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Miner Anglo American could become takeover target, say analysts

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The mining company Anglo American could become a takeover target after warning of weaker than expected production, analysts believe.

Shares in the London-listed company rose 1.5% to £18.29, valuing the business at £24.5bn, after a pummelling last week that left it exposed to a potential bid. Anglo’s stock is down nearly 45% this year, and the shares suffered their biggest one-day fall since the financial crisis on Friday when the miner slashed its production outlook.

Anglo, which is among the 20 biggest companies on the FTSE 100, said difficulties at its mines in Peru and Chile had led to the cut in its copper production forecasts. The company is also listed in Johannesburg.

Brokers at the brokerage firm Jefferies and the banks Barclays and RBC have cut their target price for the stock in response.

Analysts noted that £30bn had been lost from the value of Anglo, since Duncan Wanblad, a company insider, took over as chief executive from longstanding boss Mark Cutifani in April 2022.

Jefferies analysts have said Anglo may become “involved in the broader trend of industry consolidation” and suggested mining rival Glencore could be a potential suitor.

Glencore, which was described as the “millionaires’ factory” when its 2011 float enriched a clutch of senior executives, is also listed on the FTSE 100, valued at £54bn.

The Swiss commodities trading firm took over Xstrata, a company that made an abortive attempt to merge with Anglo in 2009. Xstrata was later subsumed into Glencore, with its colourful boss Mick Davis, known as “Mick the Miner”, banking nearly £75m from the takeover.

This year, Glencore completed a significant takeover, buying the coal assets of the Canadian company Teck to combine with its own coal business, before a planned spin-off.

Anglo notched up profits of $4.5bn (£3.6bn) in 2022, but issues with iron ore and copper production have hit performance. It is in the process of cost-cutting, which has lead to $500m of savings, including through job losses.

The company also owns the diamond miner De Beers, which has experienced a downturn in the gems and platinum sectors during a period of weak demand and too much stock on the market.

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In February, Anglo took a $1.7bn hit on its Woodsmith project to produce fertiliser nutrients in the north east of England.

Andrew Keen of the research group Edison said Anglo’s problems were related to both logistical issues at mines in Peru, Chile and South Africa, as well as “operational underperformance”.

He said Wanblad had “a long history with the business, particularly in base metals that the company announced a drastic cut in production of on Friday, leaving investors dismayed”.

Keen said Xstrata’s 2009 merger attempt had failed because shareholders had not been offered a premium. “Any potential inquirer looking at a premium bid may see their offer gain more traction this time around,” he said.

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