ii view: copper miner Antofagasta beats estimates

Exposure to copper used in energy systems across the world, and with management carefully balancing investment with shareholders returns. Buy, sell or hold?

18th February 2025 16:04

Keith Bowman from interactive investor

Full-year results to 31 December 2024

Revenue up 5% to $6.6 billion
Adjusted profit (EBITDA) up 11% to $3.43 billion
Profit before tax and including exceptional items up 5% to $2.07 billion
Final dividend of 23.5 US cents
Total dividend for the year down 13% to 31.4 US cents
Net debt up 40% to $1.63 billion

Guidance:

Continues to expect full-year 2025 production of between 660,000 and 700,000 tonnes
Capital expenditure for 2025 is expected to be around $3.9 billion, up from $2.4 billion in 2024

Chief executive Iván Arriagada said:

“We have delivered another year of strong revenue growth and cash flow generation, and our EBITDA margin widened to 52%, maintaining our position at the top-end of our peer group of pure-play copper producers.

"Copper's unique role in energy security and electrification means that the world needs more of it, and our projects are on track to deliver industry-leading levels of responsible copper supply growth.

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ii round-up:

Antofagasta (LSE:ANTO) today detailed increased profits as the copper miner flagged continued longer-term optimism given factors limiting existing supply expansion.

A 7% increase in the average realised copper price year-over-year-year helped fuel 5% growth in 2024 revenues to $6.6 billion, taking adjusted profits up 11% to $3.43 billion. That beat City hopes for around $3.37 billion.

Shares in the FTSE 100 company rose 1% in UK trading having come into these latest results up around 3% over the last year. Iron ore miners Rio Tinto Registered Shares (LSE:RIO) and BHP Group Ltd (LSE:BHP) are both down more than 5% over that time. The FTSE 100 index has gained 13%.

Antofagasta owns major stakes in and operates four copper mines in Chile. It continues to expect full-year 2025 production of between 660,000 and 700,000 tonnes – potentially up from 2024’s 664,000 tonnes and 661,000 tonnes in 2023.

Chief executive Iván Arriagada flagged global constraints such as grade decline, ore hardness and capital expenditure inflation as steadily limiting existing supply expansions.

A final dividend of 23.5 US cents per share leaves the total payment for the year down 13% at 31.4 US cents per share, although with a payout ratio to earnings per share of 50%, up from 35% the year before.

Capital expenditure for 2025 is expected to be around $3.9 billion, up from $2.4 billion in 2024, and comes as the miner continues to expand operations.

Antofagasta’s first quarter 2025 production update is scheduled for 16 April.

ii view:

Antofagasta traces its history back to the Bolivia Railway company in 1888. Today it is one of the world's largest pure-play copper producers. Japan accounts for its biggest slug of sales at around 30%, followed by China at just over a fifth and the USA 7%.

For investors, economic challenges including slow China growth and a potential global trade war started by Donald Trump cannot be ignored. Anto’s concentration on copper compares with the diversity of commodities produced at other miners such as Glencore (LSE:GLEN). Worries regarding the environmental impact of mining in general persist, while currency risks are a constant given commodities are priced in US dollars, the company's operations are in Chile and its shares are priced in pounds sterling.

On the upside, a gain in the average realised copper price in 2024 supports management comments pointing towards robust demand. An expansion of Anto’s own production facilities is ongoing. The balance sheet remains robust with a net debt to adjusted profit (EBITDA) ratio of 0.48 times, while a forecast dividend yield of around 1.2% is not to be ignored.

On balance, and despite continued risks, government drives toward energy transition and renewable energy systems often using copper means shares in miners like Antofagasta are likely to remain of interest to investors.

Positives:

Expanding operations
Focus on costs

Negatives:

Less diverse commodity portfolio than many rivals
Currency movements can hinder performance

The average rating of stock market analysts:

Hold

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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