Investors in Member Antofagasta (LON 🙂 (OTC 🙂 have had a great year so far. The price of shares in the multinational mining giant is up more than 55%. In other words, the proverbial $ 1,000 invested in the stock in early January would now be worth well over $ 1,500.
The history of Antofagasta dates back to 1888, when it was founded in London. The mining giant operates four copper mines in Chile. In addition, the transport division provides rail and road freight transport in Northern Chile.
Antofagasta 1-year pass.
The last month of the year marked a new 52-week high for stocks. On December 10, ANTO stock closed at 1,464p ($ 19.39 for US stocks). Now investors are wondering whether the price increase can continue in 2021.
No discussion of Antofagasta would be complete without a discussion of one of the oldest metals in use in the world. Let's take a closer look.
Antofagasta is a Play on Copper
Copper mining and refining are expensive processes, but the unique specifications of the metal put it in high demand. Chile is the largest copper producer in the world, followed by Peru, China, the Democratic Republic of the Congo and the US.
Highlights from recent academic research:
“China has become both a major copper user and a producer of copper-containing products…. China & # 39; s copper stock per capita in use has grown from about 7 kg in 1990 to nearly 60 kg in 2015. At the same time, total copper imports have increased from about 0.65 tons per year to nearly 10 million tons. . "
Currently "the largest importers of copper are China, Japan, India, South Korea and Germany".
After reaching a multi-year low in the first months of the year, a sharp copper boom that started in the second quarter continued into the third quarter. Incidentally, copper futures are heavily traded on the London Metal Exchange (LME).
With optimistic post-pandemic scenarios dominating, risk appetite in the markets has increased since early spring. As a result, the prices of many asset classes have gone up. Markets appear to be expecting a substantial recovery of the global economy, including heavy industry, and thus greater demand for copper.
The development of the copper price corresponds with the run-up in ANTO shares. We can also expect a parallel move in the coming months. For those investors who are bullish on copper, Antofagasta could continue to be a good game.
However, we must remind potential investors that valuation measures are becoming overloaded. The forward P / E and P / S ratios of ANTO shares are 23.75 and 4.10, respectively. In fact, the opinions of recent analysts have also been mixed.
The group was released at the end of October.
Said CEO Ivan Arriagada at the time:
" For full year 2020, we expect production to be at the lower end of the original 725-755,000 tons guideline, and net cash costs are now expected to be below the originally guided $ 1 , 20. /lb.reken19459003]
Potential investors may want to wait for the next earnings report before buying stock.
Bottom Line
In the coming weeks, we expect short-term profit taking to put pressure on Antofagasta's stock. A potential drop of about 5% -7% would improve the margin of safety for long-term investors.
Those investors who don't want to put all the capital into a single copper mining company, but still believe in the power of the red metal, may want to consider investing in a copper exchange-traded fund (ETF) designed to match the price of copper. Examples include the Global X Copper Miners ETF (NYSE :), the United States Copper Index Fund, LP (NYSE :), and the Barclays (LON 🙂 iPath Bloomberg Copper Subindex Total Return.
In addition to Antofagasta, several other mining groups held in COPX include Canada-based First Quantum Minerals Ltd (OTC :), India headquarters, Vedanta (NYSE :), Poland-based KGHM Polska Miedz (LON :), and the Swiss group. Glencore (OTC :).
Finally, there is also an exchange-traded note (ETN), the Barclays iPath Bloomberg Copper Subindex Total Return (OTC: JJCTF), which uses copper futures contracts.
