Anglo American (AAL LN) & Glencore (GLEN LN) UK
Materials
With the Golden Age, when copious amounts of cash was returned to shareholders, now a distant memory, GMR examines where the diversified miners are, in terms of existing and prospective valuations, free cash flows, as well as exposure to preferred commodities. Averages are EV/EBITDA 5.2x, FCF Yield 7.2% and Dividend Yield 4.8% for 2025 on GMR forecasts (iron ore US$115/t, copper US$4.20/lb), with P/NPV10 a reasonable 1.0x. Cash + capex costs range from US$2.49/lb for BHP to US$3.89/lb for South32, on a copper equivalent basis. GLEN is upgraded to Buy, offering reasonable value with good FCF, with AAL reduced to Sell following share price run to £24.
Edition: 196
- 04 October, 2024
S&P/ASX Index Rebalance: High impact changes in March
Brian Freitas forecasts 1 change for the ASX20 Index (South32 replaces James Hardie Industries), 2 for the ASX100 Index (nib holdings and Technology One replace Star Entertainment and ARB Corp), 4 changes for the ASX200 Index (including Syrah Resources and PolyNovo gaining entry at the expense of Adbri and SmartGroup) and 9 adds / 6 deletes for the ASX300 Index next month. Passive trackers will need to trade over 3 days of ADV on 13 stocks, over 5 days of ADV on 9 stocks and over 10x ADV on 4 stocks. Shorts have been covering positions on stocks where there are expected to be passive inflows and increasing positions on stocks that are expected to have passive outflows.
Edition: 153
- 03 February, 2023
Materials
Hermosa Taylor project value halves - GMR’s NPV for Taylor falls from US$1,120m to US$540m. Capex has increased from US$800m to US$1,700m with first production pushed back another year to FY27. The blowout for Taylor also draws into question market expectations for Ambler given harsher operating conditions in Alaska. S32 faces the difficulty of renewing most its asset base while trying to add or maintain value in a competitive world for M&A. While the shares offer exposure to alumina, met coal and manganese, GMR believes there are much better options elsewhere.
Edition: 127
- 21 January, 2022
Miners forced to become green power companies?
David Radclyffe reviews how mines with little access to green electricity will need to build capacity themselves or via a third party in order to meet emissions targets. Some will come under increasing scrutiny; Rio Tinto, South32, Southern Copper Corp, Freeport-McMoRan and Anglo American could all face increased capital/opex exposure. The potential capital costs associated with self-generation are massive, so investors should keep a close eye for opportunities present in the partial or full outsourcing of infrastructure.
Edition: 122
- 29 October, 2021