UBS has repeated a 'buy' rating for UK-listed miner Anglo American PLC (LSE:AAL), and raised its price target, ahead of its anticipated merger with Canada's Teck Resources Ltd (TSX:TECK.B), describing the deal as a material opportunity to reposition the group as a copper-focused miner.
The Swiss bank moves its target to 4,000p from 3,500p.
Analysts estimate around 80% of combined earnings (EBITDA) will come from copper by 2027 on a pro-forma basis. Specifically, they expect copper volumes to grow around 25% to 1.4 million tonnes by 2030, supported by operational improvements at Collahuasi, Quebrada Blanca and Los Bronces mining operations. Additional upside to around 1.7 million tonnes is, meanwhile, seen in the early 2030s through expansion projects and life extensions.
UBS claims the combined firm 'Anglo-Teck' trades at a discount, with the pro-forma group on approximately 7.00x 2027 EV/EBITDA versus 9.00x for copper peer Antofagasta.
UBS values Anglo at 8.5x, implying rerating potential as merger synergies are delivered and the company transitions from a diversified miner to a copper equity.
“In our opinion, there are 3 key elements to the investment case: commodity mix, self-help/growth, and re-rating potential,” UBS said in a note.