Citi has upgraded its rating for Antofagasta PLC (LSE:ANTO) to 'buy' based on the Chile-focused FTSE 100 miner's potential for volume recovery and compelling valuation.
The upgrade comes as Antofagasta is expected to see a significant recovery in copper production, adding 26% to its estimated underlying earnings (EBITDA) over the next two years.
The market has been sceptical about Antofagasta's recovery prospects, given a 4% annualised shortfall in production against the company's guidance over the past four years.
However, Citi's forecasts are more optimistic, estimating a production recovery of 85,000 tonnes compared with the much lower market consensus.
Projects nearing completion are expected to contribute an additional 100,000 to 110,000 tonnes of output in the near term, providing a buffer for any ramp-up issues. Citi also notes that Antofagasta's earnings recovery is expected to outpace that of its global peers.
In early trade, the stock was changing hands for 1,461p, up 32p, or 2.2%.