Antofagasta shares fall as Canaccord cuts full year forecasts

Canaccord said the company’s first quarter production for copper, gold and molybdenum were below its estimates.

“First quarter cash costs also disappointed, and we have adjusted both our production and cost profile accordingly,” according to analysts Nick Hatch and Tim Huff.

Antofagasta on 27 April reported a 7.5% fall in copper production to 157,000 tonnes in the first quarter compared to the previous quarter. Gold production rose 1.8% to 56,700 ounces and molybdenum output at Los Pelambres fell to 1,700 tonnes from 2,100 tonnes.

Cash costs before by-product credits in the first quarter were $1.72 per pound, 6% lower than the same period last year, but 4.2% higher than the fourth quarter.

Following the report, Canaccord said it lowered its full year 2016 copper production forecast from 723,200 tonnes to 712,600 tonnes. It also reduced gold production guidance from 256,500 ounces to 247,800 ounces and molybdenum output from 8,500t tonnes to 8,000 tonnes.

The broker raised its gross and net cash cost estimates by 3 cents per pound (c/lb) to 169c/lb and 141c/lb, respectively.

“The overall impact of these changes is that we reduce our full-year 2016 earnings before interest, tax, depreciation and amortisation (EBITDA) from $1,407M to$1,366M, underlying earnings drop from $268M to $237M," Canaccord said.

“Our earnings per share estimate declines from 27.1c to 24.0c and our dividend forecast (basis 35% of underlying earnings) drops from 9.5c to 8.4c, based on a payout ratio of 35% of net attributable earnings.”

Canaccord slashed its target price to 550p from 590p but left its rating on the stock at ‘buy’, saying Antofagasta has a “30% potential upside to the target price”.

Shares fell 1.93% to 417.50p at 1025 BST.