Anglo’s South American samba
ANGLO AMERICAN A STRIKING MESSAGE from Anglo American CEO Cynthia Carroll’s upbeat outlook concerned where the group intends spending the US$45bn in capital expenditure earmarked to drive its growth plans. The bulk of it is going into copper and iron ore projects in South America. The precise level of expenditure – which Anglo won’t quantify – dwarfs the amount earmarked for projects in South Africa, which are mainly on expansions at Anglo Platinum and Kumba Iron Ore.
Carroll stated at last week’s presentation of the group’s interim results to endJune that Anglo would double its output of copper over the next five years and push up its iron ore production five times over the same period.
She added Anglo would grow its market share in all its major businesses as a result of its planned production growth in both raw materials, as well as nickel and metallurgical coal. It means Anglo will effectively be taking business from its peers BHP Billiton and Rio Tinto.
Judging by the continuing drop in Anglo’s share price, it seems those bullish predictions are being ignored by the market. Numis Securities rated Anglo as a “hold” following its results and is sceptical about Carroll’s claims that Chinese economic growth will compensate for slowdowns in the major Western economies.
Anglo’s price at current levels at around R378 is down 32% on its 12-month high of R557/share as the markets go through another bout of jitters. The worries are the familiar ones over the on-going fallout from the sub-prime mortgage crisis and whether the commodity boom is over – which has been called three times over the past three years by my reckoning. Every time resources shares have taken a hit and then recovered.
If you believe the commodity boom isn’t over, then this is a clear buying opportunity in Anglo and other resources stocks.