Bank says takeover enthusiasm has pushed valuations to record highs, prompting a downgrade of Antofagasta and a more cautious stance on pure-play copper producers.
Morgan Stanley has struck a more cautious tone on European copper miners, warning that a rally driven by takeover speculation and high metal prices has pushed valuations well beyond underlying fundamentals, increasing the risk of investor rotation.
In a note published on February 3, the US investment bank said copper had moved to the centre of an intensifying mergers and acquisitions push, led by diversified mining groups seeking to secure producing assets and bolster long-term growth pipelines.
That dynamic, combined with strong spot prices, has driven a sharp re-rating of listed copper producers .
Equity valuations for copper pure-plays have risen to record levels, Morgan Stanley said, with enterprise value to earnings multiples expanding by about 35% to 120% over the past year on peak earnings.
Valuations measured by enterprise value per tonne have climbed by 70% to 170%, to roughly $40,000 to $100,000 a tonne, levels that the bank said were now detached from replacement costs of $20,000 to $35,000 a tonne.
“While a rising tide lifts all boats, not all coppers are created equally,” the analysts wrote, arguing that the current buy-over-build narrative favours companies with strong growth optionality rather than those where valuations already reflect optimistic assumptions.
Morgan Stanley downgraded Antofagasta PLC (LSE:ANTO), the Chile-focused copper producer, to 'underweight' from 'equal-weight', citing a valuation premium that it said had reached historical highs.
The bank estimated that Antofagasta’s share price implied a long-term copper price of $7.42 a pound, about 27% above the prevailing London Metal Exchange price, skewing the risk-reward profile unfavourably.
The bank added that Antofagasta had benefited disproportionately from investor inflows following operational setbacks elsewhere in the industry, but said that over the next 12 to 18 months there was scope for capital to rotate towards peers as projects are de-risked and new copper-focused “supermajors” emerge.
By contrast, Morgan Stanley highlighted KGHM Polska Miedz as relatively attractive despite recent uncertainty triggered by the surprise dismissal of its chief executive.
The Polish miner trades on a 2026 spot enterprise value to earnings multiple of about 4.1 times on an attributable basis, roughly 30% below its long-term average and at a steep discount to peers trading at 10 to 11 times, according to the note.