RBC cuts Antofagasta price target on Chile tax risks
Royal Bank of Canada cut its price target for Antofagasta shares because of tax risks for the copper miner in Chile.
Lawmakers in the lower house of the world's biggest copper producer nation approved a bill on 6 May that would impose a royalty on copper sales to pay for social programmes. The tax would increase with prices, causing opponents to complain it would hit investment.
RBC analysts said if the change goes through it could cause a decline of 50% or more in Antofagasta's net asset value. The bank kept its 'underperform' rating on the company's shares and cut its target price to £10.50 from £14.
"We don't think the current royalty bill will pass, but we do think following recent political shifts that risks remain high and are unlikely to be resolved until after November elections," RBC analyst Tyler Broda said in a note to clients.