Among the key news on UK stocks, Anglo American PLC (GB:AAL) halted production at its Grosvenor mine in Australia following an underground fire incident on Saturday. The company stated that the recovery efforts could take several months due to the extensive damage. AAL shares fell 2.62% as of writing.
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Anglo American is a prominent producer of platinum and has a product lineup that includes diamonds, copper, and iron ore. The Grosvenor coal project is an underground coal mine operated by Anglo Coal Australia, a subsidiary of Anglo American.
Anglo American’s Coal Business Aspirations
Anglo American’s steelmaking coal business is expected to produce between 15 and 17 million tonnes in 2024. Grosvenor is expected to add 3.5 million tonnes to the company’s total production guidance. For the first half, Grosvenor will contribute around 2.3 million tonnes to the total production of 8 million tonnes of steelmaking coal.
However, the company stated that it will issue revised guidance as soon as more information is available.
A Dent in Anglo’s Restructuring Plan
Analysts view this recent fire incident as a dent in Anglo American’s restructuring plan. In May 2024, the company announced a plan to divest its diamond, steelmaking coal, nickel, and platinum operations in a major restructuring move amid takeover bids from Australian rival firm BHP Group Limited (AU:BHP). In May, BHP abandoned its $49 billion takeover bid for Anglo after six weeks of chase.
As part of this restructuring, the company plans to sell its coal mines in Australia, separate its platinum unit, and either demerge or sell its DeBeers diamond business.
Analysts from J.P. Morgan feel that the fire incident could adversely impact the timeline and execution of Anglo’s corporate restructuring plan.
Meanwhile, analysts at Jefferies think that this incident could hurt the company’s Australian metallurgical coal business. According to Jefferies, Grosvenor represents approximately 30% of the $4.5 billion value it assigns to Anglo’s metallurgical coal business.
Jefferies expects the mine to remain offline until mid-2025. It cautioned that the fire incident could significantly disrupt the valuation of the potential sale of Moranbah North and Grosvenor.
Are Anglo American Shares a Good Buy?
According to TipRanks’ consensus, AAL stock has been assigned a Moderate Buy rating, backed by eight Buys, six Holds, and one Sell recommendation. The Anglo American share price target is 2,868.98p, which is 18.16% above the current trading price.
