Diversified miner Anglo-American NGLOY could be a promising buy as copper prices rise and the company seeks to transform itself, financial magazine Barron’s said in an article.
The company underperformed its competitors BHP Group Ltd CV, Rio Tinto RIO AND Glencore ADR GLNCY due to operational problems, disappointing production prospects and the collapse of the diamond and platinum group markets, according to the article published on Friday.
Anglo said it is reviewing its operations, with the CEO Duncan Wanblad stating on a conference call that “nothing is off the table” in the asset review.
Anglo’s exposure to South Africa, through holdings in platinum and iron ore operations, has helped push its share price down amid the nation’s problems with the economy, crime and power outages, Barron’s said. Meanwhile, analysts aren’t thrilled about the company’s expensive fertilizer project in England.
The company’s platinum and iron ore stakes could be spun off, while it would be bullish for the stock if Anglo manages to bring a partner into the fertilizer project. The article also speculated that the entire company could be sold to a competitor.
“Due to recent problems, Anglo American shares look cheap,” the article reads. “Ultimately, Anglo American offers shareholders two ways to win. Either it cleans up its business this year, or it could find itself in the hands of a larger mining company that will develop its attractive resource base.”
Read also: Biden’s $475 million for mining aims to power communities ‘most impacted by our changing energy landscape’
Barron’s article cited Jeffries mining analyst Christopher La Femina as if saying that if Anglo’s situation doesn’t improve, the company could attract a buyer or an activist investor. He also said the recovery in the diamond and platinum group metals markets could help the company’s shares.
Meanwhile, Anglo’s best business is copper, but LaFemina said the company doesn’t get credit for that metal because of other issues.
Morgan Stanley analyst Alain Gabriele recently raised Anglo to Overweight, taking into account the portfolio review, potential operational improvements and the company’s exposure to copper, which has a strong long-term outlook due to limited new supply and growing demand from the copper sector. green energy.
Others are also bullish on copper.
A RBC Capital markets An analyst note on Monday said copper fundamentals are supportive as inventories in Shanghai posted their first weekly decline since December, an indicator that inventory drawdown may have begun. This would create more supply tightness in the copper market, as Chinese smelters said they would cut production due to falling concentrate supply.
Meanwhile, demand from China, the world’s largest copper consumer, could see an improvement.
“We are also seeing constructive commentary on Chinese stimulus and property market support, with China’s central bank saying on Thursday that there is significant flexibility in monetary policy to implement further cuts to the reserve requirement ratio for banks, while media state officials cited Friday’s cabinet meetings focused on further optimizing real estate policy to support the ailing real estate sector,” the RBC note read.
A ENG Commodity strategists also see potential in improving Chinese demand resulting from increased real estate completions, as well as support for copper from a weaker U.S. dollar resulting from potential rate cuts by the Federal Reserve.
ING, along with other experts, also saw support for copper in the energy transition away from fossil fuels.
“The demand side is expected to improve slowly this year, especially in the green energy sector,” the ING note said. “Copper is used in everything from electric vehicles to wind turbines and power grids.”
Now read: EXCLUSIVE: ‘A new era for mining’ as Nouveau Monde takes on China in graphite supply chain
Benzinga Mining is the bridge between mining companies and retail investors. Contact licensing@benzinga.com to get started!
The image was created using MidJourney artificial intelligence