In a tough copper price environment, Antofagasta (ANTO) has delivered higher earnings through selling more copper and increasing its gold output. The red metal’s poor pricing run continued through the first half due to the US/China trade war and has shown little sign of improving since, despite market tightness. Even so, Antofagasta increased cash profits 44 per cent year on year to $1.3bn (£1.1bn) in the six months to 30 June. The Chile-focused miner will hand plenty of this on to shareholders as well, with its 35 per cent payout ratio seeing the dividend climb 57 per cent to 10.7¢.
Antofagasta has decided that the sub-guidance costs flagged in last month’s production report will be carried on for the rest of the year – a $1.25 per pound (lb) cash cost after the gold and molybdenum byproduct credits, down from $1.30 a lb. The company ramped up gold production at Centinela before the price ticked up to over $1,400 per ounce (oz) but this should bring in plenty of cash in the second half if the price stays anywhere near $1,500/oz.
Antofagasta is also in the midst of a $1.3bn expansion project. The years-long Los Pelambres upgrade will eventually see copper production at the company’s biggest mine upped by 70,000 tonnes a year. The operation produced 357,000 tonnes in 2018. The company is also getting closer to a permitting application on the projected 42,000 tonnes a year Twin Metals underground project in the US. The project has a pre-feasibility study and is working on a feasibility study currently.
While working on expansion plans, Antofagasta knocked $57m off its net debt, taking it to $517m.
BMO analyst Edward Sterck said Antofagasta was currently ticking plenty of boxes, despite screening as “relatively expensive” compared with other copper plays. He said the balance sheet, asset quality, operational performance and dividends were all positive for the company. CapitalIQ puts its price to forward earnings ratio at 16, higher than fellow copper miners First Quantum (14 times), Kaz Minerals (5 times) and Central Asia Metals (8 times), although Central Asia Metals has a very different business model.
Consensus estimates for full-year cash profit and EPS compiled by Bloomberg are $2.46bn and 63¢, falling to $2.43bn and 59¢ in 2020.
| ANTOFAGASTA (ANTO) | ||||
| ORD PRICE: | 825p | MARKET VALUE: | £8.1bn | |
| TOUCH: | 825-826p | 12-MONTH HIGH: | 1,026p | LOW: 713p |
| DIVIDEND YIELD: | 5.5% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 740¢ | NET DEBT: | 6% | |
| Half-year to 30 June | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2018 | 2.12 | 466 | 19.60 | 6.8 |
| 2019 | 2.53 | 763 | 30.70 | 10.7 |
| % change | +19 | +64 | +57 | +34 |
| Ex-div: | 05 Sep | |||
| Payment: | 04 Oct | |||
| £1=$1.22 | ||||
