LONDON - Antofagasta posted a fall in half-year profit on Thursday, as higher costs, lower grades and a persistent drought in Chile hit the miner's copper production.

It said it would slash its interim dividend to 9.2 cents per share from a record 23.6 cents last year, joining fellow miners including Rio Tinto and Anglo American in lowering payouts after last year's bonanza.

Mining firms have also warned about future returns on fears that slower growth or recession in key markets could dent commodity demand in the next few months.

Antofagasta, majority owned by Chile's wealthy Luksic family, saw its earnings before interest, tax, depreciation, and amortisation (EBITDA) for the first six months fall to $1.24-billion, compared with $2.4-billion last year.

The company's London-listed shares opened 2.2% lower, underperforming most of its peers.

Antofagasta's profit surged to its highest ever in 2021 when copper prices reached record levels, allowing it to make a record shareholder payout of $1.4-billion for the year.

It said it remains on track to produce its revised guidance of 640 000 t to 660 000 t of copper for the full year.

"We expect the remainder of the year to look very different from the first half - as production improves quarter-on-quarter," CEO Iván Arriagada said.

The FTSE 100 company operates four copper mines in Chile, the world's no. 1 producer accounting for 30% of global output, and no. 2 producer of battery metal lithium.

The South American country faces a water crisis due to a drought that has lasted more than a decade, hitting mining output.

The miner increased its cost estimate for its Centinela concentrator expansion to $3.7-billion from a 2015 forecast of $2.7-billion and said it will decide whether to proceed with it in early 2023.

"Higher capex forecasts for Centinela provide a further complication for an equity that is already navigating the current uncertainty on mining tax reform and the Chilean constitutional referendum," Tyler Broda at RBC Capital Markets said.

Chile will vote on a new constitution on September 4 while a tax reform bill proposes increasing copper royalties on firms mining more than 50 000 tonnes a year.