processed at Los Pelambres that remained in plant inventory at quarter-end following extended concentrate pipeline maintenance.

The company reiterated its net cash cost guidance after by-product credits at $1.15 to $1.35 per pound but revised its gross cash cost guidance before by-product credits upward to $2.40 to $2.60 per pound from $2.30 to $2.50 per pound, reflecting fuel prices and consumable costs running above January 2026 levels. Chief Executive Officer Iván Arriagada described the second quarter as delivering another consistent performance and reiterated that full-year guidance remains achievable through higher throughput and improving grades at both Los Pelambres and Centinela during the second half. The central tension is that defending 650,000 to 700,000 tonnes for the full year requires the second half to deliver 365,000 to 415,000 tonnes, implying a step-up of 28 to 46 percent versus the first half, and the confidence with which the market underwrites that step-up will define the reaction to the 13 August 2026 half-year results.

What did Antofagasta actually report in the Q2 2026 production update?

The 15 July 2026 report is a scheduled quarterly production update rather than an earnings release. It provides tonnage, sales and cash cost detail sufficient for the market to update its 2026 operating model, but does not include earnings figures, which will be published in the half-year results on 13 August 2026. Group copper production of 142,000 tonnes in the second quarter was 1 percent lower than the first-quarter figure of 143,000 tonnes, and 285,000 tonnes for the first half was 9.5 percent lower than the same period of 2025. The company disclosed that approximately 7,000 tonnes of copper processed at Los Pelambres during the second quarter remained in plant inventory at 30 June 2026 following an extended maintenance shutdown of the concentrate pipeline, and would be recognised as filtered production during the second half.

Copper sales during the second quarter were affected by adverse weather at the loading port toward the end of the period. At Centinela, sales volumes were 58,200 tonnes, 11 percent lower on a quarterly basis, with the associated volumes expected to be recovered during the third quarter. Production of by-products in the second quarter was broadly in line with the first quarter, with 2,300 tonnes of molybdenum output during the period. Group cash costs before by-product credits during the second quarter reflected continued pressure from fuel prices and unit costs for key consumables such as sulphuric acid and diesel, together with the appreciation of the Chilean peso against the United States dollar during earlier periods.

How does the 9.5% H1 production decline break down across Los Pelambres, Centinela and the other operations?

The 9.5 percent decline in first-half copper production reflects a differentiated performance across the group’s operating assets. At Los Pelambres, first-half copper production totalled 133,800 tonnes, down 7 percent year-on-year, reflecting lower grades and throughput partially offset by higher recoveries. Los Pelambres remains the group’s largest operation, and its first-half performance was impacted by scheduled maintenance and mine plan variations. Centinela delivered second-quarter total copper production of 48,300 tonnes, broadly in line with the first quarter, with 5 percent lower production at Centinela Concentrates offset by 11 percent higher production from Centinela Cathodes.

At Antucoya, first-quarter production of 19,600 tonnes was 3 percent lower year-on-year and 15 percent lower quarter-on-quarter, and Antucoya was the primary driver of the modest second-quarter versus first-quarter decline at the group level. Zaldívar delivered total copper production of 27,400 tonnes in the first half, down 24 percent on a year-on-year basis, reflecting lower recoveries partly offset by higher throughput. The mine-level pattern indicates that the production shortfall in the first half is not a single-asset issue but rather a combination of grade sequencing, planned maintenance and recovery variability across the portfolio. That distinction matters for the credibility of the second-half recovery narrative, because grade improvements at Los Pelambres and Centinela have been the specific levers management has cited to support the maintained guidance.

What does the maintained 650,000 to 700,000 tonne guidance require from H2 2026?

The maintenance of the 650,000 to 700,000 tonne 2026 production guidance range against a 285,000 tonne first-half base implies a second-half production range of 365,000 to 415,000 tonnes. That range represents a 28 to 46 percent step-up versus the first half. In relative terms, this is a material acceleration but not without precedent in the group’s operating history. Antofagasta’s mine plans typically weight production toward the second half of the year at Los Pelambres and Centinela, reflecting the ore body sequencing at both operations. Grades at Los Pelambres are expected to improve materially in the fourth quarter, and increased ore throughput is anticipated at both Los Pelambres and Centinela.

The 7,000 tonnes of copper held in plant inventory at Los Pelambres at 30 June 2026 will be recognised as filtered production during the second half, providing an initial buffer versus the required step-up. Beyond that, achievement of even the lower end of the guidance range requires an average quarterly production of approximately 182,500 to 207,500 tonnes across the third and fourth quarters, versus 142,000 tonnes in the second quarter. That is a large sequential jump, and the market will apply differentiated confidence weights to each of the components of the improvement plan. Higher grades are a mine plan issue and are typically well-understood by internal geologists. Higher throughput is a function of both mine availability and processing plant reliability, which requires continued execution across maintenance and operations.

Why did Antofagasta raise its 2026 cash cost guidance before by-product credits, and what is happening to margins?

Alongside the maintained production guidance, Antofagasta revised its 2026 cash cost guidance before by-product credits upward, from $2.30 to $2.50 per pound to $2.40 to $2.60 per pound. The 10 cent per pound increase reflects fuel prices and unit costs for key consumables running above the levels assumed at the start of the year, when the company published its 2026 outlook in January. Group net cash cost guidance after by-product credits, at $1.15 to $1.35 per pound, remained unchanged, reflecting the offsetting contribution of gold and molybdenum by-product credits. The distinction is commercially meaningful. Antofagasta’s net cash cost position remains at the low end of the global copper cost curve, and the by-product credit stream from Los Pelambres in particular provides a stable margin buffer against unit cost inflation on the primary production stream. What the revised gross cash cost guidance signals is that management is not assuming a rapid reversion in energy and consumable prices during the second half. If fuel and reagent prices remain elevated through year-end, the risk is skewed toward the upper end of the revised range. If they moderate, there is some upside toward the previous $2.30 to $2.50 range. Either way, the balance-sheet impact remains manageable given the constructive copper price environment.

