Antofagasta cuts cash costs, reconsiders hydroelectric project

* Cash costs down 13.2 percent

* Expects full-year copper output at the lower end of guidance

* Reconsidering hydroelectric project (Updates with share price move)

By Barbara Lewis and Mamidipudi Soumithri

LONDON/BENGALURU, Oct (Shenzhen: 000069.SZ - news) 26 (Reuters) - Antofagasta (Other OTC: ANFGF - news) 's full-year copper production will be at the lower end of guidance and next year's output will fall, the Chilean miner said on Wednesday, sending its shares more than 7 percent lower.

It said its year-to-date cash costs were down 13.2 percent and linked its lower output to a focus on "profitable tonnes".

Efforts to reduce expenditure also mean it is reconsidering a hydroelectric project to power its Los Pelambres copper mine, because of cost overruns, the company said.

CEO Ivan Arriagada, in a production update, said he expected full-year cash costs to be $1.25/lb, 5 cents/lb lower than previously indicated.

He added there had been "a rigorous assessment of our plans with a focus on profitable tonnes".

He said he expected production next year to be in the range of 685,000 to 720,000 tonnes, while for 2016 output is seen at the lower end of guidance of 710,000 to 740,000 tonnes given at the start of the year.

Analysts at Investec (LSE: INVP.L - news) said in a note: "Whilst this year's performance appears reasonable and the lower cash cost is encouraging, the outlook for next year suggests higher capex and not immaterial downgrades to production."

Antofagasta shares were down 7.3 percent at 0735 GMT, while the wider sector was 1.5 percent lower.

The lower output could be modestly bullish for the copper market, which has failed to see the strong rally of other commodities this year, and what some analysts say is a more accurate reflection of tepid demand growth and oversupply.

To power its Los Pelambres copper mine, Antofagasta owns a 40 percent stake in the Alto Maipo hydroelectric project.

But on Wednesday the company said it was reviewing whether to go ahead.

Energy firm AES Gener said in August its Alto Maipo hydroelectric project had run into construction difficulties and the budgeted cost would rise by between 10 and 20 percent.

Los Pelambres has also come under fire from Chilean regulators.

On Wednesday, Antofagasta said it was working to address the charges raised by the Chilean environmental authority. (Additional reporting by Melanie Burton in Sydney; editing by David Holmes and Jason Neely)