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UBS changed its rating of Anglo American because of the decline in the company’s share price. Ordinarily, a ‘buy’ rating is issued when a company has made a series of successful announcements, such as new products. However, in this instance UBS feels that Anglo American is undervalued.
Over the past year the company’s share price has declined 35%. This compares with a 21% decline for the mining sector as a whole. The Swiss headquartered bank has now increased its price target for Anglo American from 1500p to 1580p.
The firm’s latest quarterly update in October showed some positive signs. Iron ore production came in well below expectations, but this was offset by significant increases in copper and diamond production.
Chinese demand for minerals has stabilised since the most recent trading update from Anglo American, and this has been reflected in commodity prices. I feel the company’s fortunes are now turning.