Stock of the Week: Anglo American

VIDEO: Senior editor James Gard is back with another stock of the week, this time looking at mining major Anglo American

James Gard 25 April, 2022 | 9:24AM
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James Gard: Welcome to Morningstar. Mining companies have been busy updating investors with production reports in the last few days. This week we’re going to look at Anglo American, which is the biggest producer of platinum and diamonds in the world. It also mines coal and copper, both of which have been in high demand this year. So the company has just released its production figures for the first quarter of this year, and they triggered an immediate fall in the share price. Investors reacted to a drop in output among its key commodities in a time when producers want to be taking advantage of soaring prices. Copper, iron ore and coal output was down year on year. There were a range of contributing factors, including bad weather, staff absence due to Covid, and other operational issues. Diamond production was a bright spot, however, with production 25% higher in the first three months of the year compared with a year ago.

The share price fall comes after a 20% rise so far this year as mining companies returned to favour in a time of rising prices and commodity shortages. Shares are up 230% since their nadir in March 2020. This leaves them overvalued, according to Morningstar analyst Matthew Hodge, who assigns them a fair value of £31.50. Still, he thinks that Anglo American is better positioned than many of its peers – platinum and diamonds are in high demand, particularly in China, where rising incomes are being spent on jewellery and cars. For Morningstar, I’m James Gard.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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James Gard  is senior editor for Morningstar.co.uk