Antofagasta reported a sharp rise in first-half earnings and lifted its dividend by more than 80%, as soaring copper prices more than made up for a dip in production at the Chilean miner.
Revenue rose 18% to $4.48bn in the six months to 30 June, driven by a 36% jump in the average realised copper price to $6.19 a pound, alongside stronger gold and molybdenum prices.
EBITDA climbed 27% to $2.84bn, lifting the margin to 63.4% from 58.8%, while pre-tax profit surged 72% to $2.0bn and operating cash flow rose 53%. The interim dividend was raised 81% to 30.1 cents.
“With exceptional copper prices providing a supportive backdrop, it looks like a fantastic time to be a copper miner. But a dip in Antofagasta’s production has hit at just the wrong time,” said Duncan Ferris, Analyst, Freetrade.
“Soaring demand for copper, and consequent elevated prices, helped Antofagasta’s H1 revenues to soar by 18% and earnings per share rocket by over 60%. The key factor here is the realised copper price, which was 36% higher and accounted for a large part of top-line success.
However, shares were down 5% on Thursday amid concerns the copper miner wasn’t taking full advantage of the higher metals prices as production fell.
“But is the business actually making the most of these salad days for the red metal?” Duncan Ferris continued.
Production was down by 9% and sales volumes took a major hit. Looking ahead, there’s more bad news for production, too.
“Production from H1 already looked a bit lightweight when set against full year guidance, having dipped to 285,000 tonnes. However, the cut in full year guidance to between 625,000-655,000 tonnes is a source of disappointment for investors, though the culprit appears to be massive rainstorms rather than any deterioration in underlying operations.
“Even so, investors might find this painful. With copper prices so high right now, every tonne the company fails to extract looks like a missed opportunity.”
Any pain felt by Antofagasta investors would have been cushioned by an 80% hike in its dividend to 30 cents for the period, helping support shares on Thursday.