UK-listed mining stocks climbed on the back of a surprise rise in manufacturing in China, boosting hopes that demand for commodities will remain strong from the world’s second-largest economy.
Top of the risers were Anglo American and Antofagasta, up 7.3% and 4.4% respectively, after they received an additional boost from UBS which upgraded both stocks to ‘buy’ from ‘neutral’.
On Anglo, UBS pointed out the stock is down 40% from the high in January 2023, underperforming Rio and BHP by around 28% due to weakness in platinum group metals (PGM) and diamonds, concerns about the Woodsmith mine in Yorkshire, and ongoing operational challenges.
But the Swiss bank believes the risk/reward is now attractive with Anglo to benefit from improving copper prices in 2024/25, resilient iron ore and met-coal prices, as well as recovering PGM and rough diamond prices.
In 2024, it expects operational performance to gradually improve and more than $1 billion of working capital to be released.
It also thinks the market now ascribes no value to Woodsmith.
On Antofagasta, UBS thinks the bottom-up investment case is attractive.
It expects a combination of organic volume growth and unit cost improvement to drive superior earnings growth compared to mining peers in the next 3-5yrs and believes earnings growth will drive attractive returns.
On top of this it believes the copper market is also close to a fundamental inflection point with the company one of the few 'lower risk' large cap global copper miners that offers leverage to copper price upside.
UBS has a 2,500p share price target for Anglo, and a 1,700p target for Antofagasta.