Cap Falls in Chile as Santander Says Rally Unjustified

Cap SA (CAP), Chile’s largest iron-ore mining company and steel producer, fell the most in two weeks after Banco Santander cut its profit estimates and said a recent jump in the stock price was unjustified.

Cap retreated 4 percent to 12,029 pesos at 1:41 p.m. in Santiago, the most since Aug. 27 on a closing basis. It was the worst performer on the benchmark IPSA index, which lost 0.4 percent.

Santander reiterated its recommendation on Santiago-based Cap’s shares at the equivalent of sell, with a year-end price target of 9,400 pesos by the end of 2014. The bank cited lower forecasts for iron prices in an e-mailed report dated today.

New iron ore output from Australian producers and “unsustainable” growth in Chinese steel production will pressure iron prices, the analysts Rodrigo Ordonez and Francisco Errandonea wrote in the report. Cap’s 23 percent gain in the past month lacks compelling reasons, Santander said.

Santander cut its estimates for the company’s earnings before interest, tax, depreciation and amortization by 7 percent for 2013 and 9 percent for next year.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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