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Goldman Sachs upgrades miners to ‘attractive’ from ‘neutral’, concluding sector on “strongest footing for many years”

The US investment bank gave a boost to blue-chip miners, upgrading ratings for Anglo American PLC, Antofagasta PLC, and BHP Billiton
Mining truck
In a raised commodity deck, Goldman's analysts raised Anglo American’s rating to ‘buy’ from ‘neutral’

Goldman Sachs gave a boost to blue-chip miners on Wednesday, upgrading ratings for  Anglo American PLC (LON:AAL), Antofagasta PLC (LON:ANTO), and BHP Billiton PLC (LON:BLT).

In a note to clients, the US investment bank’s analysts also raised their sector stance to ‘attractive’ from ‘neutral’, concluding that: “Miners are on their strongest footing for many years”.

READ: Antofagasta nearly doubles 2017 dividend as it posts sharp rise in earnings

They highlighted a robust commodity outlook, with a slightly softer China offset by stronger ‘Rest of the World’ growth, the companies generating double-digit free cashflow (FCF) yields having repaired their balance sheets - their most should achieve net cash positions (at spot) over the next two years, and while capital expenditure (capex) is slated to rise, they still see significant FCF available to further lift investor returns.

The analysts said: “While our economists expect inflation to rise, we believe this (and higher capex) can be a positive for commodity prices, as it contributes to rising cost curves, lifting marginal cost support.”

In a raised commodity deck, they added, Anglo American’s rating has been upgraded to ‘buy’ from ‘neutral’, with both BHP Billiton and Antofagasta upgraded to ‘neutral’ from ‘sell’.

In late morning trading, Anglo American shares were 2% higher at 1,765.8p, while Antofagasta added 2.1% at 934.2p, and BHP Billiton gained 1.1% at 1,452.8p.

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