JPMorgan maintains overweight rating on Antofagasta stock

JPMorgan reiterated its Overweight rating for Antofagasta (ANTO), maintaining a £24.00 price target, citing improved outlook driven by rebounding copper prices, increased gold prices, and weakened cost inputs. Antofagasta is projected to achieve copper growth of 15-30% by 2027-2028, leading to a de-rating of its enterprise value to EBITDA and a shift in free cash flow yield from -3% to +7% by 2028. The firm has been placed on JPMorgan’s Positive Catalyst Watch ahead of its second-quarter production results on July 16, with 2025 EBITDA forecasts exceeding consensus by 6%.

Analysis

JPMorgan's reiteration of an Overweight rating for Antofagasta Plc. (ANTO) with a maintained price target of £24.00 signals a robustly positive outlook, driven by several converging factors. Copper prices have rebounded significantly, while gold, a key byproduct for Antofagasta, has seen an 8% price increase. Concurrently, cost pressures are easing with weaker oil prices and treatment charges. JPMorgan's commodities team projects a shift in the copper market from modest surpluses in 2025-2026 to a substantial deficit from 2027, potentially exceeding 3 million tons by 2030. Antofagasta is well-positioned to capitalize on this, forecasting copper production growth of 15% to 30% by 2027-2028 compared to 2024, which is expected to surpass its global peers. This growth is anticipated to lead to a significant de-rating of its enterprise value to EBITDA multiple from approximately 9 times in 2025 to around 5 times in 2028, and a notable swing in free cash flow yield from -3% in 2025 to +7% by 2028. The recent approval of the Zaldivar Environmental Impact Assessment has mitigated risks to Antofagasta's 2025 copper output guidance. Furthermore, strong gold prices and reduced input costs present an opportunity for the company to lower its cash cost guidance. JPMorgan's revised 2025 and 2026 group EBITDA forecasts for Antofagasta are up by 5% and 1% respectively, with their 2025 EBITDA estimate now 6% above the consensus. The placement of Antofagasta on JPMorgan’s Positive Catalyst Watch ahead of its second-quarter production results on July 16 underscores the anticipated positive momentum.

Key Decisions for Investors

• Consider the current Overweight rating and positive catalysts as supportive for potential accumulation of Antofagasta shares, particularly in light of its projected peer-leading growth.
• Monitor Antofagasta's second-quarter production results due on July 16 and any subsequent updates to cash cost guidance, as these are highlighted as near-term positive catalysts.
• Evaluate the long-term investment potential based on the company's projected improvement in free cash flow yield to +7% and EV/EBITDA de-rating to around 5 times by 2028, aligning with the anticipated copper market deficit.