In a note to clients, analysts at the Swiss bank pointed out that the FTSE 100-listed shares are up 14% in the year-to-date, supported by higher commodity prices, the restart of mining at Minas Rio in Brazil, and the transfer of Anglo shares by Volcan to Cairn India.
READ: Redburn cuts ratings for three UK miners on valuation grounds, highlights “serious flaw” in recent sector optimism
They said: “In our opinion, Anglo is the least attractive of the UK diversified miners as: 1) cash returns to shareholders are materially lower than peers; 2) volume growth is only in line with peers at ~3%pa (& materially worse on a per share basis after buy-backs); 3) the risk/ reward of Anglo's key commodities is skewed to the downside.”
The analysts said, in the near-term, they see headline risk going into the South African elections and with the potential for a material disruption at Minas Rio after the Brumadinho dam collapse tragedy.
They concluded: “We see Anglo's value as less attractive than peers, trading at ~5% FCF yield & >1x NPV. We trim De Beers EBITDA by 10% after diamond market review.”
In mid-morning trading, shares in Anglo American were 0.3% lower at 1,943.80p.
On Thursday, Anglo American was one of three UK miners downgraded by City broker Redburn on valuation grounds in a sector review in which it highlighted a “serious flaw in the optimism recent share price gains imply”.
Anglo American and BHP PLC (LON:BHP) were both cut to ‘sell’ from ‘neutral’, while FTSE 250-listed KAZ Minerals PLC (LON:KAZ) was downgraded to ‘neutral’ from ‘buy’.