In the last week copper spot prices have hit a seven month low, and over the course of this year they have fallen over 13%. For all mining companies, fluctuations in the underlying price of the commodities you produce tends to hit your bottom-line directly.
To assess the likely outlook for Antofagasta, we first need to gauge copper. The recent movements in the spot price were initially triggered by weaker Chinese economic data. Over the last quarter we have seen increasingly poor growth signals from China and, as the country is the largest consumer of base metals, copper has been one of the commodities to suffer. The Asian powerhouse accounts for roughly 40% of global demand.
Expectations for Antofagasta’s full-year figures, due for release on Tuesday 18 March, point towards weaker sales, a smaller operating profit and a pre-tax profit of $2.141billion, down from last year’s $2.754 billion.
The recent price movement in the shares has seen the 50-, 100- and 200-day moving averages broken. It will be hard to imagine a particularly optimistic outlook from management, certainly in the short term, in Tuesday’s release. A retest of the December lows could well materialise over the coming weeks.