Chilean copper miner Antofagasta (ANTO) has hiked its dividend after its earnings grew more than 12% in 2020 amid soaring copper prices.
For the year ended 31 December 2020, earnings before interest, tax, depreciation, and amortization (EBITDA), rose 12.3% to $2.7 billion year-on-year, as revenue increased 3.3% to $5.1 billion. Net cash costs were $1.14 per pound of copper produced.
The miner also massively increased its shareholder payouts with a final dividend of 48.5 cents per share declared, bringing the total dividend for 2020 to $0.547 per share, up from $0.178 the previous year and implying a 2% yield.
SHARES UNMOVED
The performance failed to push the stock, the shares nudging 0.3% lower to £17.31. This was partly due to earnings that were slightly lower than the $2.78 billion expected, but largely because of the stock’s 21% surge since the end of January.
Antofagasta’s shares have been on a roll over the past year, rising over 120% having reflected a more than 60% in the copper price over the same timeframe. Miners are seen by investors as leveraged plays on the commodities they produce..
After experiencing a big fall to around $2.20 per pound as the pandemic hit, copper swiftly bounced back to trade at over $3.50 - well above 2019 levels - by the end of the year as optimism grew over a global economic recovery, and this was reflected in the miner’s full year results. Copper has since gone on to trade at over $4 per pound so far in 2021.
PRICING IN YEARS OF COPPER GROWTH
Analysts at broker Peel Hunt highlighted Antofagasta’s ‘large’ final dividend, which comes 12 months before they expected, and the fact it has whittled its net debt down to just $82 million compared to the $479 million anticipated, but also said the firm’s shares look expensive and are pricing in two or three years’ worth of copper price growth.
The analysts added, ‘Trading at 6.3-times on our current 2021 EBITDA estimates the shares are trading at some of the higher multiples since the global financial crisis despite the present high copper prices.
‘Assuming spot copper prices the shares trade at five-times, implying that present conditions are mid-cycle. This makes us think that Antofagasta is pricing in material further copper price growth and means that it remains highly exposed if copper prices disappoint relative to expectations.’
