Antofagasta shifts to costly growth phase

Antofagasta (ANTO) has hit its turnaround point, although copper prices will need to stay high to allow the Chilean miner to fund its ambitious growth projects. The company reported a cash profit of $3.1bn (£2.5bn) for 2023, a 5 per cent increase on 2022, and will pay out 50 per cent of underlying earnings as a dividend, or 36¢ a share. Forecasts see earnings rebounding further next year, driven by a higher copper price again. 

In 2023, the company saw cash costs climb 5.5 per cent but this was balanced out by higher gold sales, as these are counted as byproduct credits instead of revenue. Production of the precious metal rose 18 per cent because of higher grades at the Centinela mine. The guidance for production and costs this year promises consistency, while some cost-cutting work could boost the Ebitda margin from 2023’s 48.8 per cent, a slight drop on the 50 per cent seen in 2022. 

But the biggest balance sheet impact this year will be a $1bn hike in capital spending to $2.7bn, as the company embarks on the three-year, $4.4bn Centinela second concentrator project. This will add 170,000 tonnes of copper production capacity (this year’s guidance is 670,000-710,000 tonnes, for context). 

Capital expenditure (capex) will rise further to $3.5bn-$3.9bn in 2025, including a desalination plant expansion at the Los Pelambres mine and the development of a new openpit to feed the new Centinela plant. Despite the positive environment for copper and gold, all this spending will put pressure on the balance sheet. “Higher net debt meant the [2023] dividend surprised us, particularly given the heavy capex spending likely in the next few years,” said Peel Hunt analyst Peter Mallin-Jones. Hold. 

Last IC View: Hold, 1621p, 10 Aug 2023