Anglo American (OTCQX:AAUKF, OTCQX:NGLOY) reported strong Q1 production results, particularly in copper and coal. Copper production increased by 11%, supported by the Quellaveco mine expansion in Peru. The steelmaking coal division increased its output by 7%, driven by Capcoal and Aquila operations. However, diamond and Platinum Group Metals (PGMs) output decreased by 23% and 7%, respectively.
Despite lower earnings on the Anglo Diamonds division, the company has upside potential for copper price realization. On a long-term expectation, this is mainly supported by higher product demand. In the short term, Anglo will likely be facilitated by the closure of the Panama mine.
Anglo American’s financial results for FY 2023 were in line with estimates, showing an EBITDA of $10.1 billion and a net debt of $11.1 billion. The company’s DPS is set at $0.95 for 2024.
The company’s valuation is attractive, trading at 3.6x EV/EBITDA compared to a historical five-year average of 4.9x. Analysts confirm a buy rating, supported by an EV/EBITDA target of 4.5x.
Key risks include FX and commodity price changes, as well as financial, political, and operational risks. Ninety percent of the company’s mines are located in Emerging Markets such as South Africa, Chile/Peru, Brazil, and Botswana/Namibia.
Overall, Anglo American’s strong Q1 performance and attractive valuation support a buy rating. The company’s diversified earnings approach and upside potential in copper price realization make it a compelling investment opportunity.
