* Antofagasta hikes dividend as earnings rise
* 2017 costs set to increase (Adds detail, quotes)
By Zandi Shabalala
LONDON, March 14 (Reuters) - Chilean copper miner Antofagasta on Tuesday reported a 79 percent jump in full-year earnings and raised its dividend four-fold, saying it expected commodity prices to rise further this year.
The London-listed company, majority-owned by Chile's Luksic family, like other miners has recovered from a 2015 rout in commodity prices, emboldening them to spend more on dividends and projects.
Shares in Antofagasta rose 0.4 percent by 0930 GMT, while the wider sector was mostly flat.
Antofagasta raised its 2016 dividend to 18.4 cents from the 2015 level of 3.1 cents and topped the company's minimum payout of 35 percent of underlying net earnings per share.
But the company's chief executive said dividend policy would be closely monitored.
"Any dividend in excess of (35 percent) is assessed by the board every year," Iván Arriagada told a conference call when asked whether the minimum payout would increase.
"What will happen next year is something the board will have to consider in light of the results next year."
Copper prices rose more than 17 percent last year, but lagged a broader rally across raw materials that revived miners such as Glencore, Anglo American and BHP Billiton, which had been forced to cut or suspended dividends and sell assets.
Antofagasta said it expected a slight deficit in copper markets this year and therefore "does not foresee copper returning to the lows of 2016".
"There are wild cards of course, but these are more likely to be positive for the copper price than negative," it said.
Its 2016 earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 78.7 percent to $1.63 billion, mostly on cost cuts and higher copper prices.
Future gains could come from the expansion of the Los Pelambres mine, expected to be approved by the board this year, with construction beginning in 2018. It is scheduled to start production in 2022 at the earliest.
Net cash costs for 2016 fell 14 percent to $1.06 per pound. Antofagasta said it expected costs for 2017 to increase to $1.15 per pound, with capital expenditure seen rising by 21 percent as the company focuses on completing projects currently under way.
Morgan Stanley said the cost increase could be an issue.
"We worry that Antofagasta will execute on its extensive growth pipeline, thus draining excess cash flows through 2020," Morgan Stanley said. (Additional reporting by Tenzin Pema in Bengaluru; Editing by Jason Neely and Dale Hudson)