Last Update 06 Feb 26

Fair value Increased 14%

AAL: Deal Outcomes And Margin Assumptions Will Shape Future Risk Reward Balance

Narrative Update

The analyst price target for Anglo American has increased to £33.82 from £29.54. Analysts attribute this to updated assumptions around profit margins, a lower future P/E multiple, and recent Street research highlighting a £3,000 GBp target and an upgraded stance on the stock.

Analyst Commentary

Recent Street research has focused on higher valuation benchmarks for Anglo American and how these tie back to execution risks and potential growth in earnings. Here is how bullish and cautious analysts are framing the stock right now.

Bullish Takeaways

Bullish analysts point to the raised £3,000 GBp share price target as support for higher long term value, arguing that current pricing does not fully reflect updated margin and P/E assumptions.
The upgrade in rating in the latest research is seen as a sign that recent operational and portfolio actions may be tracking closer to analysts' expectations, which they see as supportive for earnings quality.
Some bullish analysts highlight that even with a lower forward P/E multiple assumed in models, their valuation work still reaches higher price targets, which they view as a cushion if growth is more moderate.
They also point to the consistency between prior and current research notes, with price targets moving from £2,800 GBp to £3,000 GBp, as a sign that the underlying investment case has been reinforced rather than completely re written.

Bearish Takeaways

Bearish analysts focus on the Neutral rating maintained in recent research, arguing that the higher target price alone does not remove concerns around execution, capital allocation, or cost control.
Some cautious views stress that the move to a lower future P/E multiple in models signals limited willingness to pay a premium for the shares until there is clearer evidence on earnings stability.
They also question whether current assumptions on profit margins are conservative enough, given potential swings in commodity pricing and input costs that could pressure future cash flows.
In their view, the gap between the raised target price and analysts' neutral stance underlines a balance of risks, meaning that valuation upside is closely tied to consistent delivery on operational and financial targets.

What's in the News

Anglo American rejected BHP's latest takeover proposal after reviewing the offer, with people familiar with the situation saying it was not viewed as superior to the planned combination with Teck Resources (Bloomberg).
BHP Group made a renewed takeover approach to Anglo American just months after Anglo agreed to merge with Teck Resources in an all share deal, with both companies declining to comment publicly on the approach so far (Reuters in Key Developments).
Anglo American and Teck Resources received approval from the Government of Canada under the Investment Canada Act for their planned merger of equals, which is aimed at forming Anglo Teck as a global critical minerals company headquartered in Canada (company announcement in Key Developments).
GRANGEX AB announced a commercial agreement with Anglo American connected to restarting operations at the Sydvaranger Mine in Norway, including the termination of a US$37,000,000 royalty at final investment decision and the creation of an ESG advisory committee to assess alternatives to fjord tailings disposal (company announcement in Key Developments).
Anglo American scheduled a special or extraordinary shareholders meeting for December 9, 2025, at the offices of Linklaters LLP in London, United Kingdom (company notice in Key Developments).

Valuation Changes

Fair Value: Raised from £29.54 to £33.82 per share, a move of about £4.28 that aligns with the updated analyst price target narrative.
Discount Rate: Trimmed slightly from 9.50% to 9.46%, signalling only a marginal adjustment to the risk being applied in the model.
Revenue Growth: Assumed annual revenue change shifted from a 6.28% decline to a 7.12% decline, suggesting a more conservative outlook for revenue in the latest assumptions.
Net Profit Margin: Increased from 10.37% to 21.30%, a large step up that materially lifts the earnings power embedded in the valuation work.
Future P/E: Reduced from 33.13x to 19.29x, indicating that the higher fair value is being supported more by margin and earnings assumptions than by a higher valuation multiple.

Strategic exit from legacy assets and focus on premium copper and iron ore position the company to benefit from electrification and decarbonization trends.
Operational efficiencies, ESG leadership, and major project successes drive stronger margins, sustained revenue growth, and enhanced access to capital.
Operational setbacks, asset divestment delays, high capital intensity, infrastructure bottlenecks, and weak diamond markets pose significant risks to profitability, cash flow, and balance sheet strength.

