Anglo insiders ride the super-cycle

It is telling that Anglo American’s (AAL) chief executive Mark Cutifani recently stated that the mining group will take a measured line on investments, despite recent hype over a new commodity super-cycle.

As well he might. One of the abiding memories of the last period of record prices was the profligacy of executives from some of the world’s largest resource companies.

Perhaps the most infamous deal was attributable to Tom Albanese, the then newly appointed chief executive of Rio Tinto (RIO), who decided to mark his elevation to the top job in 2007, by snapping up Alcan, a Canadian aluminium manufacturer, for around $38bn (£27.3bn) – at the time, the world’s largest ever mining deal. Rio effectively created a new – though unsustainable – top in the market, and was eventually forced to write-down roughly two-thirds of the original purchase price.

Cutifani is clearly not interested in going down that road, even though demand prospects for Anglo’s copper, platinum and diamonds are wholly encouraging. So, it is doubtful that we will see a repeat of the imprudent kind of deal-making and one-upmanship which sapped strength from the miners’ balance sheets, thereby imperilling their ability to return capital to shareholders.

Yet with all the talk over the coming super-cycle, is now a good time to offload some of your resource holdings? Two of Anglo’s insiders Didier Charreton and Bruce Cleaver – the latter the chief executive of the DeBeers subsidiary – did just that, collectively hiving-off around £3.3m worth of shares following publication of the mining heavyweight full-year figures for 2020. We wouldn't follow suit – with a potential sizeable increase in production volumes over the next three to five years, we think Anglo is well positioned as anyone to exploit positive pricing trends. Buy at 2,913p.

Last IC view: Buy, 2,949p, 25 February 2021