Antofagasta rallies as Citi upgrades stock to 'buy'

Antofagasta was on the front foot on Monday after Citigroup upgraded the miner to ‘buy’ from ‘neutral’ at a target price of 807p.

Citi said Antofagasta is set to benefit from lower taxes as it will not incur withholding tax on dividend distribution from Chile through to the end of the decade. The bank estimates the net impact of an 8% lower effective tax rate, implying a 10-15% upgrade to consensus forecasts.

Citi also expects improvement in free cash flow generation to end of the decade.

“What has changed? — We believe that emergence of corporate level funding (about $500m) is a welcome sign and should lead to efficient tax planning,” the bank said.

“Historical project funding appears more of conservative stance to limit any execution risk to project/operation, however future expansions appear in reasonably well knows areas to the company and incremental corporate funding can clearly benefit earnings and cash-flows.”

Shares jumped 5.18% to 801.50p at 0935 GMT.