Deutsche Bank upgraded its rating on Antofagasta to ‘hold’ after the shares underperformed rival miners.
Antofagasta shares are down 2% while its peers are up 7% in 2021 and the price of copper, the company’s product, is up 21%, Deutsche said.
Deutsche said most of the underperformance was because investors are nervous about political uncertainty in Chile, where Antofagasta operates, and the potential for copper miners to be hit by onerous royalties.
The bank said news on royalties was likely to improve as the upper house of the Chilean legislature takes a “more rational view” and that this should reassure investors.
Deutsche analyst Abhi Agarwal upgraded Antofagasta shares from ‘sell’ and increased its price target by 3.8% to £13.50.
“We expect ANTO’s FCF [free cash flow] to remain low vs peers as the company invests in growth projects,” Agarwal wrote in a note to clients. “However, post the recent underperformance valuation no longer appears demanding.”