Anglo American plc (LON:AAL) is “well positioned” in the current commodities cycle, according to analysts at Goldman Sachs, however, the bank downgraded the firm to ‘neutral’ from ‘buy’ on valuation grounds following a recent rise in the shares.
The US bank, which also trimmed its target price to 2,200p from 2,300p, said the blue-chip miner’s current share price level, which has risen around 26% after hitting a six-month low in August, better reflected their forecast returns profile and that the risk-reward was now “more balanced”.
“With the strength of [platinum group metals] prices (palladium >US$1,700/oz, rhodium c.US$5,000/oz) and known weakness in diamonds…we now see limited scope for upward revisions to 2020 consensus EBITDA expectations”, Goldman said.
They added that there is a risk that Anglo may not be able to secure an operating licence to expand a tailings dam at its Minas Rio iron ore mine in Brazil, a requirement for the site to reach full capacity.
Without the licence, analysts said Minas would run “at a reduced capacity” in 2020 which would be negative for the share price.
Despite the somewhat neutral assessment, Anglo’s shares rose 1.7% to 2,106.1p, a 4.3% discount to Goldman’s new target price.