Antofagasta (LSE: ANTO) falls 6.8% as copper guidance is cut after strong H1

Antofagasta plc (LSE: ANTO) has handed investors an unusual half-year result: earnings, cash flow and margins all strengthened sharply, yet the shares fell 6.8% after extreme weather forced the Chile-focused copper miner to cut its 2026 production outlook. Revenue increased 18% to US$4.48 billion and EBITDA climbed 27% to US$2.84 billion, but full-year copper guidance was reduced to 625,000 to 655,000 tonnes from 650,000 to 700,000 tonnes after a July shutdown at Los Pelambres. Antofagasta closed at 3,756 pence on August 13, leaving the stock around 16% below its 52-week high. The central retail-investor question is now whether stronger copper prices and exceptional margins can continue compensating for lower production until the company’s major growth projects begin contributing in 2027.

Why did Antofagasta shares fall when H1 earnings rose 27%?

Antofagasta’s first-half financial performance was strong. Revenue increased from US$3.80 billion to US$4.48 billion, EBITDA rose from US$2.23 billion to US$2.84 billion and profit before tax jumped 72% to almost US$2.0 billion. Operating cash flow increased even faster, rising 53% to US$2.77 billion.

The EBITDA margin reached 63.4%, up five percentage points from 58.8% a year earlier. Underlying earnings per share increased 81% to 85.9 US cents, while Antofagasta lifted its interim dividend by the same percentage to 30.1 US cents per share.

The problem was production rather than profitability.

Antofagasta produced 285,000 tonnes of copper during the first half, 9% less than a year earlier, primarily because of lower output at Los Pelambres and Centinela. Management had previously expected production to accelerate through the remainder of the year, but extraordinary rainfall in Chile’s Coquimbo Region forced Los Pelambres into a precautionary shutdown during July. Operations subsequently resumed, but inspections identified repairs required to pipeline platforms and water-management systems.

The consequence was a reduction in full-year copper guidance to 625,000 to 655,000 tonnes from 650,000 to 700,000 tonnes. At the midpoint, the forecast has fallen from 675,000 tonnes to 640,000 tonnes, a reduction of approximately 5.2%.

That was enough to overwhelm the strong earnings numbers on results day. Antofagasta closed at £37.56 on August 13, down 6.78% from the previous session. The shares were about 5.5% below their August 6 close and roughly 16% beneath the 52-week high of £44.75.

How much copper must Antofagasta produce in H2 to hit revised guidance?

The revised guidance creates a useful numerical test for the second half.

With 285,000 tonnes already produced in H1, Antofagasta needs another 340,000 tonnes during H2 to reach the bottom of the new 625,000-tonne range. Reaching the 655,000-tonne upper end requires 370,000 tonnes.

That means second-half production must be approximately 19% to 30% higher than first-half output.

The requirement is significant but not inconsistent with management’s earlier expectation that production would be weighted toward the second half. Antofagasta had already flagged improving ore throughput and grades at Los Pelambres and Centinela before the extreme-weather disruption occurred. Approximately 7,000 tonnes of copper processed at Los Pelambres during Q2 also remained in plant inventory and is expected to be recognised as filtered production during H2.

The most immediate operational question is therefore how quickly Los Pelambres returns to normal mine movement following the July shutdown and repair work. Management said there was no material impact on major equipment and infrastructure, which limits the apparent severity of the event, but the reduced annual guidance acknowledges that some production has effectively been lost.

The next quarterly production report should provide the clearest test. A material increase from Q2’s 142,000 tonnes would support the case that the disruption has been contained. Continued production around first-half quarterly levels would make even the bottom of the revised range increasingly difficult.

Are high copper prices masking Antofagasta’s production weakness?

Copper prices did much of the heavy lifting during H1.

Antofagasta’s earnings benefited from substantially higher realised copper prices, allowing EBITDA to increase 27% even though copper production fell 9%. Reuters reported that higher commodity pricing was the principal driver of the earnings increase, reflecting a powerful commodity-price tailwind for the business.

