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Antofagasta: 2012 Interim Results: Better than we thought

Contributed by Fox-Davies Capital

Antofagasta released its 2012 interim results. The net profit after tax and minorities was US$646.1M. The Company also declared an interim final dividend of 8.5c/share.

This was a good result, better than we had forecast due to a lower taxation rate. The disappointing news is that to get Esperanza up to its full operating rate of 97ktpd will take another two years and require an additional $250M of capex to add two high rate thickeners and modify the grinding circuit.

The weakening molybdenum price - it declined from $13/lb as at 30 June to just under $11/lb in late August - and the additional capital expenditure required to get Esperanza up to full production are the prime drivers of the reduction in the target price.

In the short term, Antofagasta is dependent on the vagaries of the copper price. However, once into 2013, the focus will probably turn to the expansion options as first Esperanza starts the final ramp-up, Antucoya comes into focus and positive news is forthcoming on Encuentro Oxides and Esperanza Sur. Several major projects have been postponed in Chile and consequently there are fewer cost and time pressures.