Credit Suisse reiterates underweight on Antofagasta

Analysts at Credit Suisse reiterated their 'underweight' stance on shares of Antofagasta, citing their near-record valuation and the deterioration in the company's previously high operational and corporate quality.

The shares were now trading at a near-record price-to-earnings multiple relative to the sector, analyst Conor Rowley said in a research note sent to clients, on the back of the rally in copper prices at the end of 2016.

However, the Swiss broker believed copper prices would remain capped in the near-term.

At present, the shares were changing hands at an 80% premium to the broader UK mining sector, with Credit Suisse's target P/E multiple of 19.0 implicitly assuming a reversion back to its long-term average of 30%.

Furthermore, the broker believed Antofagasta's volume growth out to 2019 would be the result mainly of higher grades and softer ore which were expected to reverse in 2020.

Antofagasta was also going to need to carry out capital intensive expansion projects in order to sustain production through 2020, which meant its free cash flow yields would be among the weakest in the sector over coming years.

Despite all of the above, Rowly bumped up his target price on the shares from 550.0p previously to 570.0p.