Shares round-up: Fresnillo, Antofagasta, Polar Capital Technology
City writer Graeme Evans looks at the mixed fortunes of miners and the impact of the Wall Street rotation away from high-growth tech stocks.
17th July 2024 15:44
by Graeme Evans from interactive investor
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A record gold price today fuelled demand for the FTSE 100 shares of Fresnillo (LSE:FRES) and Endeavour Mining (LSE:EDV) but Antofagasta (LSE:ANTO) failed to benefit after scaling back output guidance for the year.
Antofagasta has four copper mines in Chile, with two of them at Los Pelambres and Centinela also responsible for significant volumes of molybdenum and gold as by-products.
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The combination of gold and copper price strength has boosted the shares of Antofagasta by more than a fifth this year, although they had been as high as 2400p in May.
Shares today weakened 88p to 2040p after the company said 2024 production is expected to be in the lower end of the company’s 670,000-710,000 tonne guidance.
The revision reflects lower grades and rates of mined ore at Centinela and pipeline constraints at Los Pelambres. Copper production in the first half was 4% lower at 284,700 tonnes.
Peel Hunt said it expected 6%-7% downgrades to consensus earnings forecasts following the update, although this could be mitigated in part by the current copper price strength.
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The broker, which has a 1,695p price target, views the stock as an expensive way of gaining copper exposure given an enterprise valuation of eight times underlying earnings.
It added: “The eight times multiple is well above Antofagasta’s own recent trading history, in our view highlighting the increased exposure to news like the guidance revisions.”
In 2023, Antofagasta increased gold volumes by 17.3% to 209,100 an ounce and benefited from a higher realised price to generate revenues of $406.9 million out of a total of $6.3 billion.
The gold price today peaked at a record $2,482 an ounce, driven by US rate cut expectations and the increased probability of a Trump presidency.
Gold is sensitive to the monetary policy outlook as higher rates dent the appeal of holding non-yielding bullion, although this relationship has been tested in recent years.
UBS Global Wealth Management said today: “Dovish remarks from Federal Reserve chair Jerome Powell on Monday saw money markets price in a 100% chance of a September rate cut.
On the presidential election, it added: “Markets have further shifted in favour of Trump, leading investors to build gold positions ahead of potential tariff and tax policy changes.”
Shares in West Africa-focused Endeavour rose 34p to 1,859p as it continued its strong performance since rejoining the FTSE 100, while Fresnillo added 11p to 636p.
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The world’s leading silver producer and one of Mexico’s largest gold firms, Fresnillo was near a 15-year low earlier this year due to the revaluation of the peso and inflation headwinds.
In the FTSE 250 index, Peru’s Hochschild Mining (LSE:HOC) added 3.2p to leave the shares up 85% this year at 192p and Egypt-focused Centamin (LSE:CEY) put on 1.5p to 133p.
At the wrong end of London’s second-tier benchmark, the shares of Genus (LSE:GNS) fell 186p to 1,718p despite the animal genetics firm forecasting that June year-end profits will be in line with market expectations at between £58 million and £61 million.
The pigs division has been boosted by an improving outlook in a number of markets but this has been offset by continued challenging conditions in China and lower year-on-year volumes in its dairy and beef cattle division.
With currency headwinds also a factor, Peel Hunt reduced its 2025 profit forecast by 15% to £68 million and lowered its price target from 3,500p to 3,100p.
Other FTSE 250 fallers reflected Wall Street rotation away from high-growth technology stocks towards value and small-cap investments.
The switch over the past two sessions stalled the strong run by NVIDIA Corp (NASDAQ:NVDA) and Microsoft Corp (NASDAQ:MSFT) backers Allianz Technology Trust Ord (LSE:ATT) and Polar Capital Technology Ord (LSE:PCT), down 15p to 387.5p and 115p to 3,285p respectively.
Their reverse came as Polar Capital also reported annual results showing 40.8% growth in net asset value per share to 3,154.11p, better than the 38.9% uplift of its Dow Jones Global Technology Index benchmark.
Polar also revealed plans for a one-into-10 share split, a move intended to assist regular savers and those who are looking to invest small amounts. The subdivision is subject to an AGM vote on 11 September.
The semiconductor sector was also spooked by the Biden administration’s threat to toughen trade rules in order to prevent China’s access to chip technology.
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