JP Morgan has increased its fair value estimate for Anglo American PLC (LSE:AAL)'s copper division by 25%, now valuing it at £21 billion ($27 billion). This revision follows an in-depth review of production, costs, and capital expenditure projections extending to 2070.
In response to these findings, the American bank has raised its price target for AAL to £27.75 per share from the previous £26 per share.
This adjustment reflects the updated valuation of the copper division and a £3.2 billion ($4 billion) reduction in projected capital expenditures between 2025 and 2028. The reduction is primarily due to the halting of development spending at the Woodsmith crop nutrient project.
Anglo American's shares currently trade at a 13.6% discount to BHP's implied offer value, indicating a low likelihood that BHP will increase its offer to secure a deal.
JPM's models include both approved projects and potential growth options, resulting in a base case net present value (NPV) of £18.5 billion ($23.4 billion) and a growth scenario NPV of £23 billion ($29.2 billion) for the copper division. These figures compare to BHP's current implied offer of £23.7 billion ($30 billion) for Anglo American.
In a change of control scenario, the US investment bank estimates that Anglo American's value could rise by 30%, suggesting BHP's offer significantly undervalues the company.
The Wall Street giant's analysis reaffirms the intrinsic value of Anglo American, particularly within its copper division, supporting the board's stance against BHP's current offer.
In late morning trading, the shares were changing hands for £26.26 - flat on the day.