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Antofagasta share price climbs 4% after increasing dividend pay-out

The Chilean mining company saw its share price rally on Tuesday morning after a year of record production in 2018, despite recording lower earnings and a fall in revenues.

Antofagasta had a record year of production in 2018, with the group hitting 725,300 tonnes of copper, reflecting the strides the company has taken in improving its operational stability and the benefits of a full year’s contribution from Encuentro Oxides.

It's record setting performance in 2018 allowed the company to increase its final dividend pay-out to 37 cents a share, bringing the total return to shareholders for the year to 43.8 cents a share.

The company hopes this momentum will continue into 2019, with the miner expecting another record-setting year as it benefits from further improvement in grades and continued strong throughput.

Antofagasta results: key figures

Overall, the Chilean mining company’s full-year results were strong, helping its share price rally more than 4% on Tuesday morning, with the stock losing some of its early momentum and trading at £9.66 levels, up 2.8% as of 2:40pm.

However, the company saw revenues remain almost unchanged from last year, coming in at $4.73 billion, reflecting a 6.3% decrease in the realised copper price, which was almost completely offset by higher copper sales volumes and higher molybdenum revenue.

“Our financial results reflect the strong operating performance of the year,’ Antofagasta CEO Ivan Arriagada said. ‘Despite lower realised copper prices EBITDA was in line with expectations at $2.2 billion with healthy operating cash flow of $1.9 billion.’

Antofagasta did manage to reduce overall capital expenditure in 2018 by $26.2 million to $873 million.

‘In 2018 we achieved savings of $184 million under our Cost and Competitiveness Programme which helped contain the increase in net cash costs to 3%,’ Arriagada added. ;These savings were in excess of the $100 million originally targeted, and now for 2019 we are targeting a further $100 million of savings.’

Antofagasta’s 2019 outlook

Group production in 2019 is expected to be 750-790,000 tonnes of copper, 240-260,000 ounces of gold and 11,500-12,500 tonnes of molybdenum (as previously announced).

'As US/China trade negotiations have progressed during the first few months of this year the copper price has traded favourably,' Arriagada said.

'We expect price volatility to persist in the short term but consider the fundamentals of the copper market will remain positive and that the supply deficit will increase during the year,' he added.

Group cash costs in 2019 before and after by-product credits are expected to be $1.70/lb and $1.30/lb respectively.

Cost savings of $100 million targeted under the Cost and Competitiveness Programme which have been included in the unit cost guidance figures.

Capital expenditure for 2019 is estimated at $1.2 billion including expenditure carried over from 2018 and the Los Pelambres Expansion project.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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