Antofagasta feels pressure ahead of FY announcement

With Antofagasta preparing to announce full-year figures on Tuesday 17 March, soft metal prices weigh on the company. 

Source: Bloomberg

The Chilean copper miner continues to feel the pressure as weak commodity prices combined with high costs keep the share price under the cosh.

For the first six months of the year the company posted EBITDA of $1.13 billion, which was down 11.5% on the year and compares with forecasts of $1.22 billion. As previously stated, falling copper prices recently forced Antofagasta to close its 30-year-old Michilla mine. The closing of underperforming mines has become common across the natural resources sector, and with Antofagasta also battling high extraction costs additional closures could be in the pipeline.

Output is also being compromised at its Los Pelambres mine after the company was ordered to demolish a dam on the site, which produces 7% of Chile's copper. Protestors argue that the dam has added to drought problems in the region, and the closure was ordered despite the firm pledging to reduce output by 5000 tonnes in order to reduce water consumption.

Consensus is for revenue of $5.3 billion and adjusted net income of $662 million. These forecasts equate to an 11% drop in revenue and a 0.5% increase in adjusted net income. The miner will also announce second-half figures on the same date, where consensus is for revenue of $2.61 billion and adjusted net income of $386 million.

The company’s first-half figures missed market estimates. Revenue came in at $2.66 billion and adjusted net income was $337 million, while dealers were anticipating $2.7 billion and $397 million respectively.

Equity analysts are bullish on Antofagasta; out of the 30 recommendations, seven are buys, 17 are holds and six are sells. The average target price is £7.65 which is 9.5% above the current price. Investment banks are bullish on Anglo American, and out of the 34 ratings, 11 are buys, 14 are holds, and nine are sells. The average target price is £13, which is 21% above the current price.

Support is provided by £7, and if this level is held resistance at £7.60 will be the target. A move through that level will bring £8 into sight. A drop below £7 will make the support at £6.80 the initial target, and beyond that trade will look to £6.60.

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