In a note to clients, the US investment bank’s analysts also raised their sector stance to ‘attractive’ from ‘neutral’, concluding that: “Miners are on their strongest footing for many years”.
They highlighted a robust commodity outlook, with a slightly softer China offset by stronger ‘Rest of the World’ growth, the companies generating double-digit free cashflow (FCF) yields having repaired their balance sheets - their most should achieve net cash positions (at spot) over the next two years, and while capital expenditure (capex) is slated to rise, they still see significant FCF available to further lift investor returns.
The analysts said: “While our economists expect inflation to rise, we believe this (and higher capex) can be a positive for commodity prices, as it contributes to rising cost curves, lifting marginal cost support.”
In a raised commodity deck, they added, Anglo American’s rating has been upgraded to ‘buy’ from ‘neutral’, with both BHP Billiton and Antofagasta upgraded to ‘neutral’ from ‘sell’.
In late morning trading, Anglo American shares were 2% higher at 1,765.8p, while Antofagasta added 2.1% at 934.2p, and BHP Billiton gained 1.1% at 1,452.8p.