Antofagasta: the pure-play copper test
For investors looking for more direct exposure to copper prices, Antofagasta provides a particularly interesting test.
The Chilean miner’s next quarterly production report is due on 15 October, immediately after Rio Tinto’s update.
Antofagasta’s second-quarter production was 142,000 tonnes, taking first-half output to 285,000 tonnes, down 9% year-on-year. However, management expects production to increase through the second half and maintained its full-year copper-production guidance at 625,000–655,000 tonnes following operational disruption at Los Pelambres.
That makes the third-quarter figures particularly significant.
The company needs to demonstrate that production is recovering as expected at Los Pelambres and Centinela, while investors will be looking for evidence that the lower production of the first half is being offset by stronger second-half volumes.
There is plenty to like elsewhere in the business. First-half EBITDA rose 27% to $2.84 billion, operating cash flow increased 53% to $2.77 billion and the EBITDA margin reached 63.4%. The company also increased its interim dividend by 81% to 30.1 cents per share.
Antofagasta is also progressing its major growth projects, including the Centinela Second Concentrator, while its Zaldívar water-supply project could extend the mine’s life towards 2051.
For the shares, the key question is whether the combination of higher copper prices, improving production and disciplined costs can justify the premium valuation attached to one of the world’s leading pure-play copper miners.