Editor's note: This story has been updated to correct spelling by investment banking firm Jefferies.
Diversified miner Anglo-American NGLOY could be a promising buy as copper prices rise and the company looks to transform, financial magazine Barron's said in an article.
The company has underperformed its competitors. BHP Group BHP, Rio Tinto RIVER and Glencore ADR GLNCY due to operational issues, disappointing production prospects and a decline in the diamond and platinum group markets, according to the article, which was published on Friday.
Anglo said it is reviewing its assets, with the CEO Duncan Wanblad saying in a conference call that “nothing is off the table” in the asset review.
Anglo's exposure to South Africa, through stakes in platinum and iron ore operations, helped depress its share price due to the country's economic problems, crime and power outages, Barron's said. Meanwhile, analysts are not enthusiastic about the company's expensive fertilizer project in England.
The company's platinum and iron ore stakes could be spun off, while it would be positive for the shares if Anglo could bring in a partner for the fertilizer project. The article also speculated that the entire company could be sold to a competitor.
“Given its recent problems, Anglo American shares look cheap,” the article said. “Ultimately, Anglo American offers shareholders two ways to win. It either cleans up its business this year or it could find itself in the hands of a larger mining company that will develop its attractive resource base.”
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The Barron article cited Jefferies mining analyst Christopher La Femina like saying that if Anglo's situation does not improve, the company could attract a buyer or activist investor. He also said recoveries in the diamond and platinum group metals markets could help the company's shares.
Meanwhile, Anglo's best business is copper, but LaFemina said the company is not receiving credit for that metal because of other problems.
Morgan Stanley analyst alain gabriel recently upgraded Anglo to Overweight, highlighting the portfolio review, potential operational improvements and the company's exposure to copper, which has a strong long-term outlook due to limited new supply and growing demand from the energy industry green.
Others are also bullish on copper.
A erythrocytes The capital markets An analyst note on Monday said copper fundamentals are favorable, as inventories in Shanghai posted their first weekly decline since December, an indicator that destocking may have begun. That would create further supply shortages in the copper market as Chinese smelters said they would cut production amid falling concentrate supplies.
Meanwhile, demand from China, the world's largest copper consumer, could improve.
“We are also seeing constructive comments around China's stimulus and support for the property market: China's central bank said on Thursday that there is significant flexibility in monetary policy to implement additional cuts to the reserve requirement ratio for banks, while that state media cited cabinet meetings on Friday that focused on further optimization of real estate policy to support the struggling real estate sector,” the RBC note says.
A IN G The commodities strategist also sees potential for improving Chinese demand thanks to rising home completions, as well as support for copper from a weaker US dollar as a result of potential rate cuts by the Federal Reserve.
ING, along with other experts, also saw support for copper in the energy transition away from fossil fuels.
“Demand is expected to slowly improve this year, especially in the green energy sector,” the ING note reads. “Copper is used in everything from electric vehicles to wind turbines to power grids.”
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