Antofagasta (Price: 922p | Target: 892p | Rec: Reduce) Antofagasta’s ex-dividend date of 8th May is approaching, after which it will pay out close to US$900m to shareholders, comprising the 12.5c/share final dividend and the 77.5c/share special.

This equates to just under 60p/share.

We have updated our commodity price assumptions, with lower near term prices reducing our TP to 892p/share from 934p/share.

Since our forecast total return is now close to zero, we have adjusted our recommendation from Sell to Reduce. * Our updated TP stands at 892p/share, down from 934p/share, as a consequence of a reduction in our 2013E copper price forecast from 365c/lb to 360c/lb.

We have also updated our GBP/US$ exchange rate from US$1.51/GBP to US$1.54/GBP.

The impact on earnings is to reduce our 2013E EPS from 136c/share to 131c/share.

A reduction in our commodity price outlook for by-products (Au and Mo) increases our cash cost, including by-product credits, from 130c/lb to 135c/lb.

Pre by-products, our cash cost for ANTO is forecast at 174c/lb this year, rising in future years as grades decline (see financials overleaf). * Near term price movements are being led by volatility in copper prices that were over US$8,000/t (362c/lb) in February and fell below US$6,800/t (308c/lb) a week ago (and have since recovered to US$7,100/t) as concerns over consumption, capacity and inventories have weighed on prices. * Our TP is based on a 50:50 split between P/E and NPV.

We use a 12X multiple for valuation for this year’s earnings (equivalent to 1,018p/share).

Our NPV for the company stands at 766p/share (708p post dividend).

At spot commodity prices (copper at 322c/lb), our TP would stand at 788p/share with cash costs including credits at 137c/lb this year.
To access the full note please click here Analyst: Marc Elliott
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