MINING group Anglo American’s share price last year recovered some of the losses it and its peers suffered when commodity prices plummeted in 2011, but it remained to be seen if the shares could recover to the pre-2011 levels, Ashburton Investments senior portfolio manager Wayne McCurrie said yesterday.
The commodity prices declined amid economic uncertainty and slowing economic growth, prompting Anglo American to reduce operating and capital costs in order to preserve its balance sheet. Anglo American has said that its focus was on its core portfolio of diamonds, platinum group metals and copper.
“When the commodities fell, Anglo American’s share price also collapsed drastically. It fell from approximately R350 to about R50 in 2011. While it has risen to about R220, it is nowhere close to the levels before 2011. Anglo American has previously said that a combination of subdued demand and, in some instances, oversupply of commodities had placed significant downward pressure on prices.
The weak demand for commodities triggered production cuts to stimulate a price recovery. “When commodity prices fell drastically, global players decided to cut back on production. As a result, prices for commodities such as iron ore have risen. Iron ore has improved from $40 to $80 (R1 080) a ton.
“So the Anglo American share price has improved, because the prices of underlying commodities have improved. Can the share price rise to pre-2011 levels. Who knows? Personally I do not think so,” he said.
He said the market conditions had strained Anglo American’s balance sheet, hence the decision to sell off some assets. “They were desperate,” he said.
The Anglo American share price was down 0.18 percent to R220.05 at the JSE close yesterday. – Siseko Njobeni