Chilean miner Antofagasta PLC (ANTO.LN) Wednesday reported a 4.1% rise in third-quarter copper production compared with the second quarter and said costs rose, partly due to less molybdenum by-product credits.

Antofagasta sells molybdenum as a by-product from its copper production and accounts for those sales as credits which are subsequently used to offset the company's total cash costs.

Increased output at Los Pelambres boosted copper production for the three months to Sept. 30 to 140,700 metric tons, from 135,200 tons in the second quarter, the company said.

Copper production over the first nine months of the year rose 20% on-year to 393,600 tons. If Antofagasta replicates this in the fourth quarter, it will produce 534,300 tons, beating its full-year target of 530,000 tons.

Cash costs for the quarter rose nearly 23% to 109 cents a pound from 88.7 cents/lb in the second quarter mainly due to a decrease in molybdenum output and prices, planned maintenance at Los Pelambres and the suspension of operations at El Tesoro North East pit and consequent use of low grade stockpiles instead of high grade ore.

Molybdenum output dropped 18.5% to 2,200 tons in the third quarter from the previous quarter due to a decrease both in grade and recovery. Molybdenum is primarily used by steelmakers to strengthen and protect steel. Steelmakers account for about 60% of molybdenum consumption and have paired back their consumption of the minor metal due to faltering global steel demand.

As a result molybdenum prices have fallen 8.5% on-quarter to an average $15/lb in the third quarter, meaning Antofagasta has provisionally fewer credits from molybdenum sales to offset against its total cash costs.

Costs excluding credits from by-products were up 11% to 138.3 cents/lb in the third quarter from 124.5 cents/lb in the second quarter.

Meanwhile copper prices increased 3.3% on-quarter to average $328.5/lb in the third quarter, reflecting tight supplies in the market due to declining ore grades at many of the world's largest and more mature mines.

Antofagasta operates three copper mines in Chile. It also has transport and water divisions.

At 1234 GMT, the company's shares were down 29 pence, or 2.1%, at 1,355 pence while London's FTSE-100 stock index was 0.3% higher.

Analysts at Credit Suisse said the company's copper output was in line with expectations but the costs were up "significantly."

The U.K.-listed miner also said it expects to ramp up its Esperanza mine this month, and ship its first copper concentrate from that mine by the end of the year. It also said the feasibility study for the Reko Diq Pakistan gold project is complete and discussions over a mineral agreement with relevant Pakistani authorities continues.

Antofagasta will report third quarter results Nov. 25.

-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328; alex.macdonald@dowjones.com
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