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Antofagasta – sign of the bull

The copper miner again smashed through analysts' final dividend forecasts
March 19, 2019

Just as it did a year ago, Antofagasta (ANTO) used preliminary results and a larger-than-expected final dividend to flag confidence in both its operations and the market for its product. Investors will hope the sense of déjà vu stops there. In 2018, the miner’s average realised copper price slipped 6.3 per cent to $2.81 (£2.11) per pound, which together with a slight rise in cash costs accounts for the negative headline financial numbers. In mining, self-confidence alone doesn’t increase profits.

IC TIP: Buy at 981p

Still, these were a decent set of figures. The rise in overheads was contained by a cost and competitiveness drive that resulted in savings of $184m, well above the initial $100m goal, which has been reissued for 2019. Should this be met, Antofagasta reckons it can offset upward cost pressure to keep net cash costs at $1.30 per pound, which should help to push up underlying margins, assuming the copper price stays at or above its current level.

This doesn’t mean free cash flow is about to rocket. Deferred project spending and the expansion of Los Pelambres mean capital expenditure is slated to hit $1.2bn this year, which increases the onus on a pick-up in grades at Centinela. Should this occur, Antofagasta expects group copper production to rise by 3.4 to 8.9 per cent, and for gold output to jump by 15-25 per cent to as much as 260,000 ounces.

Analysts at Peel Hunt expect earnings of 72.7¢ per share this year, rising to 93.1¢ in 2020.

ANTOFAGASTA (ANTO)  
ORD PRICE:981pMARKET VALUE:£9.68bn
TOUCH:981-982p12-MONTH HIGH:1,172pLOW: 713p
DIVIDEND YIELD:3.4%PE RATIO:25
NET ASSET VALUE:745¢NET DEBT:6%
Year to 31 DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
20145.151.5242.821.5
20153.230.24-0.53.1
20163.620.2812.118.4
20174.751.8376.150.9
20184.731.2551.543.8
% change-0.3-32-32-14
Ex-div:25 Apr   
Payment:24 May   
£1=$1.33