ii view: copper miner Antofagasta underlines growth plans

First-half results to 30 June

• Revenue up 2% to $2.96 billion
• Adjusted profit (EBITDA) up 5% to $1.39 billion
• Earnings per share including exceptional items down 21.5% to 26.3 US cents per share
• Interim dividend down 32.5% to 7.9 US cents per share
• Net debt of $1.44 billion, up from $1.16 billion as of late December

Guidance:

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

Chief executive Iván Arriagada said:

"Antofagasta demonstrated its resilience in the first half of the year, maintaining EBITDA margins, generating savings and productivity improvements of $130 million and advancing with key projects that provide a strong platform for future growth. "

• Invest with ii: Top UK Shares | Share Tips & Ideas | What is a Managed ISA?

ii round-up:

Antofagasta (LSE:ANTO) today detailed sales and profits broadly matching City forecasts with the copper miner underlining progress for its continuing growth plan. 

First-half revenues up 2% to $2.96 billion year-over-year pushed a 5% increase in adjusted profits (EBITDA) to $1.39 billion. Expansion plans for a second concentrator at its Centinela operations are ahead of schedule with initial new project works starting at Los Pelambres. 

Shares for the FTSE 100 company rose 0.5% in UK trading having come into these latest results up around 12% year-to-date. That’s in contrast to a 17% fall for iron ore producer and China exposed Rio Tinto Registered Shares (LSE:RIO). The 100 index itself is up 7% in 2024. 

Antofagasta owns major stakes in and operates four copper mines in Chile. Copper production retreated 4% from the first half of 2023 to 284,700 tonnes, hindered by lower concentrates at Centinela but countered by higher output at Los Pelambres.

Management reiterated its estimate for full year 2024 production to be at the lower end of its previous 670-710,000 tonne guidance range. That’s potentially up from 2023’s 660,600 tonnes. 

Exceptional costs in relation to expansion at Los Pelambres helped leave earnings down by just over a fifth to 26.3 US cents per share. 

An interim dividend of 7.9 US cents per share fell by close to third from last year’s payment, although remained in line with the board’s payout policy of 35% of net earnings. 

A third-quarter production update is scheduled for 16 October. 

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 both gold and molybdenum by-products of copper production. 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 heightened interest rates is not to be ignored. Worries regarding the environmental impact of mining in general persist. Anto’s concentration on copper contrasts with the diversity of commodities produced at other miners such as Glencore (LSE:GLEN), while currency risks given commodities priced in US dollars, Chilean operations and a pound sterling share price are a constant. 

• Sector Screener: rate cuts a catalyst for two FTSE 100 stocks
• Sign up to our free newsletter for share, fund and trust ideas, and the latest news and analysis
• Shares for the future: this FTSE 100 stock owns its market

To the upside, an expansion of its existing operations continues with a second concentrator at Centinela expected to add around 170,000 tonnes of copper-equivalent to production. Desalination facilities have and 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 sat at 0.46 times, while an estimated future dividend yield of around 1.4% is not to be ignored. 

On balance, and despite continued risks, a global requirement to push towards renewable energy systems regularly using copper should keep at least existing shareholders sitting tight. 

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