Why Copper Miner Antofagasta's NAV Conversion Is Underpriced

Copper demand is supported by the energy transition. Electric vehicles and grid upgrades consume roughly three to four times more copper per unit than fossil-fuel infrastructure, and supply growth from new mines remains constrained by permitting delays and declining ore grades. That backdrop favors low-cost producers like Antofagasta, which can invest in small expansions without the risk of building a new mine from scratch.

Antofagasta's medium-term production target is roughly 800,000 tonnes by 2026, up from 700,000 tonnes in 2024. That growth comes from the Centinela and Los Pelambres operations, using existing infrastructure. Each incremental tonne at low cost adds significant value per share.

The company has also reduced energy costs by shifting to renewable power. A 2023 contract supplies solar and wind electricity to its operations, fixing a portion of its power bills and reducing exposure to Chilean electricity price spikes.

Risks remain. Chile's government has proposed tax increases on mining profits. A higher royalty rate would cut into Antofagasta's free cash flow, though the company's low cost base provides a wider buffer than it would for higher-cost peers. A sharp global recession that crushes copper demand could also delay the NAV conversion timeline.

The net asset value estimate depends on assumptions about long-term copper prices, production volumes, and cost inflation. Using a long-term price near $4.00 per pound, the NAV on Antofagasta's owned mines is roughly 40% above the current stock price, the analyst said. That gap narrows as the company delivers quarterly results that confirm the cost and volume trajectory. The next earnings report will show whether the efficiency improvements are materialising.