RBC Capital downgrades Antofagasta, Anglo American
By Michele Maatouk
Date: Wednesday 15 Jan 2025
(Sharecast News) - RBC Capital Markets downgraded Antofagasta and Anglo American on Wednesday to 'underperform' from 'sector perform' as it took a look at European diversified miners.
The bank cut its price target on Anglo to 2,200p from 2,400p. It noted that Anglo was the standout outperformer in 2024, delivering on its restructuring plans, and said it retains a residual bid premium since BHP's takeover approach.
"However, we do not believe it is a bid target at the current share price (trading at 1% above BHP's final offer) and certainly not before it spins out Anglo Platinum (expected by mid-2025)," RBC said.
"Management face trickier restructuring steps from here in our view."
It also said that De Beers' demerger will likely have to be delayed, as diamond markets continue to deteriorate - prices are off 20% in past 12 months - and how to progress the much maligned-Woodsmith project if a partner cannot be found.
RBC maintained its 1,600 price target on Antofagasta. It said the company was "hitting peak capex" and that this would be a very bad time for a copper wobble as a result of a trade war.
"Copper COMEX move year-to-date of +8% looks overdone to us and we expect the stock to be dragged as it moves back to $4.00/lb," RBC added.
More broadly, the bank maintained its neutral sector view on the diversified miners, but said it sees plenty of opportunities in the months ahead as markets get to grips with a second Donald Trump term in the US.
"The world awaits to see how this new government fares against the practical realities of trying to implement Trump's seemingly implausible agenda and what will be the reaction from other governments and central banks," RBC said.
"Our base case is for more of the same that we saw in the first term. Markets have arguably become desensitised to the rhetoric and checks and balances hold."
RBC said it prefers cheaper, more defensive bulk plays over the "racier" copper equities.
"The bear case is that with the 'governing trifecta' and greater control of the courts, Trump will push through with the planned tariffs, sparking a trade war that puts a sharp break on global growth (ANTO most vulnerable, BHP/RIO the least)," it said.
"The bull case is that we are at peak enthusiasm for US equities and the dollar, and a significant unwind is to come. Funds should then flow to more commodity intensive developing countries, with higher beta stocks likely to outperform in this scenario."
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