Antofagasta output falls in third quarter on production stoppages

* Q3 output down 5 pct from previous quarter

* Says on track for full-year output of 700,000 tonnes

* Q3 costs slightly lower (Adds analyst comments, details, background, shares)

By Silvia Antonioli

LONDON, Oct 29 (Reuters) - Chilean copper miner Antofagasta (LSE: ANTO.L - news) posted a 5 percent fall in third-quarter output from the previous three months, mainly due to production stoppages at its Los Pelambres and Centinela operations.

The London-listed miner, which like others in the copper sector is battling sluggish prices, falling ore grades and rising costs, managed to reduce its costs slightly in the quarter, though, thanks to a lower energy bill at Los Pelambres.

Chief Executive Diego Hernandez said in an interview last week the company would aim to maintain average production costs flat or lower next year.

The miner, controlled by Chile's Luksic family, produced 169,200 tonnes of copper in the third quarter, down from 178,800 in the previous three-month period.

The fall was mainly due to a suspension of mining activities following a fatal accident at its Los Pelambres mine and a maintenance shutdown at its Centinela plant.

It was also down to harder ore recovery at Los Pelambres. Harder ore generally takes longer to process.

The company said, however, that it was on track to hit its target of 700,000 tonnes of copper this year with net cash costs of $1.45 per pound.

"I did expect production to be a bit higher. If you had the same quarter again it would be light for the year guidance but clearly they think that they can recoup that," said Liberum analyst Ben Davies. "They tend to deliver on target so I am not too worried about that."

Cash cost before by-product credits was down 2.6 percent quarter on quarter to $1.85 per pound. The decrease was mainly due to lower energy costs at Los Pelambres, which is now getting 20 percent of its energy from a wind farm commissioned in July.

Rising costs and low availability of energy are a big concern for Chilean mining companies.

HIGHER TAX BILL

Lower copper prices are also a worry in the short term.

Copper has lost about 8 percent of its value so far this year and is down by a third from a 2011 peak.

"We remain positive on the long term copper price but acknowledge that short term price risks remain, which, allied with cost increases, could limit Antofagasta (Other OTC: ANFGF - news) 's upside potential in the near term," Bernstein Research analysts said in a note.

The miner is also facing a tax reform in Chile which will likely increase corporation tax rates from 20 percent in 2013 to 25 percent in 2017, and potentially to 27 percent in 2018.

As a consequence, it decided to make a one-off increase to its deferred tax provision, meaning it will retain $105 million to $150 million of its earnings this year.

Antofagasta is hoping to counter falling copper grades, another issue for the Chilean mining sector, with new projects such as Antucoya and Encuentro Oxide, the expansion of its large Pelambres mine and the construction of a second concentrator at Centinela. This would lift its output to 900,000 tonnes by 2018 and about 1 million tonnes by 2020

The miner said its $1.9 billion Antucoya project was now 94 complete and remained on budget and on time for first production in the first half of 2015.

Shares (Berlin: DI6.BE - news) in Antofagasta were down 0.8 percent in early trade in London, underperforming a 0.3 percent rise of the UK-listed mining sector.

(Editing by David Goodman and Mark Potter)