Our target price of £20 is based on the average of our DCF-based SoTP NPV valuation and our EV/EBITDA valuation.

The NPV approach provides a longer-term view of normalised returns. We calculate the DCF-based enterprise value using a WACC of 8.0% and terminal growth rate of 2%. Thereafter, we reduce the EV by the end-2024 net debt and minorities to arrive at the NPV.

We apply a multiple of 8x to our forecast EBITDA, lower than the stock's long-term average multiple, to reflect risks from global growth slowdown.

We consider the following risks to the investment case and achievement of our target price:

With >80% of sales related to copper, any change in copper prices has a significant effect on our estimates, valuation, and target price.

In terms of costs, there is an additional risk given the difficulty in predicting cash production costs: not only are cash costs related to copper prices, but they are also affected by FX (primarily CLP) and prices of by-products, such as molybdenum, gold, and silver.

Execution/ramp-up of organic projects is also a key risk towards delivery of volumes/earnings/cash flows.

While Chile has politically been generally stable, fiscal changes have materially impacted the earnings base including revised royalties and corporate tax regime, and more changes going forward cannot be ruled out.

Chile also remains an earthquake-prone country, which can result in significant disruption, although not many operational issues have been encountered during previous such instances.

Mineral reserves/resources are generally subject to a high degree of estimation risk, where any misjudgment by technical experts can lead to significant deviation in the prospect of asset both from economic viability and longevity point of view.

Tailings dam collapse and resource nationalisation remain broader significant risks to the mining sector generally.

If the impact of these risk factors is more or less negative than we currently anticipate, the share price could fail to reach or exceed our target price.