* H1 EBITDA down 31.2 pct at $1.28 bln, in line with f'casts
* EPS down 39 pct, misses forecast on higher taxes
* Interim dividend up almost 5 pct to 8.9 cents per share
* Shares down as much as 5 percent (Recasts with special dividend comment, adds details on projects, costs, quotes)
By Clara Ferreira-Marques
LONDON, Aug 27 (Reuters) - Copper miner Antofagasta Plc dampened hopes of a special dividend for 2013 after posting a drop in first-half profit and forecasting challenging market conditions.
Shares in London-listed, Chile-focused Antofagasta have long traded at multiples at the top end of the sector, not least because of its generous shareholder rewards. The company has paid special dividends in nine of the last 10 years.
But less cash coming from its core operations, increased spending on growth projects and comments on short-term copper weakness dented market expectations of another one-off payment, weighing on the stock which fell as much as 5 percent.
Chief Executive Diego Hernandez said the board would consider its position, taking into account cash, the market outlook and existing capital commitments.
But he anticipated a "return to 35 percent" payouts as a percentage of earnings, or half the level in 2012 when returns were boosted by a 77.5 cent special dividend.
"With new copper supply coming online during the remainder of this year and demand growth largely dependent on the economies of China and the United States, the pricing environment for copper is expected to remain challenging," Hernandez said.
Analyst Marc Elliott at Investec said: "Antofagasta remains in a strong position, but isn't immune to headwinds ... It has growth opportunities ahead of it, although capital programmes ... look likely to undermine special dividend potential."
Majority-owned by Chile's Luksic family, the group said core profit (EBITDA) fell 31.2 percent to $1.28 billion for the six months, in line with market expectations, as higher power costs and lower prices overshadowed improved production.
At the bottom line, the group missed forecasts due to higher-than-expected tax payments, with earnings per share down almost 39 percent to 40.1 cents against what analysts said was a consensus estimate of 44.1 cents.
It will pay an interim dividend of 8.9 cents per share, up almost 5 percent.
Antofagasta had already last month reported higher than expected output for the first half and reiterated it was on track to meet full-year guidance. Output is expected to weaken in the second half of 2013 as it mines weaker grades.
Hernandez said Antofagasta anticipated second-half costs would be similar to the first, excluding lower production.
At 1000 GMT, the stock was down 2.8 percent at 889 pence, underperforming a 1.5 percent drop in the sector. Antofagasta shares have fallen by more than a third since the start of 2013, but still trade on a price to book RATIO of 1.98 times, at the top end of the sector and above an average of 1.67, according to Thomson Reuters data.
Antofagasta is betting on existing operations rather than new mines as it seeks to grow amid falling ore grades. It is betting on expansion at its two main mines - long-troubled flagship mine Esperanza, whose ramp-up weighed on the company last year, and Los Pelambres, which accounts for more than half of output and core profit.
It said on Tuesday that improvements at Esperanza were on schedule to allow the company to hit throughput of 105,000 tonnes per day - above an initial target - from 2015.
At Los Pelambres, where it secured a new source of energy with its acquisition of a stake in the Alto Maipo hydroelectric project, Antofagasta is studying two options to tap the mine's resources, including one which could almost double throughput.
The size of the mine's resource is 5.6 billion tonnes, more than three times the quantity of ore expected to be processed under the existing mine plan.
It expects to finish the pre-feasibility studies in 2013.
The company in March also said it would press ahead with plans for a $1.9 billion new mine, Antucoya, one of the most capital intensive projects in the copper industry.
It said on Tuesday that it expected to finalise project financing of $650 million by the end of the year. (Editing by David Holmes)