Anglo American is Unique Among Global Megaminers

MORNINGSTAR ANALYSIS: Significant exposure to platinum and South Africa makes Anglo unique among global megaminers

Daniel Rohr, CFA 26 January, 2011 | 1:15PM
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Fair Value Estimate: 2,700p ¦ Uncertainty Rating: Very High ¦ Economic Moat: None

Thesis (Last updated 04/01/2011)
No factor will play a more important role in Anglo American's (AAL) 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 like 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.

Anglo is positioning its portfolio for a future that looks much like the decade just past, defined by continued strong growth from China and the rest of the emerging world. The company has jettisoned multiple noncore businesses ranging from paper to construction materials to gold and redeployed capital to segments better leveraged to emerging market growth. Platinum, copper, iron ore, and coal--each of which accounts for roughly 20% of Anglo's revenue (excluding operations the company plans to sell)--will play a leading role for Anglo.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Anglo American PLC2,717.00 GBP0.00Rating

About Author

Daniel Rohr, CFA  is a senior equity analyst at Morningstar.