Jefferies highlights M&A opportunities for copper miner Antofagasta

7th Apr 2015 11:22

Antofagasta's stock should outperform, according to analysts at Jefferies, with the copper miner approaching a "strategic inflection point".The broker reiterated a 'buy' rating and 900p target price for the shares.Jefferies believes Antofagasta has significant advantages compared with other miners, such as the anticipated copper price recovery, a strong balance sheet with almost no net debt, low operation costs and high exposure to low-risk Chile.At the same time however, the company has longer-term disadvantages due to its relative lack of organic growth, cost inflation and ongoing legal dispute regarding environmental issues at its flagship Los Pelambres mine.These issues "should be addressed (potentially via M&A)", the broker said."There have been recent media reports indicating that Antofagasta and Teck Resources have had early-stage merger discussions. Based on our analysis, a full merger of these companies would not be strategically sensible at all for Anto and is highly unlikely."However, [...] Teck's copper business (or individual assets) could be a good fit for Anto if Teck is a willing seller at a reasonable price. This may be unlikely, but we would expect Anto to look more aggressively for acquisition opportunities now than it has in the recent past. A focus on M&A would be a strategic inflection point for Anto and is a risk to the Anto investment case."The stock was trading 2.2% higher at 734p by 11:22.