Volcan Investments’ plan to buy a £2-billion stake in Anglo American (LON:AAL) shows that the next stage of the mining sector recovery is underway, analysts at Jefferies have said, as they retained their ‘hold’ rating on the blue-chip miner. The comments come after it emerged this week that the Indian billionaire behind Vedanta Resources was interested in building up a stake in the FTSE 100 company.
The news lifted Anglo American’s share price in yesterday’s session, with the stock closing 8.62 percent higher at 1,297.50p, and outperforming the blue-chip FTSE 100 index which added 47.31 points to close 0.64 percent higher at 7,415.95. The group’s shares have rallied more than 151 percent over the past year, and are up by some 11 percent in the year-to-date.
Jefferies reiterated its ‘hold’ recommendation on Anglo American yesterday, after Anil Agarwal’s Volcan Investments announced plans to make an investment in the miner’s shares of up to £2 billion.
“This equates to a 13-percent interest in Anglo,” the broker’s analyst Christopher LaFemina said, as quoted by Citywire. “Volcan has said it does not intend to make an offer to acquire all of Anglo American and therefore cannot do so for at least six months, as per the UK Takeover Code.”
LaFemina argues that the move means that the recovery in mining has further to go.
“Our expectation has been that the mining sector recovery would comprise three separate phases: phase one, which is mostly complete, was the balance sheet recap trade of 2016. Phase two, which is happening now, is the cashflow and capital returns phase,” the analyst explained, adding that phase three, which the bank had expected to start next year, included growth and M&A, and was possibly beginning now.