RBC downgrades Antofagasta to 'underperform', cuts target

Analysts at RBC Capital Markets downgraded shares in Antofagasta to 'underperform' and lowered their target price, saying the South American copper miner faced more downside than its peers from the Covid-19 pandemic impact.

Antofagasta on Monday said it had suspended its Los Pelambres Expansion project in Chile for about 120 days due to the crisis. Its other operations in the country have also been shuttered.

"Challenges to mining in Chile appear to be increasing with the nationwide lockdown in place and this reinforces our fears around lack of geographic diversification in the asset base," the bank said in a note as it cut the target price to 600p from 760p.

"Only three weeks ago with management indications of capex cuts we saw Antofagasta, with its still strong balance sheet as a likely stalwart through the downturn. However, even so, at a $1.75/lb copper Covid-19 downside price, the margin compression in Antofagasta remains well ahead of peers."

"As Antofagasta has only $563m of net debt, and liquidity at $3bn the challenge remains one of profitability rather than any concerns around solvency," RBC added, noting that the sector could face a sustained period of low prices as inventories built up.