Jefferies expects solid recovery at Anglo American

The broker claimed that negatives are mostly priced into the stock and that consensus expectations "seem too negative", and said that the company "is at a turning point now".

Jefferies said it expects "significant relative outperformance for Anglo's shares over the course of this year and beyond", as it kept a 2,500p target price, indicating around 40% upside from current prices.

Anglo's share price tumbled around 40% over the course of 2023 after a tough year, as the miner cut production guidance due to operating issues and had to deal with weakness in the diamond and platinum group metals (PGM) markets. Free cash flow was also negative and the ongoing heavy investment into the Woodsmith polyhalite fertiliser mine is "unhelpful", Jefferies said.

Nevertheless, the broker said: "The path to recovery for Anglo after a difficult 2023 includes meeting recently rebased guidance, pursuing portfolio strategies to unlock value, and benefiting from: 1) increased exposure to copper (nearly 40% of Anglo's NPV), 2) cyclical upside in diamonds and PGMs, and 3) ongoing strength in iron ore and met coal prices.

"The Anglo recovery will take time to fully play out. But it is coming, in our view."

Jefferies added that, even if Anglo is unable to improve operationally over the coming year, "then we see a risk that an activist gets involved or another miner approaches it for a merger". The broker said: "Anglo has a portfolio of world-class assets with operational upside. The value of these assets is not fully reflected in its current share price, based on our analysis."