Antofagasta PLC (LON: ANTO) – 100% electricity consumption from renewable sources by 2022.

Antofagasta PLC (LON: ANTO) is an FTSE 100 index listed Company engaged in copper mining. Moreover, ANTO operates through four copper mines in Chile. The Company is well known for creating sustainable value, high profitability, and operating efficiency. Furthermore, the transport division facilitates rail and road cargo services in northern Chile to mining customers. It also produces gold and molybdenum as by-products from two mines in Chile.

On 21 July 2021, ANTO will release the Q2 FY21 production report. Also, it expects to release H1 FY21 results on 19 August 2021.

(Source: Company Report) 

Recent Trend of Dividend payments

ANTO had paid a final dividend of 48.35 US cents per share on 14 May 2021, while the ex-dividend date was 22 April 2021. The total FY20 dividend stood at 54.70 US cents per share, equivalent to 100% of the underlying earnings per share during FY20.

Growth Prospects

• Usage of Renewables Energy: The Company had undertaken various initiatives to tackle climate change. Moreover, the Company aims to use 100% renewable energy in the mining operations from 2022, and approximately 90% of the mining division’s water will be accounted from the sea or recycled water by 2025.
• Carbon Emission Targets: ENTO aims to reduce Scope 1 and Scope 2 CO2 emissions by 730,000 tonnes or 30% by 2025 from the levels of 2020.
• Global economic recovery: The Company had anticipated a rapid economic recovery in the USA, Europe and elsewhere in the world, supported by fiscal stimulus packages and rapid vaccination programmes. Moreover, it would increase the economic activity levels and fuel up the demand for copper.
• Los Pelambres Expansion: The Los Pelambres Expansion project was 47.9% complete as of 31 March 2021. Moreover, the project would be expected to complete by 2025.

Key Risks

• Second wave of Covid-19 in Chile: The Company had reduced on-site workforce during March 2021 as the country had reinstated nationwide lockdowns.
• Rise in Interest rates: The recent hawkish comments made by Federal Reserve indicating an interest rate hike by 2023 would pose a challenge for ANTO to obtain funding at a low cost.
• Climate Change: The drought in the central part of Chile and excess rainfall in the northern part of Chile had adversely impacted the operations.
• Project Execution: Failure to effectively manage the development projects could result in delays and bring down the bottom-line profitability.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of Antofagasta PLC.  

E. Abaroa Foundation is the most significant shareholder as it holds nearly 598.02 million shares as of 31 March 2021. 

Q1 FY21 Production Highlights (as of 21 April 2021)

(Source: Company result)

• The Copper production remained in line with the guidance at 183,000 tonnes during Q1 FY21.
• Moreover, the Q1 FY21 gold production came out to be 8.0% higher than the levels achieved during Q4 FY20.
• ANTO had reported an increase of 600 tonnes in molybdenum production and reached 3,000 tonnes during Q1 FY21 as compared to Q1 FY20, due to higher recoveries at Centinela.
• The net cash cost remained around USD 1.16 per pound during Q1 FY21.

FY20 Financial Highlights (for the 12 months ended 31 December 2020, as of 16 March 2021)

(Source: Company result)

• The revenue grew by around 3.3% to USD 5.13 billion during FY20, illustrating increases in copper and gold realised price.
• On the profitability front, the EBITDA margin rose by 430 basis points to 53.4% during FY20.
• The cash flow from operations remained around USD 2.43 billion during FY20.
• The Company had strengthened the balance sheet and reported net debt of USD 82.0 million as of 31 December 2020.

Financial Ratios (FY20)

Share Price Performance Analysis

 (Analysis done by Kalkine Group)

On 23 June 2021, at 07:44 AM GMT, ANTO’s shares were trading at GBX 1,433.00, down by around 0.04% from the previous day closing price. Stock 52-week High and Low were GBX 1,972.00 and GBX 894.80, respectively.

From a technical perspective, the 14-day RSI of ~35.95 is inching towards the oversold zone, supporting the upside potential in the stock price. Moreover, the stock price is hovering around the lower standard deviation of the Bollinger Bands.

Over the last one year, ANTO’s stock price has delivered a positive return of ~55.76%; and it has outperformed the FTSE All-Share Precious Metals and Mining index (benchmark sector) with a return of around 29.75% and the FTSE 100 index (benchmark index) with a return of about 12.18%.

Valuation Methodology: Price/Cash Flow Approach (NTM) (Illustrative)

Peers used in the valuation methodology (Price/NTM Cash Flow per share)

Business Outlook Scenario

ANTO had achieved copper production well within the guidance during Q1 FY21. Moreover, the Los Pelambres facility has implemented several operational changes during Q1 FY21 to preserve water availability. The Company had shown an accelerated progress with respect to the growth projects at Los Pelambres, Centinela and Zaldívar. ANTO had provided full year FY21 production guidance. It expects copper production to be ranging from 730 kt to 760 kt, gold production between 240,000 ounces & 260,000 ounces, and molybdenum production ranging from 9.5 kt to 11.0 kt. Moreover, the guidance was on the assumption that the Covid-19 pandemic would remain for the entire 2021. The Company had anticipated capital expenditure to remain higher at USD 1.60 billion during 2021 due to the accelerated progress of various development projects. In a nutshell, ANTO expects the copper market to deliver strong performance, and the Company would achieve sustainable growth with a focus on efficient cost management and disciplined capital allocation.

Considering the impressive FY21 production guidance, several development projects, decent revenue growth, bright outlook, robust profitability, and support from the valuation as done using the above method, we have given a “BUY” recommendation on Antofagasta at the current price of GBX 1,433.00 (as on 23 June 2021 at 07:44 AM GMT), with lower-double digit upside potential based on 7.83x Price/NTM Cash Flow per share (approx.) on FY21E cash flow per share (approx.).

 

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

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