Antofagasta Reports Amid Challenging Environment

The Chilean copper mining industry is expected to see growth this year, but production challenges and weakening demand may pose significant obstacles as its share price witnesses double-digit declines. Can earnings offer some respite?

Facing Uncertainty

The copper and gold mining company will report interim earnings for the first half on Tuesday, August 20. Analysts generally agree that 2024 should see the company return to revenue and profit growth above prior year levels. However, Antofagasta highlighted some concerns in its interim production update, including adjusting expectations for full-year production.

While copper production increased 20% in the second quarter, it was insufficient to offset earlier losses, resulting in 3.7% less copper production year-on-year (YOY). Gold production also failed to recover, down 22.4% YOY, a worry as gold prices reached record highs earlier in the session. With stagnant gold output, Antofagasta cannot fully capitalise on rising gold prices, as copper prices have fallen below $9000 per tonne, the lowest in over six months. Reflecting copper prices, Antofagasta's share price has also dropped double-digit to levels last seen in March.​

Production Update

Maintenance works at the Los Pelambres mine have now been completed, allowing for smoother production going forward. Construction has also commenced on a second concentrator at the Centinela mine, alongside efforts to reduce water supply costs. Recent rains in Chile have ended an extended drought period, enabling the company to lower forecast cash costs to $2.40 per pound from $2.65 at the start of the year.

Global economic uncertainties persist, so lower copper prices may continue. The price briefly increased due to a strike at BHP's Escondida mine in Chile, though this was resolved over the weekend and production is expected to resume. Investors in BHP will likely monitor Antofagasta's results to inform copper earnings when BHP reports next week. For Antofagasta, the focus remains on cost control should "Dr Copper" signal slow worldwide activity through depressed prices, barring any decisions around cutting production further.​

Towards Neckline Support

ANTO stock is nearing the neckline support near 1750 GBX, as established by the inverse head and shoulders (H&S) pattern it broke above. For further gains to achieve the measured-move target at 2650, overhead resistance levels at 2000, 2250 and 2420 must be overcome. Conversely, a breakdown below 1750 could pave the way for a decline towards 1300, risking additional losses following a potential break under 1540.​

Source: SpreadEx ANTO

Antofagasta is expected to report earnings for the first half of 2024 on August 20th, with analysts predicting a return to revenue and profit growth above prior year levels. However, the company highlighted some production challenges in its interim update, including adjusting full-year expectations. While copper production increased 20% in Q2, it was insufficient to offset earlier losses, resulting in 3.7% less copper production YOY. Gold production also declined, down 22.4% YOY despite record gold prices. Antofagasta cannot fully capitalise on rising prices as copper prices have fallen below $9000 per tonne, with its share price witnessing double-digit declines.​