Analysts at Jefferies International have said their call is to continue to buy Antofagasta PLC (LSE:ANTO) shares "for the long term for leverage to a rising copper price" despite the risk of a near-term pullback following a recent massive rally in the stock.
The call comes after the Chile-focused miner reported 4Q production and costs that met its most recently revised guidance, with copper production of 195.7kt up from 181.9kt in 3Q, while sales increased by 13% quarter-on-quarter to 201.5kt. On a full-year basis, the company produced 646.2kt of copper at an average net cash cost of $1.61/lb, in line with guidance of 640-660kt and $1.65/lb, respectively.
The FTSE 100-listed firm reiterated its 2023 copper production guidance for 670-710kt versus 2022 production of 646.2kt and sales of 642.5k, at a net cash cost of $1.65/lb as inflation in copper mining rages on.
Volumes are expected to improve in 2023 as the Los Pelambres desalination and concentrator plants should come online in 2Q 2023, with volumes at Los Pelambres expected to increase to 320-335kt in 2023 (from 275kt in 2022) while volumes at Centinela should average 235-250kt (vs. 247.5kt in 2022).
The Jefferies analysts noted: "If history is a guide, we believe risk to volumes is to the downside and risks to unit costs is to the upside. The company's capex guidance for 2023 of $1.9bn is allocated 21% to development/79% to sustaining and mine development."
They said they have updated their company model to reflect the 4Q operational results as well as the outlook, chopping earnings per share forecasts for 2023 by around 22% and trimming those for 2024 by 1.6%.
The analysts noted that their unchanged net present value (NPV) based share price target of 2,050p assumes that Antofagasta can deliver on its operational targets.
On the revised estimates, Antofagasta trades at a 2024 attributable EV/EBITDA of 7.1 times, and a FCF (free-cash flow) yield of 3.7%, and the Jefferies analysts reiterated a 'buy' rating on the stock.