Broker snap: Investec cuts Antofagasta target price to 716p

22nd Nov 2013 11:55

Copper miner Antofagasta faces higher treatment and refining charges (TC/RCs) for 2014, and cost increases.Yes, the balance sheet is strong, but the company will have to invest heavily for several years. As well, softening earnings will limit the scope for special dividends, explain analysts at Investec. Recent settlements on TC/RCs are moving from around US$70/t and 7c/lb toward US$90/t and 9c/lb reflecting greater copper concentrate availability. Applying higher charges reduces the broker's valuation to 716p from 737p adding around 5c/lb in cash costs, the South African broker said. Investec added that production is widely anticipated to move into surplus in 2014, although it does not expect excessive oversupply. Using current spot copper and gold prices in their valuation would lower their price target to 688p, they went on to explain. For all of the above reasons they decided on Friday to maintain their 'Sell' recommendation on the stock, describing the 15 times forward earnings multiple assigned to the shares as 'generous.'AB