Back on May 15, 2016 I wrote a post stating I considered Antofagasta’s current stock price an opportunity, the price of the stock had been severely punished due to pesimistic short-term macroeconomic forecasts and the overall downward in commodity prices, back then the market didn’t distinguish between good and bad companies thus creating a gap between the company’s price and its real value.
Since then Antofagasta’s strategy has consisted on costs reductions in order to survive the adverse market enviroment, improving their overal efficiency and preparing for better times through strategical adquisitions and disinvestments.
I believe the company has done great following this strategy:
· Cash costs before by-product credits in Q4 2016 were $1.46/lb, 5.2% lower than in Q3 2016 as production volumes increased, particularly at Centinela.
· Cash costs before by-product credits for the full year were $1.54/lb, 27c/lb lower than last year as a result of the successful cost savings achieved during the year, higher production and the previously announced change in the estimation method for deferred stripping costs.
· Net cash costs were $1.13/lb in Q4 2016, a 4.2% decrease compared with the previous quarter. This was primarily due to lower cash costs before by-products credits and higher production of gold and molybdenum
· Net cash costs for 2016 were $1.20/lb, 20.0% lower than in 2015. This reflected the lower cash costs before by-product credits, higher gold production and higher realised prices for gold and molybdenum, partly offset by lower molybdenum production.
Despite the fall in revenue, EBITDA increased by 2.3% to $571.6 million reflecting a 24.7% reduction in operating costs and the inclusion of EBITDA from Zaldívar and other associates for the first time. This has resulted in earnings per share from continuing operations for the period of 8.9 cents per share, down 3.3% compared with the same period last year.
- If so why am I leaving?
I believe the stock price already takes the good news into account and reflects a fairer valuation of the company, the higher the price the less the margin of safety – in this particular case and for the time being -.
Moreover I believe some of the lastest euphoria regarding the stock is due to political events i.e. Trumps victory and his plans on public infraestructure spending.
I don’t like the idea of investing my money following political statements, since politicians might say something today and do the opposite tomorrow without any real consequences.
Whether or not the stock keeps going up I don’t know & I can’t know, I’m exiting after a 67.7% surge + dividends in a 10 months swim which is a fairly good result if you ask me.
For the time being I’ll keep the resulting liquidity while I search for new opportunities to add to my portfolio.
Nevertheless this isn’t a goodbye but simply a see you soon, given the fact Antofagasta is one of the lowest cost producers on its sector, a greatly managed and an excellent company overall I’ll constantly keep an eye on it patiently waiting for another chance to invest on it.