Despite copper falling to a new three week low, mining group Antofagasta gained ground in an uncertain market.
The company benefited from news that fellow Chilean miner Codelco expected its copper output and sales to fall by around five per cent next year, ahead of a major investment programme to boost production.
Antofagasta, up 27.5p to 761p, was also helped by analysts at Bernstein raising their rating and lifting its target price to £10.25 from £9. Bernstein said:
We upgrade Antofagasta from market-perform to Outperform partly as we recognise the company’s improving cash profile going forward. Our concerns over FCF have lessened as Antucoya appears on time and budget and the current valuation is compelling.
We like Antofagasta’s pure copper exposure and believe the stock is well positioned to benefit from the upside we see in the copper price, especially given the current valuation. We continue to like the impressive margin generation of at least two of Antofagasta’s assets (Los Pelambres and Esperanza) and see this as proof positive that while cost performance has been an industry wide issue Antofagasta has emerged from the last few years in a better position than many copper miners in Chile.
We would still be accumulators of Antofagasta’s stock for those with the patience to look through the price cyclicality to the longer term fundamentals, particularly where this can be achieved at points of periodic weakness in the copper market. Moreover, we consider Antofagasta to be one of the “safest” copper stocks available as the company would be able to generate strong returns even in a continuing low price environment.
Mining shares in general had been boosted by China’s surprise interest rate cut on Friday and although the initial enthusiasm quickly wore off, they edged higher again on Wednesday.
Rio Tinto rose 16p to £30.02, Anglo American was 18p better at 1347.5p and Randgold Resources ended 46p higher at £44.74.
Overall the FTSE 100 finished virtually unchanged, down 1.97 points at 6729.17.
Investors were nervous ahead of the Thanksgiving holiday, with disappointing US housing and consumer sentiment figures, and higher than expected weekly jobless claims. There was some support from continuing hopes that the European Central Bank will sanction some form of quantitative easing to lift the flagging eurozone economy. Optimists hope for news at next week’s ECB meeting but the bank’s vice-president Vitor Constancio seemed to suggest any move if it came would not be until next year.
There was also some uncertainty ahead of this week’s Opec meeting, with disagreement about whether the cartel would agree to cut production or not. Brent crude slipped 0.5% to $77.94 a barrel as a consequence.
BT closed 8.6p higher at 404.4p as EE confirmed it was the other company involved in talks about a mobile deal (as well as O2).
The shock news that Harriet Green was stepping down as chief executive at Thomas Cook sent the travel company’s shares down 24.4p or nearly 18% to 113.5p. The company’s comments that the outlook was getting tougher hit rival Tui Travel, 9p lower at 417.5p.
Fruit Shoot maker Britvic lost 41.5p to 655p after it said competition among retailers would put pressure on its prices in the coming year and lead to subdued revenue growth.
Finally Flybe dipped 1p to 100.75p despite the company signing a deal to fly services for Scandanavian airline SAS. Analysts at Liberum said:
A new six-year, four aircraft contract flying deal with SAS represents tangible progress on the second element of management’s twin-engined growth strategy. Although the immediate financial uplift is likely to be modest, there is scope for the contract to be extended and expanded. It could also lead onto additional work for SAS or other airlines. Our recommendation remains buy with a 180p target price.
