Mining titan Anglo American (LON:AAL) is out of intensive care and has no need to sell off any more assets at fire sale prices said HSBC after a site visit.
As the share price has already recovered more than 400% this year, you could argue that’s pretty evident already.
But after the rollercoaster the miner has been on for the past two years, for Anglo’s management to say it just crosses the Ts and dots the Is, added the broker.
The mining rally has helped, with Anglo’s basket price of metals rising 40% in 2016 to date.
Net debt is now expected to fall below US$10bn by year end without any further disposals.
While the for sale signs still hang over the coal arms (met and thermal), iron ore and manganese operations, Anglo can now afford to wait and take advantage of the mining industry’s recovery.
Immediate issues are the reduction of the South African exposure to 30% of the portfolio.
This is the number one strategic priority for 2017, management said, though the country’s capital controls remain a major hurdle.
The site visit was to two of De Beers’ operations.
HSBC visited the Jwaneng diamond mine in Botswana, which the broker said is a world class operation earning cash margins of 90%.
Management’s view was that the diamond market is also near balance and liquidity, profitability and inventory issues in the mid-stream have improved materially.
The visit also took in Amplats’ platinum mine at Mogalakwena, which is also one of the world’s best said HSBC.
Even so, the shares have now outstripped HSBC’s target price of 1,100p and ‘hold’ is its investment rating.
Shares were down 1% at 1,238p today.