Broker snap: Credit Suisse pares forecasts for Anglo American

30th Jul 2012 10:53

Credit Suisse has lowered its price target for diversified miner Anglo American from 2,500p to 2,200p after slashing its forecasts on the back of lower volumes within copper and iron ore.The broker said that Anglo is expected to lag peers on volume growth over the next two years (2-3% per annum in 2013/14); "we believe the market continues to underestimate the potential margin squeeze in 2013 and beyond."Earnings per share (EPS) estimates for 2012, 2013 and 2014 have been reduced by 7%, 3% and 13%, respectively. Credit Suisse's 2013 EPS forecast is now over 30% below consensus estimates with a further 30% (versus Credit Suisse) downside at spot metal prices."Within platinum the bull case of a tightening market is simply not happening, and we believe the market may remain in surplus for the next 18 months (without substantial production cuts which will be difficult to achieve)."What's more, Minas-Rio, Anglo's iron ore mining project in Brazil, is still at least two years awe from commissioning with potentially over $3bn in capital expenditure still to go. Credit Suisse now models a significant over-run to $6.5bn (from $5bn) and first ore in 2015."The project is now likely to deliver first tonnes at a time when the other majors are also delivering large (lower risk) volumes into the seaborne market. Any efforts to monetise the asset through a part sale (considered in the past) would be a positive in our view, however, operational problems may limit interest."With the valuation being "far from compelling", the broker maintains its 'hold' rating on the stock.By 10:52, shares were down 0.26% at 1,889p.Bc