Anglo American PLC (LSE:AAL) could be forgiven for thinking it has bought itself a problem or two along with Teck Resources.
The Canadian miner’s latest operational update, released this week, was a laundry list of production snags and lowered expectations, but that may actually work in Anglo’s favour.
Berenberg, which upgraded the FTSE 100 miner to 'buy 'just a day before the update, reckons the gloomy tone from Teck “sets a low bar”.
In other words, it clears the way for Anglo to surprise on the upside once it takes control. The analysts say Teck has effectively “kitchen-sinked” its outlook, dropping most of its more ambitious targets in favour of a focus on stabilising operations.
The most serious issue lies at Quebrada Blanca, a copper mine in Chile, where Teck is struggling to manage its tailings, the waste material left after ore is processed.
Too much fine material is making it hard to dry the waste and use it to build up the dam walls, which in turn limits how much the plant can produce. That has forced Teck to trim its copper production guidance by around 50,000 tonnes a year between 2025 and 2028.
That setback feeds neatly into Berenberg’s broader bullish case for copper. With supply growth constrained, the metal’s long-term fundamentals remain strong.
Anglo, for its part, says Teck’s revised plan lines up with what it found during due diligence and that it has handled a similar tailings issue at its own Quellaveco mine in Peru. The bank thinks that reassurance should help calm nerves about the merger.
Berenberg’s model tweaks are minor, a slight reduction to 2027 earnings forecasts, and it keeps its price target at 3,000p, implying a modest gain from the current 2,900p.
Anglo trades on about eight times forecast 2026 earnings before interest, tax, depreciation and amortisation, or EBITDA, and 1.6 times net asset value.
After months of uncertainty about Anglo’s direction, the deal with Teck appears to be changing the story. If Teck has done the dirty work of resetting expectations, Anglo might just have the easier job of delivering against them.