Sign up UNITED KINGDOM
Proactive Investors - Run By Investors For Investors

Anglo American between a rock and a hard place

Anglo American between a rock and a hard place

Anglo American (LON:AAL) has made two big strategic moves in the last fortnight but it is a long way from being out of the woods, JPMorgan argues.

On January 8 the group unveiled its new chief executive officer (CEO), Mark Cutifani, who starts on April 3, while on January 15 its Amplats subsidiary published a strategic review of its platinum business, which caused uproar in South Africa as it flagged 14,000 job losses.

JP Morgan (JPM) considers Cutifani “the stand out candidate for addressing Anglo American’s long term underperformance” relative to peers.

JPM notes Anglo has lagged BHP Billiton (LON:BLT) by 413% and Rio Tinto (LON:RIO) by 134% in the last ten years, so Cutifani has a lot of catching up to do.

Unfortunately, in JPM’s view, the shares are set to be weighed down this year by the difficulty and fall out of implementing essential operational change in South Africa.

Anglo American derives most of its earnings from South Africa; JPM’s numbers project 54% of Anglo American’s full-year earnings will come from South Africa in 2013.

“We reduce our Dec-13 target price to £16.30/shr (£16.70/shr previously) and reiterate our underweight [rating],” JPM’s Frasier Jamieson said.

Anglo American releases a trading update this Friday in which it will report fourth quarter production data.

Citigroup has forecast “a disappointing 15% drop in copper equivalent volumes year-on-year,” noting most operations have been plagued by labour issues, declining grades and/or weak markets.

Citi’s key forecasts are: equivalent refined platinum down 50% year-on-year to 292,000 ounces; diamonds -16% to 5.5mln carats, copper -9% to 154,700 tonnes, iron ore -14% to 10.7mln tonnes.

John-H.jpg


Register here to be notified of future AAL Company articles
View full AAL profile

Anglo American Timeline

Related Articles

Gold pour
April 28 2016
The gold miner's renaissance continues with two game-changing deals, while it said it is in advanced discussions with its lenders about new terms for its lending facilities
shutterstock_16417633.jpg
March 22 2016
Last year, the company produced 126,000 tonnes of rutile and 37,600 tonnes of ilmenite
Galileo---Gabbs.jpg
March 17 2016
Galileo Resources has gold in Nevada and copper in South Africa, and a management team with a track record of success

© Proactive Investors 2016

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.