Broker snap: Jefferies downgrades Anglo American to 'hold'

24th Aug 2012 09:54

Jefferies has downgraded its rating for mining giant Anglo American from 'buy' to 'hold' in spite of yesterday's announcement that it had resolved the 10-month dispute with Codelco over assets in Chile.As part of the agreement with Codelco, Anglo will lower its stake the Anglo Sur (AAS) copper assets from 75.5% to 50.1% in exchange for net after-tax proceeds of $1.55bn. Jefferies said: "While these transactions should be almost 7% EPS dilutive for Anglo and should increase Anglo's EV/EBITDA multiple by an average of almost 5% for the 2013-2015 period, we do consider the resolution of this dispute to be a net positive for Anglo American."However, the broker highlights concerns about delays and capex overruns at Anglo's large Minas Rio iron ore project in Brazil. "While Anglo's recently revised guidance is that Minas Rio would first deliver ore in 2H 2014, we do not expect first shipment until 2016. Further delays at Minas Rio would likely be viewed negatively by investors, but may be inevitable."Meanwhile, problems about cost inflation and weak end markets have led to margin compression for Anglo Platinum and other South African platinum inures.The broker has retained its 2,200p target price for the stock."We are concerned that newsflow relating to the company will be negative in the near/medium term, and we see much better risk adjusted value elsewhere in the sector."By 10:26, shares were trading 2.68% lower at 1,889.5p.BC