🕐01.05.13 - 10:54 Uhr

INVESTEC: ANTOFAGASTA - SOLID QUARTERLY UPDATE PERFORMANCE - REDUCE



Antofagasta (Price: 898p | Target: 892p | Rec: Reduce) ANTO reported a solid quarterly update.

Total copper output at 183.8kt was in line with company expectations and slightly ahead of our model on an annualised basis.

Cash costs stood at 172c/lb (vs our FY forecast 174c/lb) pre by-products.

The recent drop in commodity prices is leading toward negative provisional price adjustments totalling c.US$88m for the quarter.

Should commodities drop further then this is a growing area of risk.

We expect to see some further negative adjustment at the interim results, although ANTO does have a strong balance sheet to handle such issues. * Los Pelambres produced 101.2kt Cu at 107c/lb, up from 98.7c/b in Q4 FY12, as the mine entered into higher priced energy contracts.

Throughput was down due to planned maintenance, however, copper grades rose qoq from 0.71% to 0.74% Cu.

Esperanza benefitted from higher throughput and grades, although actual copper output was down from 49.4kt to 47.9kt qoq due to inventory movements.

74.4koz Au production (63koz sold) was up marginally qoq.

Cash costs were 210c/lb (221c/lb previous quarter) pre by- products and at 85.4c/lb post credits, benefitting from lower maintenance costs. * El-Tesoro produced 25.4kt Cu at 126.6c/lb reflecting lower costs but reduced production.

El Tesoro is set to see grades fall, but in Q1, they were largely maintained at 1.82% Cu (1.84% the previous quarter).

We model the full year grade to fall to around 1.4% Cu.

Michella produced 9.3kt Cu at 329.7c/lb. * Commodity prices have fallen in recent months with copper now at around US$7,000/t (317c/lb) versus US$7,960/t (361c/lb) in Q1.

Gold has also suffered a significant drop in price.

Negative provisional price adjustments in the quarter totalled some US$90m, so unless there is a strong recovery, further negative adjustments appear likely.

At spot prices, our TP would fall to 763p/share.

We value ANTO on 50:50 blend of NPV and P/E, using a 360c/lb copper price for the year.

We maintain a Reduce recommendation in this weaker commodity price environment.
To access the full note please click here Analyst: Marc Elliott
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