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Antofagasta: Suspension & Review of the Antucoya Project

Contributed by Fox-Davies Capital

On the 21st December 2012, Antofagasta announced that the Antucoya project has temporarily been suspended to enable a full review of the project given existing and potential levels of cost escalation. Accordingly, Antucoya has also decided to immediately issue notices of termination under the principal construction contracts for the project.

Following this announcement, we have inserted a 3 month hiatus in capital expenditures whilst the review is conducted and then assumed that construction restarts. This effectively delays the start-up by 3 months. At this stage, we have made no changes to capital expenditures or operating costs.

The model has also been updated for the actual commodity prices for the December quarter. Both the copper and gold prices averaged less than our forecasts which have reduced the earnings estimates for 2012.

The other major change to the model is the sterling US dollar exchange rate. The strength of sterling against the dollar has improved significantly over the past two months, and the Antofagasta accounts, being in US dollars have suffered as a result, reducing the target price.