March 19, 2019 / 11:44 AM / a year ago

UPDATE 2-Antofagasta 2018 dividend beats expectations as profits fall

* Annual dividend sends shares higher

* Expects copper market deficit of as much as 300k T

* 2019 capex to rise to $1.2 bln on mine expansion (Adds shares, CEO comments from call)

By Justin George Varghese and Zandi Shabalala

March 19 (Reuters) - Chilean copper miner Antofagasta Plc announced on Tuesday a higher-than-expected dividend for 2018, sending its shares to a seven-month high, though core earnings dropped in line with analysts' projections.

The company, majority-owned by Chile's Luksic family, lowered its 2018 total dividend by 14 percent to 44 cents per share compared to the prior year, but beat the 26 cents expected by analysts, according to Refinitiv Smart Estimates.

"The dividend is strong and equates to a significant portion of our earnings, it's a positive surprise to what was expected," Chief Executive Iván Arriagada told Reuters.

"Essentially we are giving back all excess cash to our shareholders and rewarding them in this way."

Antofagasta, along with its peers, has steadily increased returns to shareholders after repairing its balance sheet from the damage done by the commodities crash of 2015-16.

Shares in the FTSE-100 company rose 4.7 percent to 984.2 pence at 0943 GMT, their highest since August.

"The dividend is higher than expected with Antofagasta effectively pushing through non-core asset proceeds to investors which should be taken positively," said RBC Capital Markets analyst Tyler Broda.

Antofagasta said earnings before interest, tax, depreciation and amortisation (EBITDA) fell 13.9 percent to $2.23 billion in the year ended Dec. 31, hurt by higher input costs and lower sales volumes.

It said in January that annual copper production rose 3 percent to 725,300 tonnes and came in at the higher end of its forecast, as its Centinela mine produced better quality ore and higher output.

This was after the company was forced to tighten its 2018 production guidance in October, hurt by demand disruptions for the metal, caused by top consumer China's trade war with the United States.

The tit-for-tat trade dispute pushed benchmark copper prices down 17 percent last year, stoked by fears over demand from the world's top metals consumer China.

Arriagada said he expects a deficit of between 100,000 and 300,000 tonnes this year which should help prices trade either sideways or slightly higher.

He added that Antofagasta's planned $2.7 billion concentrator at the Centinela mine, which is at the feasability stage, would most likely be funded by debt.

Antofagasta plans to spend $1.2 billion this year, higher than $873 million in 2018, mainly on the expansion of Los Pelambres which is expected to be completed in late 2021.

The company saved $184 million this year as part of a cost-savings plan, ahead of its targeted $100 million. The miner said it was targeting another $100 million in savings this year. (Reporting by Justin George Varghese in Bengaluru and Zandi Shabalala in London; Editing by Gopakumar Warrier and Emelia Sithole-Matarise)

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