FTSE 100 was trading marginally down on Thursday with mining companies’ underwhelming updates dragging the index down.
Mining stocks were the FTSE 100 biggest fallers Thursday after Anglo American and Antofagasta provided updates on a Covid interrupted the first quarter of 2022.
Despite broad weakness in mining companies, the FTSE 100 was trading mostly flat as strong gains elsewhere offset the impact of weaker metals and mining stocks.
“It’s been a bad start to the year operationally for the big mining companies and their latest updates have served to act as a drag on the FTSE 100,” said Russ Mould, Investment Director at AJ Bell.
“The cracks in the latest round of trading updates from the sector are a reminder that mining operations don’t always run smoothly, commodity prices rarely go up in a straight line on a sustained basis, and earnings are volatile.”
FTSE 100 Miners
Antofagasta
Antofagasta shares tanked 8% to 1,498p after the company reportedly produced less copper, gold and molybdenum in its first quarter of 2022 update.
Antofagasta’s production of copper fell 24% to 138,800 tonnes compared to 183,000 tonnes in Q1 2022, and 22% lower than Q4 2021.
The group’s gold production dropped by 41% from Q4 2021 to 38,400 ounces in Q1 2022, which is also 35% lower than Q1 2021 when Antofagasta produced 59,100 ounces.
Antofagasta produced 2,000 tonnes of Molybdenum in Q1 2022 which is 33% lower than 2021’s first quarter where the group produced 3,000 tonnes.
A continuing drought at the Los Pelambres mine along with lower grades hampered production, according to Antofagasta.
The net cash cost per pound of copper produced increased to $1.75 from $1.16 in Q1.
For the full year of 2022, the company expects to generate 660,000 to 690,000 tonnes of copper at a net cash cost of $1.55 per pound of copper produced. Antofagasta also expects a total Capex of $1.9bn, which is “at the top end of the previously guided range of $1.7bn to $1.9bn,” the firm said.
Antofagasta faced a difficult first three months of 2022 which led to the group stating that “spending will be at the top end of previous guidance,” according to Russ Mould.
Anglo American
Anglo American shares dropped 8% to 3,707p after the company reported a 10% decline in output during what they describe as a “normally slower” first quarter.
The group’s decrease in output was due to Covid-related absences, high rainfall in South Africa and Brazil, and operational challenges at metallurgical coal and iron ore operations.
Anglo American’s copper production was down 13% YoY, platinum group metals production was down 6%, metallurgical coal production was down 32%, and iron ore production was down 19%.
However, the group’s Diamond output increased by 25%, making it the only category to show a rise.
Anglo American’s cost forecast for the whole year has climbed by 9%, with a 4% hit from stronger producer currencies and a 3% hit from inflationary pressures. Anglo America also lowered its output forecasts for its PGM, iron ore, and metallurgical coal businesses.
Mould says that “shareholders in Anglo American can’t really grumble” about the Q1 results as they have seen 24% gains in share price in the last 12 months, which is “more than double the FTSE 100’s 10.4% gain.”
Mining weakness
Glencore shares lost 5% to 492p despite the company advocating “responsible stewardship” of its coal assets to meet its green ambitions. Glencore said its revised emissions targets are a 15% reduction by 2026 and a 50% cut by 2035.
Rio Tinto shares are trading down 2.5% to 5,701p after the company reported a poor performance yesterday.
Berenberg, JP Morgan and RBC all cut Rio’s price target from 6,500p, 5,730p, and to 5,500p respectively.
“Commodity producers have enjoyed soaring prices in the past year but their moment in the sun might be coming to an end,” said Russ Mould.
“The key question now is whether commodity prices are close to their peak for this cycle as a reduction in selling prices together with rising costs will put a squeeze on profit margins.”
FTSE 100 fallers
FTSE 100 fallers included National Grid, HSBC and Ocado whose price targets were altered.
National Grid’s shares fell 1.4% to 1,164p after Berenberg downgraded its view to hold from buy and amended price target to 1,210p.
HSBC Holdings were trading down to 537p despite Jefferies raising its price target to 574p from 473p and BoA raising its price target to 645p from 620p.
Credit Suisse cut Ocado’s price target to 1,600p from 1,650p as Ocado shares dropped 0.25% to 1,079p.
Rentokil
Amongst the risers of the FTSE 100 was Rentokil whose shares gained almost 3% to 528p after the pest control company released an optimistic first-quarter trading update where the company managed to weather the inflation storm.
Meggitt, the defence tech company, reported a 116% rise in its civil order book which lead the company’s stocks to gain 0.03% to 769p.
Rolls-Royce’s shares seem to be enjoying a wave of optimism following its latest update on nuclear reactors. The shares of the company gained 2.6% to 95.9p.
The completion of a financing round saw Ferguson shares rise 1.8% to 10,802p.
Segro shares gained 1.6% to 1,387p asthe company announced a positive growth outlook for 2022 in its results on Thursday.
Segro said it sees “continued demand from a broad range of customers enabling us to capture further rental growth through rent reviews and the re-letting of space,” according to its CEO, David Sleath.
Aviva shares increased 0.11% to 444p after Jefferies raised Aviva’s price target to 460p from 435p.
Shell and BP shares helped support the FTSE 100 after the companies gained 0.33% and 0.24% to 2,215p and 402p respectively after oil prices hiked 1% to $108 a barrel.
Gains in AstraZeneca, Diageo and Unilever also helped the FTSE 100 counteract the damage caused by mining companies today.
AstraZeneca shares were trading up 0.6% to 10,529p, followed by Diageo up 1.4% to 3,926p and Unilever shares increasing 0.9% to 3,498p.
ITV was among FTSE 100 top risers after content-creating rival Netflix signalled they would start to reign spending on Netflix Originals and other forms of content that could possible see budgets flow into ITV Studios.
US Stocks
Tesla shares fell 5% to $977 despite the company reporting a sharp rise in first-quarter earnings as demand for electric vehicles continued in its first quarter. Tesla noted an 81% increase in total revenue to $18.7bn in Q1 2022 compared to $10.4bn in 2021.
While all eyes are on Tesla’s founder’s bid to take over Twitter, “Tesla shares unsurprisingly charged up after market hours in the US yesterday,” handily above quarterly expectations, commented Mould.
Netflix shares plummeted 35% to $226 after the company announced a few days ago that it’s losing subscribers as the cost of living hurts consumer pockets.
