Jefferies upgrades Anglo American to ‘buy’

"There are still risks related to the timing and value capture associated with Anglo's planned restructuring, especially in the case of De Beers, but we see value and potential positive catalysts in Anglo's shares following the pullback from this past summer's highs," Jefferies said.

Jefferies noted Anglo’s recent announcement of the sale of its met coal business in two separate transactions for a potential maximum value of $4.875bn, of which $1.0bn is contingent on coal prices and the restart of the Grosvenor mine.

Based on the bank’s met coal price forecasts, Anglo's commentary on the likelihood of an eventual Grosvenor restart, and its modelled interim coal cash flows, Jefferies estimated an NPV of $4.1bn for this business.

Separately, it noted that Anglo has begun to offload its controlling stake in Amplats, with an initial sale of 13.94m shares in September for about $400m - reducing its stake to circa 73.7% - and a second share sale of 17.5m shares earlier this week at a discount of about 9%, for $527m.

Anglo is expected to fully de-merge this business in 2025 by distributing the remaining shares to its own shareholders, it said, adding that "a de-merger of Amplats should be a positive catalyst for Anglo's shares".

Jefferies said Anglo will be well positioned to benefit from a rising copper price and a resilient iron ore price after its restructuring is complete.

"It should have a strong balance sheet and robust cash flow, enabling it to deliver large capital returns," it said. "In our base case, we do not assume BHP revisits its bid for Anglo in the near future, but BHP and other bidders may emerge as Anglo's restructuring progresses (2H25/2026)."

Essentially, Jefferies said it sees Anglo as a more attractive acquisition target without met coal and an even more attractive target without Amplats and De Beers.

It also pointed out that Anglo's shares have fallen by around 15% since it announced its restructuring plan in May.

Jefferies said its downgrade at the time was based on the risks associated with this restructuring, the removal of any acquisition premium in its shares and operational challenges.

"Although risks related to the restructuring remain, progress so far has been very good," it said, adding that operational performance has also improved.

"We see value in Anglo at the current price based on our updated sum-of-the-parts analysis (which we view as the most appropriate for a company in the midst of a breakup), and we upgrade our rating on AAL shares from hold to buy."

Jefferies said the new price target is roughly in line with its SoTP analysis and reflects progress on restructuring, operational improvements, free cash flow growth and near-term M&A potential.

At 0930 GMT, the shares were up 2.9% at 2,460p.