Antofagasta share price: 4 things to watch out for in its 2018 results

Antofagasta finished 2018 on a high after achieving record copper production in its fourth quarter of 220,000 tonnes, bringing its full year total to 725,300 tonnes – hitting the top end of revised guidance.

However, when the company published its full-year results on Tuesday next week, investors have already baked in what will be a strong set of results into its share price.

Therefore, on results day, investors focus will turn to the company’s 2019 outlook, with it predicted to be another record year of production, according to RBC.

Analysts lower target price

RBC recently cut its recommendation for Antofagasta from ‘outperform’ to ‘sector perform’, meaning the investment believes that expected returns to be in line with the sector average over the next 12 months.

The downgrade also led the investment bank to lower its target price for the mining company’s stock to 850p a share, down from 890p.

Record production

After a record year of copper production in 2018, led by growth from it Centinela operation, Antofagasta is looking to take that momentum forward into this year, with the Chilean-based miner forecast to break records again in 2019.

The company’s operations have achieved an improve level of operating stability as the it headed into the new year with real momentum for what the business expects to be another record-setting year, with production increasing by up to 9% to 750,000 – 790,000 tonnes at net cash costs of $1.30/lb, Antofagasta’s CEO Ivan Arriagada.

Update on the expansion of Los Pelambres

Investors will focus on how the company’s expansion plans at its Los Pelambres are going, with construction at the site a major priority for the miner as it continues to strengthen operational safety and efficiency at the site.

‘The Los Pelambres expansion should pic up pace in 2019,’ RBC said in a note to investors. ‘We expect this project will increase production circa 60,000 tonnes per annum over the next 15 years.’

‘Once complete this would open up the Phase 2 expansion which has low capital intensity for an additional 35,000 tonnes.’

In October last year, after 26 months without a fatality there was a fatal accident at the Los Pelambres site. A full investigation was carried out and the company has taken steps to improve safety at the mine.

2019 guidance

Group cash cost in 2019 before and after by-product credits are expected to be similar to last year at $1.70/lb and $1.30/lb respectively.

Meanwhile, capital expenditure in 2019 is forecast to be $1.2 billion, including the Los Pelambres expansion project, which will add 60,000 tonnes of copper per annum.

Sustaining capital expenditure and mine development will remain at similar levels as 2018, the company said.