In a note to clients, the global bank’s analysts said: “Strong outperformance (+15% vs. pure-play peers in past year) has left Antofagasta as one of the most expensive base metal pure plays we cover globally.”
They added: “We see negative catalysts ahead driven by declining grades and rising opex and capex limiting FCF (free cashflow) generation close to zero at spot over the next 5yrs.”
The analysts said they estimate that the FTSE 100-listed miner is pricing in copper prices at $3.30 per pound into perpetuity which they think “looks challenging over 2020-22 given ample supply growth.”
They pointed out: “While ANTO is considered a ‘sleep-easy’ copper exposure, we’d rather play upside to copper prices through KAZ which trades at a 61%-64% discount to ANTO on P/E (spot 2019⁄20) with similar leverage to copper prices and more attractive catalysts (Baimskaya sell-down)."
The global bank reduced its target price for Antofagasta by 6% to 750p from 800p, with the stock currently trading at 935p, down 0.3% on Monday’s close.
But Deutsche Bank raises target price
However, Antofagasta’s share price decline was cushioned by a more upbeat note from Deutsche Bank, which raised its target price for the Chile-focused miner to 880p from 800p, while retaining a hold rating on the stock, in a report on copper miners.