Deutsche Bank upgrades Antofagasta, Kaz after coronavirus correction

Deutsche Bank upgraded its stance on shares of Antofagasta and Kaz Minerals on Wednesday following the recent correction on concerns about the impact of the coronavirus.

The bank upped Antofagasta to ‘hold’ from ‘sell’ and lifted the price target to 850p from 840p. DB upgraded Kaz Minerals to ‘buy’ from ‘hold’, with an unchanged target price of 610p.

It noted that Antofagasta shares are down around 15% since mid-January, having suffered an "aggressive" correction following the outbreak of the coronavirus, while Kaz has fallen more than 20% since the outbreak.

DB pointed out that Antofagasta is one of the very few large-scale, low-risk copper producers globally.

"We expect the company to maintain its premium valuation driven by its long-life asset base, established track record and strong balance sheet," it said, adding that the group's limited free cash flow generation and political uncertainties in Chile prevent a more bullish view.

"However, 2020 should represent a trough volume year with higher volumes and lower costs expected in 2021 with the start-up of the Los Pelambres expansion and higher grades at Centinela," it said.

DB also said that it expects an above-consensus special dividend to be announced for FY19 at the full-year results in March.

As far as Kaz is concerned, the bank put the upgrade down to valuation, a positive copper outlook and potential project de-risking catalysts from the second half of this year.

"While the Baimskaya project is an impediment for some investors, we find the current valuation too compelling to ignore. The core Kazakh operations continue to perform well, are low cost and highly cash generative," it said.

At 1320 GMT, Antofagasta shares were up 4% at 892.20p and Kaz shares were 5.7% higher at 500p.