Financial Trading Blog
Stock of the day 21/08/2015 – Antofagasta PLC
Can it be lifted from its current nadir by its half year results next Tuesday?
After opening the year at £7.56 the stock had plunged to £6.30 by the middle of January, a price that was so be its low for much of the year. Antofagasta managed to climb away from this slump and by the end of February was looking a bit perkier, rising back above 2015’s opening price. However March turned into a bit of a nightmare month for the company; first it was ordered to knock down a dam it had built at its Los Pelambres copper mine in Chile, before its full year results in the middle of the month compounded matters as Antofagasta saw a 36% fall in net profit to $659.6 million, alongside an 11% drop in revenue to $5.97 billion.
(Source: IT-Finance.com 21/08/2015)
This left the stock at £6.82, only for it to slowly recover as we headed into April. It then received a big boost at the end of the month with the sale of its Aguas de Antofagasta business in Chile earning the company $965 million and pushing the stock to a 2015 (and 8 month) high of £8.09 in the process. Since then, however, the stock has seen a practically uninterrupted decline, with the Chinese economic slowdown, subsequent market volatility and yuan-devaluation all taking its toll. Add onto that the unwelcome purchase of a 50% stake in Barrick’s Zaldivar copper mine at the end of July, and Antofagasta is now trading at £5.68 (IT-Finance.com, 21/08/2015), only a smidgen above its 2015 low of £5.48.
The mining sector as a whole was helped this week by the devaluation of the Kazakhstani tenge, but all-in-all it’s a tough time to be a commodity stock. Things aren’t looking good for Antofagasta’s half year results, understandable given the complete collapse of copper; it already cut its full year production guidance at the end of July, stating that its half year production had plunged by 12.9%.
Analysts have given Antofagasta a consensus rating of ‘Hold’ with an average target price of £6.66.
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