Broker snap: Antofagasta close to fair value

31st Mar 2010 12:58

Natural resource specialist Fox Davies Capital has commenced coverage of Chilean copper miner Antofagasta with a 'hold' recommendation and a discounted cash flow valuation of the shares of 985p.'We have run all the mines life of mine with the exception of Los Pelambres, In the Los Pelambres case we have mined all the reserves but there are ample resources left to keep the mine going for many more years past the 2035 when our modelling ceases,' the broker said, as part of a lengthy explanation of its modelling assumptions.The investment case for Antofgasta is supported by Fox Davies's belief that 'copper is one of the less risky commodities,' while the broker also thinks that the political risks are minimal, even though all the producing mines are located in one country.'Currently the exploration programme encompasses Pakistan, Zambia, Spain, Mexico and the USA. Of these countries Pakistan is the most risky, a statement justified by current market comment that the project may not be allowed to proceed assuming a positive feasibility report.,' Fox Davies notes.