That relationship works both ways.

The current financial performance demonstrates the earnings leverage Antofagasta can generate when copper prices are strong, but it also means investors should avoid assuming that the 63.4% H1 EBITDA margin is independent of commodity conditions.

Operational cost performance provides some protection. Net cash costs declined 8% year on year to US$1.22 per pound during H1 because stronger gold and molybdenum by-product credits offset higher underlying production costs. The company’s Competitiveness Programme delivered US$67 million of savings and productivity improvements during H1 and remains on track for its US$110 million full-year target.

The underlying cost picture is less benign. Q2 cash costs before by-product credits increased to US$2.94 per pound as diesel, sulphuric acid and other consumable costs increased, while a labour settlement at Centinela also contributed. Antofagasta continues to expect 2026 group cash costs before by-product credits of US$2.40 to US$2.60 per pound and net cash costs after credits of US$1.15 to US$1.35 per pound.

The investment case therefore has two layers. Strong copper and by-product prices can keep margins elevated even when volumes disappoint, but sustainable earnings growth becomes more convincing if Antofagasta can combine high prices with rising physical production.

Why could 2027 matter more than the 2026 production cut?

The longer-term Antofagasta thesis is increasingly tied to two major projects expected to move through commissioning during 2027.

The Centinela Second Concentrator is designed to materially increase throughput at the Centinela mining district. Pre-commissioning work continued during H1, while additional geotechnical work has resulted in further work around the flotation-cell area. Antofagasta said the additional activity remains within the overall project schedule.

At Los Pelambres, the company is progressing a replacement concentrate pipeline and expanding desalination capacity to 800 litres per second.

Management expects the Centinela and Los Pelambres projects collectively to support approximately 30% growth in copper production once fully reflected in the portfolio. That prospective increase is strategically important because it would move the investment case away from relying predominantly on copper-price appreciation and toward physical volume growth.

Antofagasta is also investing approximately US$900 million in a water pipeline and pumping system at Zaldívar. The project is intended to move the operation away from continental water sourcing from mid-2028 and could support a mine-life extension to 2051.

These projects make the 2026 production disappointment important but not necessarily decisive to the longer-term thesis. A weather-related cut can be recovered from. Delays or cost escalation across the projects expected to deliver the next structural increase in output would carry much greater significance.

Investors should therefore watch two timelines separately: the H2 recovery needed to meet revised 2026 guidance and the commissioning milestones that determine whether Antofagasta can achieve its targeted medium-term production expansion.

Can Antofagasta fund its growth programme without stretching the balance sheet?

Antofagasta remains in a relatively strong financial position despite operating through one of the most capital-intensive phases of its growth programme.

Operating cash flow reached US$2.77 billion during the first six months, up 53% year on year. The balance sheet ended June with net debt equivalent to 0.68 times EBITDA, compared with 0.53 times at the end of 2025. Management described leverage as remaining low and said the current phase of investment had passed peak capital-expenditure intensity.

The increase in leverage should still be viewed in context. Antofagasta ended 2025 with approximately US$2.75 billion of net debt after capital expenditure rose sharply as construction activity at the Centinela Second Concentrator accelerated. The company’s 2026 capital expenditure guidance has been around US$3.4 billion.

That means strong commodity prices are arriving at a useful point in the investment cycle. Higher operating cash flow can help finance the remaining Centinela and Los Pelambres spending while limiting the need for a much larger increase in debt.

The interim dividend provides another signal. Antofagasta increased the payment to 30.1 US cents per share from 16.6 US cents, equivalent to a 35% payout of underlying net earnings. The company has maintained a policy of distributing at least 35% of underlying net earnings while balancing shareholder returns against growth investment.

For investors, continued strong cash generation matters more than the absolute dividend increase. Antofagasta needs enough internally generated cash to fund project completion, maintain balance-sheet flexibility and preserve distributions if copper prices become less favourable.

