RBC Capital Markets analysts led by Tyler Broda said in a note Friday that, although H1 was a period for Antofagasta to forget, the second half of the year suggested better prospects.
In a H1 results, Antofagasta CEO Iván Arriagada reiterated the company's full-year copper production guidance and net cash cost guidance of 705-740,000 tonnes at US$1.35 per pound, noting the year was "a tale of two halves".
The RBC analysts said Antofagasta checked nearly all of the boxes the bank looked for in a mining company for long-term investment, as it had "large, long-life and expandable assets in a mining-friendly jurisdiction producing a commodity into a structurally compelling market, at a reasonable margin, with little to no debt".
They said the recent sell-off after the H1 results and weaker copper prices has seen Antofagasta de-rate, which was rare for the company, with the it down from a price to net asset value (NAV) of 1.5x at the start of June to 1.1x, 21% more than peers.
The disappointing H1 results led the bank to drop its target price for Antofagasta to £9.50 (US$12.18) per share from the previous £9.80/share.
Antofagasta's shares were trading at £8.28/share Friday, which was down from £10.01 at the start of the year and an intra-year peak of £11.49/share on June 6.
The RBC analysts said valuation provided a compelling entry point, while there also opportunity from Antofagasta's copper exposure, with the commodity having significantly underperformed iron ore by 10% year-to-date.
"The previous ‘invincibility' in the rating, much like the Ark from Indiana Jones, is likely to return in our view, in due course. We also think this window might be brief, providing investors an opportunity to switch a proverbial bag of sand with the proverbial golden idol of outperformance," the analysts said.
However, they remained cautious on the outlook in the near-term for the London-listed miners, noting that peers looked more similar than before and Antofagasta's capital expenditure profile and mid-tier cost curve positioning no longer provided it with meaningful differentiation in a potential downturn.
They added that, with copper prices also lower and Antofagasta's capex profile at Los Pelambres, the company's NAV could compress significantly.
"Like our estimate movements today we would expect consensus earnings downgrades in H2. This said, on a relative basis, Antofagasta's near-term growth profile and counter-cyclical investment style should help to continue to differentiate - with a strategy that is consistent and well understood in our view," the RBC analysts said.
