should I buy Antofagasta or Atalaya Mining?
With the global transition to green energy well underway, the prices of several commodities have increased in anticipation of increased demand. Copper is one of them. The price of copper has climbed 74% in the past year. In addition, the pandemic has caused problems with supply chains, causing copper supplies to drop, pushing up prices as well.
Mining stocks are risky and cyclical in nature, but as the price of commodities has risen, the values of many FTSE side minors. So should I consider investing in Antofagasta (LSE: ANTO) or Atalaya Mining (LSE: ATYM), or did I miss the mark?
Antofagasta’s share price takes a hit.
Based in Chile, where 25% of the world’s copper reserves are found, Antofagasta operates four copper mines in the region. Two of them also produce molybdenum and gold as by-products.
The Antofagasta share price fell 20% last month. Maybe some investors are taking profits. Or it could be that the excitement around copper has waned as economies appear to rebound. But it’s more likely that investors are increasingly worried about an impending tax.
A government bill worries Antofagasta investors. If the bill passes, it will bring in a royalty on copper sales to help alleviate social problems. As a result, analysts at the Royal Bank of Canada believes this could reduce Antofagasta’s net asset value by 50%.
Antofagasta FY20 results
The company produced 733.9,000 tonnes of copper in 2020, down 4.7% year-over-year. The decrease is attributable to lower ratings. It projects a similar level in 2021, between 730k and 760k at a higher cost per pound.
Fiscal 2020 revenue increased 3.3% year-over-year thanks to higher commodity prices. The company increased its annual dividend in response, resulting in a return of 2.6%. In addition, he reduced his net debt by 85%.
Its forward price-to-earnings (P / E) ratio is 17 and its market capitalization is £ 15 billion. This is all very encouraging, but the impending tax makes me nervous. As a result, I do not intend to invest in Antofagasta today.
Atalaya Mining shares show strength.
Cyprus-based Atalaya Mining is much smaller, with a market capitalization of £ 442million. It has a P / E ratio of 16 and earnings per share is 19p. It is primarily a copper miner operating in Europe and double listed in London and Canada. It owns a wholly owned Spanish mine called the Proyecto Riotinto project.
Atalaya Mining’s share price is up 33% year-to-date, but down 12% from its 52-week high. Meanwhile, the price of copper is up 25% year-to-date. However, it was down 8.5% from its May high.
The company reported first quarter revenue up an impressive 59% year-over-year. And he is now looking to expand his drill targets into areas that look promising, near where he is currently drilling.
Mining stocks are notoriously risky, especially those listed on the FTSE-AIM index. Nonetheless, I like the fact that it has an experienced management team, that it generates cash, operates in a reasonably safe jurisdiction, and that there is reason to believe that the demand for copper will continue to increase.
When it comes to copper stocks, I prefer the look of Atalaya Mining to that of Antofagasta. In fact, I can consider a small allocation of Atalaya shares in my shares and ISA shares.
Post Copper actions: should you buy Antofagasta or Atalaya Mining? first appeared on The Motley Fool UK.
Kirsteen has no position in any of the stocks mentioned. The Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a wide range of ideas makes we are better investors.
Motley Fool United Kingdom 2021