Is Antofagasta expensive after the 6.8% share-price drop?

At the August 13 closing price of £37.56 and approximately 985.9 million shares outstanding, Antofagasta carries an equity market value of about £37 billion.

The stock remains far from conventionally cheap on trailing market metrics. Current market data puts Antofagasta’s price-to-earnings ratio around 40 times, although commodity-company earnings multiples can change rapidly as metal prices and attributable profits move.

The more useful valuation question is what investors are paying for the production profile beyond 2026.

The shares remain about 16% below their £44.75 52-week high but are still dramatically above the £20.73 area that marks the lower end of the past year’s range. The four-week performance was only modestly negative before the latest result, meaning the August 13 decline represents a meaningful reset rather than a stock that was already priced near its annual low.

Investors are effectively balancing three variables. Current copper prices support exceptional margins and cash generation. The 2026 production outlook has weakened. Meanwhile, Centinela and Los Pelambres could materially increase production from 2027 onward if commissioning proceeds as planned.

The valuation may therefore remain sensitive to production evidence even if commodity prices stay high. A company priced for structural copper scarcity still needs to demonstrate that it can physically increase the tonnes available to sell.

Antofagasta stock key takeaways after the 2026 copper guidance cut

• Antofagasta reduced 2026 copper production guidance to 625,000 to 655,000 tonnes from 650,000 to 700,000 tonnes following July’s extreme-weather shutdown at Los Pelambres.
• ANTO shares closed 6.78% lower at £37.56 on August 13 despite H1 EBITDA increasing 27% to US$2.84 billion and operating cash flow rising 53% to US$2.77 billion.
• Antofagasta needs 340,000 to 370,000 tonnes of H2 copper production to meet revised guidance, approximately 19% to 30% more than the 285,000 tonnes produced during H1.
• H1 EBITDA margin increased to 63.4%, supported by higher realised commodity prices and lower net cash costs after strong by-product credits.
• The key longer-term catalyst is the 2027 commissioning cycle at Centinela and Los Pelambres, which management expects to support approximately 30% production growth.
• Net debt remains manageable at 0.68 times EBITDA, but Antofagasta is still financing a substantial capital-investment programme.
• The next quarterly production report should provide the clearest evidence of whether Los Pelambres has recovered sufficiently for Antofagasta to reach its revised full-year range.

What would strengthen or weaken the Antofagasta investment case from here?

Antofagasta’s H1 result shows why the stock remains one of the more direct large-cap ways for London investors to gain exposure to copper. Higher realised prices drove revenue, EBITDA, cash flow and dividends sharply higher even as physical production declined. A 63.4% EBITDA margin and US$2.77 billion of six-month operating cash flow give the company considerable financial capacity while it completes the largest projects in its current growth programme.

What has weakened is near-term production certainty.

The revised guidance means Antofagasta now needs a clear second-half acceleration simply to reach 625,000 tonnes. The weather event at Los Pelambres appears contained rather than structurally damaging, but the August 13 share-price reaction shows that investors are placing a high value on reliable volume delivery.

The thesis would strengthen if quarterly copper production rises materially during H2, net cash costs remain inside the US$1.15 to US$1.35 per-pound range and the Centinela Second Concentrator and Los Pelambres infrastructure projects continue toward 2027 commissioning without material delays. Continued strong operating cash flow alongside disciplined net debt would further support the case.

The thesis would weaken if Los Pelambres takes longer to recover, the company struggles to reach even the lower end of revised guidance or inflation pushes underlying costs substantially higher despite by-product credits. A material setback to the 2027 growth projects would matter more than the current weather-related cut because those projects underpin the next major step-up in production.

Antofagasta’s August sell-off therefore creates a more precise investment question than whether copper demand will remain strong. The market already assigns considerable value to that long-term theme. What ANTO now needs to demonstrate is that it can turn a favourable copper environment into materially higher production rather than relying on commodity prices to compensate for fewer tonnes.