Already-impressive Anglo is getting even better

By Annunziata Rees-Mogg Dec 12, 2005

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Mining group Anglo American (AAL) has “an impressive history”, says Edward Hadas on Breakingviews.com. But if it is to have a future, it has to “embrace modern, shareholder-friendly culture”. So it is good news that it has announced a “large restructuring involving the reclassification of its gold and paper interests as non-core”, says Richard Prew, senior equities fund manager at Axa Investment Managers in The Business (tipping the shares at 1,633p).

The core businesses will now be platinum, diamonds, coal, base metals and iron ore – which the company is looking to expand organically and through acquisitions. “Anglo will then be a simplified mining company with cash,” says Prew, which should see investors re-rate the company’s value as it “sheds its conglomerate tag and becomes a more focused competitor to the likes of Rio Tinto and BHP Billiton”. 

All this is going down well with investors. HSBC has given Anglo a price target of 1,850p, while Dresdner Kleinwort Wasserstein has raised its target to 2,000p. In the recent past, suggests Hadas, poor operational performance has “cost investors dear”, so Anglo trades at a big discount to its peers in terms of price to net asset value. If it were able to close this gap, by increased restructuring, Anglo’s core mining businesses “would be worth £30.5bn”.

That’s equivalent to 2,100p per share – almost 30% up on today’s price. The even better news is that the company is committed to returning $1bn to shareholders in 2006: even if the share price doesn’t rise at the speed analysts think it should, there is still real upside for investors.

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Published in Tips & advice | More articles by Annunziata Rees-Mogg

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