Third-quarter production numbers for iron ore and copper, currently Anglo-American's (AAL) most profitable segments (accounting for roughly three quarters of operating profits in the 12 months to June 30), were a mixed bag, with sequentially stronger iron ore output offset by decidedly weaker performance in copper. We expect stronger production numbers from these key segments in the coming quarters as critical growth projects achieve commercial production.
No factor will play a more important role in Anglo American's future than the economic trajectory of emerging markets. For the past decade, emerging market economic growth--and the demand for industrial commodities that accompanies it--has pushed prices for copper, iron ore, and coal to record highs and the profits of miners such as Anglo to previously unheard-of levels. This has also engendered a dramatic shift in the underlying sources of volatility facing miners. Where commodity prices would once shudder at the release of weak industrial production numbers from the United States, Germany, or Japan, Chinese statistical releases now command the market's attention--and rightfully so, given China's pre-eminent share of consumption for most industrial commodities.
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