Potential wage deal good for Anglo but Credit Suisse still cautious

13th Jun 2014 12:13

Credit Suisse has maintained a 'neutral' stance on Anglo American but has said that the potential wage settlement with employees at its platinum operations in South Africa would be a positive for the company after 20 weeks of strikes.Partners Anglo (operating as Amplats), Lonmin and Impala on Thursday agreed an informal deal with the Association of Mineworkers and Construction Union (AMCU) to take a new pay deal directly to employees.While no details were given regarding the offer, Credit Suisse reckons that "some form of middle ground must have been reached to break the deadlock meaning the companies have improved on their previous offer of a 7.5-10% [increase in wages]".The bank explained the importance of the offer, saying that the companies' thin margins mean that they have "very limited capacity to shoulder double-digit wage increases in the current platinum environment". The level of increase will have a bearing on Amplats' ability to divest marginal assets further down the line, it said."Our recent downgrade [from 'outperform' to 'neutral'] was driven by near term earnings concerns (greatest earnings risk from the peer group), with the 15% return on capital employed target largely priced in. "This remains the case, but a resolution to the strikes will be a medium-term positive to Anglo as it opens up the 'next phase' of restructuring which, in our view, will involve divestment of higher cost assets."Anglo's shares were down 1.1% at 1,402p by 12:21.BC