ii view: Antofagasta keeps 2024 forecasts after copper boost

Third-quarter production update to 30 September

• Copper production up 15% from Q2 to 179,000 tonnes

Guidance:

• Continues to expect full-year 2024 production to be at the lower end of management’s 670,000 to 710,000 tonne estimate range

Chief executive Iván Arriagada said:

"Construction across our growth and development projects continued during the quarter as expected, with work at Los Pelambres and Centinela focused on initial groundworks and the deployment of personnel and equipment to each site.”

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ii round-up:

Miner Antofagasta (LSE:ANTO) today detailed production growth for key commodity copper, maintaining its estimate for annual output in 2024. 

Third-quarter copper production climbed 15% from the second quarter to 179,000 tonnes, with the Chilean miner continuing to expect full-year production at the lower end of its previous forecast of between 670,000 and 710,000 tonnes. That compares with 660,600 tonnes in 2023.

Shares in the FTSE 100 company rose 2% in UK trading having come into this latest news up around 8% year-to-date. That’s similar to the price of copper itself over that time and ahead of a 7% gain for the FTSE 100 index. 

Antofagasta owns major stakes in and operates four copper mines in Chile. A partial destocking of copper inventories at Los Pelambres and an increase in copper grades at Centinela helped drive the quarterly production increase.

Production for by-product gold improved 54% from the second quarter to 51,800 ounces, although that's down 17% year-to-date. Output for by-product Molybdenum rose 8% from Q2 to 2,700 tonnes and is flat year-to-date. 

Anto also maintained expected full-year capital expenditure of $2.7 billion, as well as cash cost guidance before by-product credits of $2.40 per pound (/lb) for 2024.

An early estimate of 2025 copper production sees management forecasting a range of 660,000 to 700,000 tonnes, around 3% shy of current City forecasts.  

A fourth-quarter production update is scheduled for 16 January. 

ii view:

Antofagasta traces its history back to the Bolivia Railway company in 1888. Today it is one of the world's largest pure-play copper producers with rivals including Rio Tinto Registered Shares (LSE:RIO) and Anglo American (LSE:AAL). Japan accounts for its biggest slug of sales at almost a third, followed by China at just over a fifth, and the USA and Singapore each at around 7%.  

For investors, the tough economic backdrop including challenges for China cannot be ignored. Anto’s concentration on copper contrasts with the diversity of commodities produced by other miners such as Glencore (LSE:GLEN). Worries regarding the environmental impact of mining in general persist, while currency risks exist given commodities are priced in US dollars, mines are in Chile and the shares are priced in sterling.  

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More favourably, an expansion of existing operations continues, with a second concentrator at Centinela expected to add around 170,000 tonnes of copper-equivalent to production. Desalination facilities are replacing previous drought challenges and its production need for clean water. The balance sheet remains robust with a net debt-to-adjusted profit (EBITDA) ratio of 0.46 times as at the interim results, while there is a modest dividend yield of around 1.3%. 

In all, and despite ongoing risks, government drives towards energy transition and renewable energy systems regularly using copper will likely give reason for investors to consider Antofagasta.  

Positives: 

• Expanding operations
• Focus on costs

Negatives:

• Less diverse commodity portfolio than many rivals
• Currency movements can hinder performance

The average rating of stock market analysts:

Hold