Border Control Comes to the Forefront
In the heart of Europe's renewable energy expansion, Antofagasta, a London-listed copper producer, stands as a key player. Known for its operational resilience and solid EBITDA performance, Antofagasta is gearing up for a forecasted H1 2025 EBITDA of around $2.05 billion, despite new US copper tariffs and political risks in Chile.
Antofagasta, founded by British investors, showcases a diverse portfolio, yet copper remains its core business. In the first half of 2025, the company produced 315,000 tons of copper, 91,200 ounces of gold, and 7,400 tons of molybdenum.
However, the stock's valuation is complicated. With a forward P/E ratio of 1,957.69, the high figure indicates either overvaluation or expectations of significant future earnings growth. Contrasting this, the more typical P/E around 34 in the mining sector suggests a potential undervaluation. Additionally, the company has experienced negative free cash flow recently, raising concerns about capital expenditure impacts.
The success of Antofagasta is closely tied to the volatile copper price and political risks inherent in investing in South American emerging markets. Significant risks include the impact of a 50% US tariff on semi-finished copper products, political risks in Chile, and copper price volatility.
Despite these challenges, analysts collectively assign a moderate buy rating, with a consensus target price suggesting modest upside potential (~8%) from current levels, supported by buy ratings from firms like Citigroup and JPMorgan. However, some analysts recommend a "hold" for Antofagasta stock.
Antofagasta's operational strengths and analyst support must be weighed against valuation concerns and external risks before deciding to buy. Investors should also consider the company's sustainability efforts, as it scores well in comparison to the mining industry from an ESG perspective, with a "Medium Risk" score of 23.9 from Sustainalytics, placing it in the 11th position out of 219 companies in the industry.
Notable projects include the Centinela mine expansion in the Atacama desert, which is Antofagasta's largest-ever investment and expected to increase its annual copper production by 144,000 tons starting in 2027. Moreover, the construction of a seawater desalination plant for sustainable water supply at the Los Pelambres mine is worth mentioning.
Investors should also note that Antofagasta has managed to avoid nationalization throughout Chile's turbulent history and secured $2.5 billion in financing for the Centinela mine expansion project from international lenders last year.
However, mining conglomerates are typically not favoured by sustainability-focused investors due to their greenhouse gas emissions. Yet, Antofagasta does not face suspicion of tolerating child labour in its Chilean mines.
In conclusion, Antofagasta's stock may be a buy for investors comfortable with high valuation multiples and industry/political uncertainties, supported by solid operational performance and moderate analyst optimism. More conservative investors may prefer to wait for clearer valuation signals or reduced geopolitical risk.
Antofagasta, with its diverse portfolio centering around copper, is venturing into real-estate development as well, planning to construct a seawater desalination plant for sustainable water supply at the Los Pelambres mine. The company, known for its resilience, is also investing in the expansion of its Centinela mine in the Atacama desert, anticipating increased stock-market gains and real-estate values upon project completion in 2027.
