Is Anglo American the Most Undervalued Major Miner?

July 17, 2009



Anglo American (AAUK) is more than just a major miner--it's one of the most diversified metals and minerals holders in the world. With such a wide range of valuable assets, owning shares of AAUK would be a great addition to any portfolio.

Copper, nickel, and zinc rake in a significant portion of the company's profits. As China, India, and Brazil continue to develop at such a fast pace, the demand for these base and industrial metals will inevitably increase.

Make no mistake; the company is still a big player in the precious metals sector. Although it recently sold its stake in major gold miner, AngloGold Ashanti (at the same time gold was trading above $ 950) Anglo American is still exposed to platinum. Through its subsidiary, Anglo Platinum, it's the world's largest platinum producer supplying roughly 40% of all the world's platinum.

In addition to platinum, Anglo American owns a 45% interest in DeBeers, making it one of the largest holders of diamonds in the world. The company's mines are located in some of the most mineral-rich regions on every inhabitable continent and to top it all off, Anglo American has a $ 10 B annual profit.

Like other platinum stocks, AAUK's price is well below highs set a year ago. At under $ 1,200 platinum prices are also a far cry from last year's high of $ 2,280.

The good news is that since hitting a multi-month cyclical low in April, shares of AAUK rose 80% and we've seen fair reversal signals. If the reversal is confirmed, we expect AAUK's prices to climb back to the $ 25-30 range by year's end--near last year's highs.

Presently, the company is in merger talks with smaller diversified miner, Xstrata plc, which is desperately trying to create a mega mining company and increase its platinum reserves. Anglo American rejected the proposal citing an underestimation of its real value. AAUK is attracting quite a lot of attention as investors finally wake up to the realization that it is sorely undervalued.


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