Berenberg lowers target price on Anglo American

Berenberg said Anglo American's Q3 results showed "promising consistency" at its Kumba site and in platinum group metals, but that issues at the copper operations in Chile and ongoing weakness in the diamond and PGM markets were likely to continue weighing on sentiment.

In Q3, Anglo American produced 209,000 tonnes of copper, 9,300 tonnes of nickel, 1.03m ounces 6E PGMs, 7.4m carats of diamonds, 15.4m tonnes of iron ore, 4.4m tonnes of steelmaking coal and 1.01m tonnes of manganese ore. Copper production was below Berenberg's estimates on lower grades and throughput at Los Bronces, linked to the impact of a fire that interrupted power supply for 16 days, alongside issues with ore hardness.

The German bank, which reiterated its 'hold' rating on the stock, expects unfavourable ore conditions to persist until the next mine phase, and thinks that Anglo American will need to undertake efforts to manage costs until it can access more areas of the orebody.

"FY 2023 copper cost guidance is maintained, but production guidance has been reduced to 830,000-870,000 tonnes (from 840,000-930,000 tonnes previously), all attributable to Chile where guidance is down to 520,000 tonnes from 530,000-580,000 tonnes previously due to the Los Bronces issues, as well as a geotechnical fault and heavy rain at El Soldado," said Berenberg.

"FY 2023 production and unit cost guidance have been maintained across the rest of the group. On corporate activities, the company notes that opportunities to unwind price-driven working capital builds from H1 in H2 have been limited, while inventory at De Beers continues to build (on weaker market sentiment)."

Reporting by Iain Gilbert at Sharecast.com