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RBC lowers Anglo share price target ahead of results

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Analysts at RBC Capital Markets have dropped their share price target for Anglo American on the London Stock Exchange ahead of the release of its second quarter production and first half financial results.

RBC moved the target down to £23 ($35.680) £26.50 per share, and has also reviewed its production and earnings forecasts for the company.

The target, at a 9x earnings per share multiple for 2012, is at the lower end of previous trading ranges, the analysts said, adding that this is at a discount to BHP Billiton and Rio Tinto.

“We have adjusted our model to reflect a delay in Minas Rio coming online – now assumed 2014 – and our Nickel valuation is reduced to reflect the Loma de Niquel concession ending in November,” the analysts said.

“We [also] forecast flat copper production this quarter of 168,000 tonnes; at Collahuasi, a continuing grade issue, a ball mill failure and a fatality in May have impacted output,” they added.

Production losses there have, however, been set off by the Los Bronces ramp up, the RBC analysts said.

Platinum group metals (PGMS) production is expected to go up, they said, but will remain weak for the period.

“We are forecasting a solid rise in production from PGMs after a weak [first quarter], although overall production is still weak when compared with previous levels,” the analysts said.

“We are forecasting a steady rise to 552,000 oz of platinum for [the second quarter], versus 403,000 oz in [the first quarter.”

The conclusion, therefore, is that the results will show a flat quarter from Anglo, according to the RBC analysts.

“Cooper production is weak following issues at Collahuasi; we are not expecting great growth from coal or iron ore; and growth in diamonds will likely be mitigated by weak rough pricing,” they said.

“The share has been overshadowed by a continuing PGM business unit review, delays at Minas Rio and production issues at Collahuasi. We expect these issues to weigh in the near term.”

Anglo American’s shares were trading at £20.45 each as of 15.36 BST on the London Stock Exchange on Wednesday, July 11, close to a 52-week low of £19.12 per share, seen at the end of June.

Claire Hack
chack@metalbulletin.com
Twitter: @clairehack_mb


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