Analysts believe that the mining company Anglo American may become a target for a takeover after it warned of lower than expected production.
After a brutal week, the shares of the London-listed firm rose by nearly 1% on Monday to £18.17, valuing it at £24.3bn.
Anglo’s shares are down almost 45% in this year. On Friday, the company slashed production forecasts and suffered its biggest one-day drop since the financial crises, which is one of the twenty largest companies on the FTSE 100 , said that difficulties in its mines located in Peru and Chile led to a reduction in copper production estimates. Anglo’s shares are also traded in Johannesburg.
In response, brokers at Jefferies, Barclays Bank and RBC and Barclays have reduced their target prices for the stock.
Analysts reported that £30bn has been lost in the value of Anglo since Duncan Wanblad took over from Mark Cutifani, who had served as CEO for many years, in April 2022.
Analysts at Jefferies have suggested that mining rival Glencore may be interested in Anglo.
Glencore is listed on FTSE 100 and valued at £54bn. It was described by some as “the millionaires’ factory”, when its 2011 float enriched a number of senior executives.
The Swiss commodities trading company took over Xstrata. This was a company which had made an unsuccessful attempt to merge with Anglo back in 2009. Xstrata, a company that attempted to merge with Anglo in 2009, was subsumed by Glencore. Its colourful boss Mick Davis, , also known as “Mick The Miner”, , , reaped nearly £75m from the takeover.
Glencore has completed a major takeover this year. It bought the coal assets from the Canadian company Teck, to be combined with its coal business before the planned spinoff.
Anglo made $4.5bn in profits (£3.6bn), but production issues with copper and iron ore have affected performance. The company is currently in the process to cut costs, which has resulted in $500m of savings.
De Beers is also owned by the company. During a period when demand was weak and there were excess stocks, the sector of gems and precious metals experienced a decline.
Anglo suffered a $1.7bn loss in February on its Woodsmith Project to produce fertiliser nutrients north-east of England.
Andrew Keen, of the research group Edison, said that Anglo’s issues were due to “operational underperformance” and logistical problems at mines in Peru Chile South Africa.
He said Wanblad has “a long history in the business”, especially in base metals. The company announced a drastic reduction in production on Friday to the dismay and disappointment of investors.
Keen stated that Xstrata’s 2009 merger effort failed because shareholders were not offered a premium. He said that a potential inquirer who is interested in a premium offer may find their bid gaining more traction.