Investec talks up diamond potential at Anglo American

4th Nov 2014 10:17

Following an investor seminar this week on Anglo American's De Beers division, Investec reckons that the market will begin to recognise the potential value hidden in the diamond business.The broker has maintained its 'buy' rating and 1,588p target price for Anglo, but said that the improved disclosure on operations given at the meeting on Monday will help investors to better assess De Beers.Investec said that the company provided more details on the overall portfolio, making ownership structures clearer and outlining the long-life nature of various mines, including carat values and grades. The broker hailed this as a "major step forward" which will "enable a better understanding of the long-term workings of the business"."Most notable is the potential value of the trading side of the business, which we believe masks the true profitability of the group as a whole," it said.De Beers was also said to be adamant that the recent falls in rough diamond prices were only seasonal and to be expected. With the upcoming holiday season likely to free up liquidity through the supply chain, near-term pressures on prices should alleviate and prices should begin to rise, Investec said."In our view, De Beers represents the best asset within Anglo's current portfolio, which we believe the market will now begin to recognise," the broker said, adding that De Beers could represent over $20bn (£12.5bn) of value within Anglo.Anglo American was trading 0.6% higher at 1,324p by 10:52 on Tuesday, giving it a market capitalisation of £18.4bn.