Catalysts

About Anglo American

Operates as a mining company in the United Kingdom and internationally.What are the underlying business or industry changes driving this perspective?

The company's accelerated portfolio simplification and exit from thermal coal, PGMs, and diamonds positions Anglo American to benefit disproportionately from the global push for electrification and decarbonization, concentrating future earnings on high-growth commodities like copper and premium iron ore, which are in increasing demand for renewable energy, EVs, and infrastructure-supporting structurally higher long-term revenue and improving EBITDA margins.
Multi-year investments in operational excellence-such as technology-led cost savings, digitalization, and asset optimization-are already delivering $1.8 billion of targeted cost reductions, setting up a higher-margin and more cash-generative profile for the re-shaped portfolio and enhancing long-term net margin and free cash flow resilience.
The ramp-up and operational success of major copper projects like Quellaveco, upcoming synergies from the Los Bronces-Andina joint plan, and iron ore premiumization (via UHDMS at Kumba and Serpentina at Minas-Rio) expand production optionality in future-enabling metals, underpinning above-peer volumetric growth and sustained increase in revenue over the next decade.
Industry-wide supply constraints (Chile water scarcity, resource nationalism) and long lead times on new copper/iron ore projects are likely to keep market balances tight, enabling established, high-quality producers like Anglo American to realize higher price realizations and improved long-term return on capital employed.
The company's leading ESG positioning, sustainable mining practices, and high-quality product suite (low-carbon iron ore, ethically sourced copper) allow it to capture premium pricing and preferred access to capital, supporting margin expansion and top-line growth as downstream customers increasingly demand "greener" metals.

Anglo American Earnings and Revenue Growth

Anglo American Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Anglo American's revenue will decrease by 6.9% annually over the next 3 years.
Analysts assume that profit margins will increase from -5.7% today to 10.2% in 3 years time.
Analysts expect earnings to reach $2.2 billion (and earnings per share of $2.04) by about September 2028, up from $-1.5 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.5 billion in earnings, and the most bearish expecting $1.4 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.4x on those 2028 earnings, up from -21.8x today. This future PE is greater than the current PE for the GB Metals and Mining industry at 11.7x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.59%, as per the Simply Wall St company report.

Anglo American Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Operational challenges and lower-than-expected copper recoveries at key mines like Collahuasi (due to metallurgical variability, water constraints, and delayed transition to new phases) highlight the risk of unpredictable production issues, which could suppress revenue and increase costs over an extended period.
The delayed or uncertain monetization of discontinued assets (e.g., De Beers, Steelmaking Coal, Valterra stake) creates uncertainty in debt reduction and liquidity, potentially impacting net margins, cash flow, and the capacity for capital returns if market conditions or buyer interest deteriorate.
Ongoing elevated capital intensity and cost overruns associated with portfolio simplification (e.g., Collahuasi development acceleration, Woodsmith progress) may compress net margins and strain free cash flow if planned cost savings and asset optimization are not fully realized.
Heightened exposure to South African rail and port infrastructure (Transnet) introduces risk of continued logistical bottlenecks or system failures, which could constrain volumes, force take-or-pay penalty payments, and thus negatively affect earnings and return on invested capital.
Persistently weak diamond market conditions and challenging exits from De Beers could result in lower sale proceeds and prolonged cash-neutral operations, dragging on overall group profitability and potentially weighing on the balance sheet during the company's transition.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of £22.708 for Anglo American based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £27.63, and the most bearish reporting a price target of just £18.81.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $21.5 billion, earnings will come to $2.2 billion, and it would be trading on a PE ratio of 23.4x, assuming you use a discount rate of 8.6%.
Given the current share price of £22.88, the analyst price target of £22.71 is 0.8% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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