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Anglo American Plc and the US listing of Rio Tinto could be offering the most value at present
Following recent production reports from heavyweight miners including BHP Billiton, Anglo American and Rio Tinto, we take a brief look at the respective production reports, outlooks and the mean of analyst target price estimates relative to current share prices across exchanges.
Anglo American Plc Q2 2017 (vs Q2 2016) and Outlook
Second quarter (O2) of 2017 saw a strong increase in output from both its diamond and iron ore operations (36% and 27% respectively). Copper production was more or less flat (down by 2%), while platinum production was marginally higher (5%). Metallurgical coal production contracted (19%) due to the impact of Cyclone Debbie.
Iron ore remains the most profitable commodity for the group and efficiencies at its Kumba operations have helped the increased productivity. The group has revised its forecasts for iron ore production this year higher.
Billiton Q4 2017 (vs Q4 2016) and Outlook
Production trends in the most recent quarter for Billiton were similar to that of Anglo American Plc, in that copper and metallurgical coal output were lower (6% and 27% respectively) with the latter also being affected by Cyclone Debbie, while iron ore production was the outperforming commodity (production up by 8%). Petroleum output declined by 7% in the quarter.
The group is optimistic that productivity in full year 18 will increase significantly in copper (30%), iron ore (4%) and metallurgical coal (13%), although petroleum production is expected to decline by 13%.
Rio Tinto Q2 2017 (vs Q2 2016) and Outlook
Unlike Anglo and BHP, Rio saw production in iron ore contract (6%) in the most recent quarter due to rail track maintenance. Output in hard coking coal was negatively impacted (down by 14%) by Cyclone Debbie. Production also contracted in copper (6%) and aluminium (1%). Titanium was the standout performer (up by 34%) benefitting from improved demand, while bauxite and thermal coal production improved as well (7% and 7%).
The group has revised its production guidance for both coal and iron ore lower into year end.
Analyst target prices
The below graph shows the various country listings of Anglo American Plc, BHP Billiton and Rio Tinto, with the mean of analyst long-term price targets for the companies (blue) relative to the last traded prices (orange) of these companies as of today (20 July 2017). The implied discounts between these two values are labelled red.
While the suggestion below is that for the most part, the various listings of these diversified miners are trading at marginal discounts to the mean of analyst price targets, the South African listing of Anglo American Plc currently offers a 9.25% discount, as US listing of Rio Tinto trades at a 10.52% discount to the mean of estimates.
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