Antofagasta PLC

Antofagasta reports slump in nine-month copper and gold production

The mining group said it had narrowed its copper production guidance for the full year to 705-725,000 tonnes

The Chile-based group expects copper production volumes to be “particularly strong” in the final quarter of fiscal 2018

Antofagasta Plc (LON:ANTO) said that copper and gold production in the year to date had slumped due to lower grades and narrowed its full-year copper production guidance.

The Chile-based company on Tuesday reported that group copper production for the first nine months of the year was 505,500 tonnes, 4.0% lower than in the same period last year, while gold production dropped by 30.1% to 120,100 ounces due to lower grades at Centinela.

READ: Antofagasta shares jump as RBC upgrades the stock to 'outperform'

Molybdenum production, meanwhile, was 43.1% higher than in the same period last year, principally due to higher grades and recoveries at Los Pelambres, it added.

The mining group, however, said it expects copper production volumes to be “particularly strong” in the final quarter of the year after a 15.4% increase in third-quarter production to 188,300 tonnes compared to the prior three month period.

Antofagasta said that third-quarter gold production jumped by more than a fifth to 48,100 ounces compared to the previous quarter and that molybdenum production came in at 4,400 tonnes, 57.1% higher than in the second quarter.

The company added that Centinela had started producing molybdenum during the quarter.

The copper mining group said that though it benefited from higher production in the quarter, its disciplined approach to costs allowed it to combat inflationary pressures during the year, which - combined with the strong molybdenum market - contributed to a 15% fall in its net cash costs to US$1.27/lb. Guidance for the full year remains unchanged at US$1.35/lb, it said.

“Production (of copper) volumes will continue to grow, with the fourth quarter expected to be particularly strong,” CEO Iván Arriagada said in a statement.

"The physical copper market continues to look tight and the outlook for next year remains positive despite ongoing fears about disruptions to global trade. We have narrowed our copper production guidance for the full year to 705-725,000 tonnes and looking ahead we expect production in 2019 to increase to 750-790,000 tonnes, driven by higher average grades at Centinela Concentrates and Zaldívar,” he added.

Arriagada said he expected total capital expenditure for the year to be less than the $1.0bn previously guided.

In a note to clients, UBS analysts said that while Antofagasta offers investors exposure to potential medium-term copper price upside they still feel that the company’s valuation remains full and it offers inferior dividends and cash returns compared to its peers.

Shares in the company were 0.13% down at 755.6p in mid-morning trade. 

- updates adding analyst comment, share price - 

Quick facts: Antofagasta PLC

Price: £8.24

Market: LSE
Market Cap: £8.13 billion

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