In a Jan. 23 research note, analyst Edward Sterck reported Antofagasta Plc (ANTO:LSE) "had a strong end to 2018 resulting in record annual production" and "2019 is expected to be a new record year." He added the company "remains one of our Top Picks in the copper space."
Sterck noted that Antofagasta's Q4/18 production of all metals, copper, gold and molybdenum, exceeded expectations. "The high throughput underlines a strong operating performance and should be well received as it underlines the potential for 2019 and beyond," he added.
Q4/18 copper production was 220,000 tons (220 Kt), 8% higher than BMO's projection of 204 Kt. The beat is attributable to higher-than-expected throughput and grades at Los Pelambres and Centinela, which partly offset weaker results at Zaldívar and Antucoya.
Q4/18 gold production was 90,000 ounces (90 Koz), above BMO's estimate of about 75 Koz on higher-than-expected output at Centinela.
Q4/18 molybdenum production was 4 Kt, "slightly ahead" of BMO's forecast.
Along with production, Q4/18 sales also were a beat. Copper sales amounted to 218 Kt, 2% higher than BMO's forecast. Gold sales totaled 78 Koz.
2019 production guidance is "slightly higher," Sterck pointed. Copper guidance of 750–790 Kt is in line with BMO's projection of 763 Kt. Gold guidance, however, is 240–260 Koz, 17–27% higher than BMO's estimate of 205 Koz. Molybdenum guidance is about 12 Kt, also above BMO's forecast, of 9 Kt.
Sterck also noted "slightly negative accounting charges in 2018" will affect earnings but not cash flow. One was a provisional pricing charge in H2/18 of US$95 million, greater than BMO's US$70 million estimate. The other is a depreciation charge in 2018 of US$775 million, also above BMO's projection, of $647 million.
BMO has an Outperformer rating and a £10 per share price target on Antofagasta, whose current share price is about £8.21.
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Disclosures from BMO Capital Markets, Antofagasta, January 23, 2019
IMPORTANT DISCLOSURES
Analyst's Certification
I, Edward Sterck, hereby certify that the views expressed in this report accurately reflect our personal views about the subject securities or issuers. I also certify that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 9C: BMO Capital Markets makes a market in Antofagasta in Europe.
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