In a note on European mining equities on Friday, Goldman maintained a ‘buy’ rating on the stock, saying: “Our top idea remains Anglo American — it is one of the few quality companies for which we expect positive earnings momentum this year, especially as Minas Rio returns.”
READ: Anglo American restarts operations at Minas-Rio iron operation in Brazil after discovery of two pipeline leaks
Anglo halted production at the Brazilian Minas Rio iron ore mine last March after two leaks at a pipeline that channels slurry more than 500 km from the mine in Minas Gerais state to a port in Rio de Janeiro state.
The company restarted operations in December and Goldman expects this should help earnings (EBITDA) in 2019 by 7-8%.
"This, coupled with an improved portfolio that can generate cash even at a lower commodity price deck, makes Anglo an attractive stock, in our view," the investment bank said.
Anglo generates more than 50% of its earnings from bulk commodities, iron ore and coal. Investors remain bearish on these commodities but Goldman thinks it is notable that iron ore and met coal prices remained strong in recent months despite trade tensions between China and the US that have hit base metal prices.
However, Goldman lowered its target price on Anglo American to 2,200p from 2,250p to reflect changes to its 2019 estimates.
"Our estimates change as we update for our commodities team’s recent price forecast changes and also mark to market for fourth quarter commodity prices and foreign exchange," it said.
"Key risks to our view include lower commodity prices, stronger FX (ZAR/AUD vs. USD), and political risk associated with political and fiscal changes in South Africa."
In late morning trading, shares rose 1.7% to 1,820p.