FTSE falters as Antofagasta leads mining shares lower

Discussion in 'Market News' started by Lily, Mar 15, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
    Likes Received:
    Copper specialist cancels final dividend, while Chinese concerns persist

    Leading shares have slipped back as mining companies fell on Chinese growth worries and the Bank of Japan made gloomy noises about the economic outlook.

    Antofagasta is leading the fallers, down 50.7p at 486.8p as the copper specialist cancelled its final dividend,saying its interim payment met its target of paying 35% of earnings. Its full year profits fell by 82.9% to $259.4m, and the company said it did not expect a sustained recovery in copper prices until late 2017.

    Antofagasta’s 2015 financials were very poor in comparison with 2014, and revenue, EBITDA and total dividend per share were also behind consensus...

    In an effort to rein in capital expenditure and preserve cash in 2016, the Encuentro Oxides project and the new molybdenum plant at Centinela will have their development slowed so that they will only be completed in the second half of 2017, rather than end 2016 and early 2017, respectively. According to Antofagasta, stopping these projects would have been “disproportionately expensive”, whereas the slow-down as “no impact” on their net present value (we wonder how this is possible, unless net present value is zero or worse). Further commitments to other projects “will only be considered when the market outlook improves”.

    Given that these results were at the bottom end of the consensus range, and the shares have rallied over 50% since mid-January, we would expect Antofagasta shares to react negatively today, all else being equal.

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