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Copper Investing

Chilean miner Antofagasta saw its share price take a dip on Wednesday after it reported a drop in overall copper production for the first quarter.

Chilean miner Antofagasta (LSE:ANTO) saw its share price dip on Wednesday (April 25) after it reported a drop in overall copper production for the first quarter, due mainly to lower-quality ore. 

Despite assuring investors that the lower grades were anticipated ahead of time, Antofagasta’s share price fell to GBX 933.90, down from the previous day’s close of GBX 977.40. The company’s share price closed down 2 percent at GBX 960.40.

According to the company’s Q1 production report, copper output was down by 10.5 percent compared to the same period in 2017, at 153,800 tonnes.

Antofagasta operates four primarily copper mines across the Antofagasta and Coquimbo regions of Chile.

CEO Iván Arriagada said that despite lower grades and production in Q1, copper output “will increase quarter-on-quarter as grades improve during the year and into 2019. For the full year our production guidance is unchanged at 705-740,000 tonnes.”

According to the company, net cash costs were higher at US$1.54 per pound due to lower grades and a stronger Chilean peso, but net cash cost guidance was unchanged at US$1.35, “assuming no further strengthening in the Chilean peso.”

Analysts at Bernstein said in a note that the results were weaker than expected, but the firm will keep its “outperform” rating as full-year guidance was maintained.

Gold production also took a hit, dropping 39.4 percent on Q1 2017 to 32,000 ounces. Gold production was also 20.4 percent below Q4 2018 results, reportedly because grades were down at the company’s 70-percent-owned Centinela mine in the Antofagasta region.

The Centinela mine is Antofagasta’s second-largest source of copper, producing 228,300 tonnes in 2017 as well as 157,000 tonnes of gold.

The quarterly report also says that labor negotiations at the company’s largest copper asset, the Los Pelambres mine, have concluded. The mine is forecast to produce half the company’s projected copper output at 345,000 to 355,000 tonnes.

“The one-off signing bonuses related to these three-year agreements increased Los Pelambres’ cash costs by 8 cents pound  and group cash costs by 4 cents per pound for the quarter,” the report states.

In the first three months of the year, the company also saw an increase of 40.9 percent in molybdenum production due to better grades.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

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