ii view: fuel costs affect Antofagasta's forecasts

Third-quarter production update to 30 September

• Copper production up 7% from Q2 to 151,900 tonnes

Guidance:

• Continues to expect full-year (FY) 2026 production of between 625,000 and 655,000 tonnes
• Now expects FY 2026 cash costs of $2.60–2.70 per pound, up from a previous $2.40–2.60
• Now expects FY 2027 production of between 630,000 and 690,000 tonnes

Chief executive Iván Arriagada said:

“Construction activities across our major growth projects at Centinela and Los Pelambres are progressing well, and we have entered the final phases of each schedule, ahead of construction and commissioning activities completing in 2027. These projects will deliver significant growth and strengthen the resilience of our portfolio, and we remain focused on completing each project in line with expectations.

“The copper market continues to demonstrate strong fundamentals. Looking ahead, the combination of continued investment in energy infrastructure and digitalisation, together with supply constraints, provides a supportive backdrop, helping to reinforce the long-term outlook.”

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ii round-up:

Copper miner Antofagasta (LSE:ANTO) offered a lacklustre outlook as it raised production cost forecasts for 2026 due to elevated diesel prices and predicted potentially flat production in 2027.

While third-quarter copper production rose 7% from Q2 to 151,900 tonnes, expected annual costs of $2.60–2.70 per pound is an increase from a previous $2.40–2.60 estimate.

Shares in the FTSE 100 company fell 4% in post announcement trading having come into this news up by close to a tenth so far in 2026. That’s similar to the FTSE 100 index over that time. Miner and energy trader Glencore (LSE:GLEN) has soared by 42% year-to-date.

Anto operates copper mines across Chile with major expansion works at Centinela and Los Pelambres expected to boost production by around a third over the medium term.

Predicted 2027 production of 630,000 to 690,000 tonnes is potentially little changed from 2026’s estimated of 625,000 to 655,000 tonnes.

Anto flagged expected higher 2027 copper grades at its Los Pelambres operation as being at least partially countered by lower grades at its Centinela mine.

Increased production via expanded operations has been expected to take affect from late 2027.

As usual, Anto expects to offer cost guidance and capital expenditure forecasts for the year ahead alongside its Q4 production update scheduled for 27 January.  

The City expects profit forecasts for 2027 to be downgraded by around 6%, although with possibly conservative year ahead production guidance after three years of missing initial estimates.

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  Ordinary Shares (LSE:RIO) and Anglo American (LSE:AAL). Japan and China accounted for most revenues in 2025 at a fifth each, followed by Switzerland and the USA each at around a tenth, and others the balance. The UK accounted for less than 1%.

For investors, elevated energy prices pressuring inflation and resultant interest rate rises could yet slow economic growth and dampen copper demand. The miner’s own costs are subject to fuel price moves. A share price-to-estimated net asset value comfortably above the three-year average may suggest the shares are not obviously cheap, while currency risks remain given commodities are priced in US dollars, operations are based in Chile and the shares are priced in sterling.

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On the upside, continuing construction projects are expected to see output rise by around 30% over the medium term. A focus on efficiency persists, with savings and productivity improvements of $115 million made in 2025. A net debt to profits ratio of under one continues to point to a robust balance sheet, while a forecast dividend yield of close to 2% is not to be ignored.

On balance, and despite ongoing risks, a government drive towards energy transition and renewable energy systems regularly using copper should keep this South American miner on the radar of many investors.

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