How do the Centinela Second Concentrator and desalination expansion projects fit into the medium-term production trajectory?

The medium-term production trajectory for Antofagasta depends heavily on two capital projects currently under construction. The Centinela Second Concentrator is the larger of the two, with recent activity focused on the assembly of key mining equipment at Esperanza Sur, continued installation of structural steel for the concentrator and mechanical works for thickeners and ball mills. Once commissioned, the second concentrator will meaningfully expand copper production capacity at the Centinela site. The desalination plant expansion at Centinela is a related project supporting water security for the expanded operation.

Recent activities include the installation of the feed and backwash pumps and the completion of marine works, with structural work now underway on the Seawater Reverse Osmosis building. Both projects have been described as on track and on budget in successive quarterly reports. At Zaldívar, the financial and technical evaluation of the options for long-term water supply beyond 2028 continues, with a decision expected during 2026. The scale of the Centinela expansion in particular is significant. Once operational, it lifts Antofagasta’s group nameplate capacity and provides the anchor for medium-term production growth into the 2028 and 2029 timeframes. That growth outlook is one of the reasons the market has been prepared to accept year-to-year variability in current production, provided the growth projects remain on schedule.

What the constructive copper price environment means for cash flow despite the H1 production shortfall

The commercial context for the 15 July 2026 update is a constructive copper price environment. Copper has traded above historic averages through the first half of 2026, supported by structural demand drivers including electrification of transport, grid infrastructure investment, artificial intelligence data centre buildouts and energy security policies in major consuming economies. The supply side remains constrained. Existing large copper producers have limited near-term additional capacity, and new greenfield mines face extended permitting and construction lead times. In this environment, Antofagasta’s revenue exposure to the copper price is high, and a strong price offsets a meaningful portion of the first-half volume shortfall from a cash flow perspective. Management has commented that copper continues to demonstrate strong market fundamentals and that medium-term fundamentals for the metal remain compelling.

From an investor perspective, that framing has two implications. First, cash generation in the first half will be less affected by the volume decline than a naïve calculation might suggest. Second, the value proposition in Antofagasta shares over the balance of 2026 rests on the combination of copper price durability and volume recovery in the second half. If both hold, the current traded discount to the 52-week high of 4,475 pence can compress. If either falters, the share price may struggle to reclaim recent highs even with maintained guidance.

What to watch on the 13 August 2026 half-year results release

The next material investor moment is the release of the half-year 2026 results, scheduled for 13 August 2026. Beyond the standard income statement, cash flow and balance sheet disclosures, the market will focus on several specific items. First, updated commentary on the third-quarter production trajectory, particularly at Los Pelambres and Centinela, will provide an early indication of whether the second-half step-up is developing on plan. Second, the capital expenditure position and updated guidance range will help calibrate free cash flow expectations for the second half. Third, the interim dividend, based on Antofagasta’s stated policy of a minimum 35 percent payout of earnings, will provide a mechanical link from earnings to cash returns.

Fourth, any updated commentary on the Centinela Second Concentrator and desalination expansion schedule will influence the market’s confidence in medium-term production growth. Fifth, management commentary on the copper price outlook and the trade-off between concentrate exports and inventory building will provide additional context for the H2 sales recovery expected at Centinela following the second-quarter weather disruption. The 13 August release is therefore the first substantive test of whether the maintained guidance can withstand full financial and operational disclosure, rather than a production summary alone.

Key takeaways from Antofagasta’s Q2 2026 production update and defended 2026 guidance

• Antofagasta reported H1 2026 group copper production of 285,000 tonnes, down 9.5 percent year-on-year, reflecting lower grades and throughput partially offset by higher recoveries.
• Q2 2026 copper production of 142,000 tonnes was 1 percent lower than Q1 2026, with the modest decline primarily reflecting lower output at Antucoya.
• Approximately 7,000 tonnes of copper processed at Los Pelambres during Q2 remained in plant inventory at 30 June 2026 following concentrate pipeline maintenance, and will be recognised as filtered production in H2.
• Full-year 2026 copper production guidance of 650,000 to 700,000 tonnes was maintained, implying an H2 production requirement of 365,000 to 415,000 tonnes.
• Group net cash cost guidance after by-product credits was maintained at $1.15 to $1.35 per pound, but gross cash cost guidance before by-product credits was raised to $2.40 to $2.60 per pound.
• Los Pelambres H1 production of 133,800 tonnes was 7 percent lower year-on-year; Zaldívar H1 production of 27,400 tonnes was 24 percent lower year-on-year.
• Centinela Q2 total copper production of 48,300 tonnes was broadly in line quarter-on-quarter, with 5 percent lower Concentrates production offset by 11 percent higher Cathodes production.
• Copper sales at Centinela during Q2 were 58,200 tonnes, 11 percent lower quarter-on-quarter due to adverse weather at the port, with the shortfall expected to be recovered during Q3.
• The Centinela Second Concentrator and desalination plant expansion remain described by management as on track and on budget.
• Half-year 2026 financial results are scheduled for release on 13 August 2026.