Anglo American Upgraded to 'Buy' by BofA on Teck Merger's Copper Potential

BofA Securities has upgraded its rating on mining giant Anglo American to "Buy," citing the significant value creation potential from its proposed merger with Teck Resources. The bank's analysts believe the deal would establish a premier copper-focused company trading at a compelling discount to its peers.

Valuation and Copper Focus Drive Upgrade

In a note to clients, BofA set a new price objective of 4,700 pence per share for Anglo American. This target is derived from a sum-of-the-parts valuation model that assumes the successful completion of the Teck merger and the realization of anticipated synergies.

The core of the investment bank's thesis is the creation of a copper powerhouse. On a combined basis, BofA estimates the new entity would trade at less than 7 times its projected 2027 and 2028 enterprise value to EBITDA (EV/EBITDA). This represents a significant discount compared to other major copper producers, which typically trade at multiples between 8 and 15 times, according to the BofA report.

Merger Synergies and Production Outlook

BofA models that the combined Anglo-Teck entity would have near-term copper production of approximately 945,000 tonnes per year. The bank highlighted significant long-term potential from operational synergies, particularly at the adjacent Collahuasi (Anglo) and Quebrada Blanca (Teck) mines in Chile.

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Analysts estimate that combining these operations could create a mining complex with an annual output of about 1 million tonnes. The merged company's portfolio would also include other major assets such as Quellaveco in Peru, Los Bronces in Chile, and Antamina in Peru, creating a globally significant copper producer.

Regulatory Hurdles Remain a Key Risk

The merger, which the companies expect to close by March 2027, faces a key risk in securing anti-trust approval from Chinese authorities. BofA noted that while the companies have stated talks are proceeding "as expected," any requirement for forced asset disposals to gain approval would make the transaction more challenging to complete.

The upgrade comes as Anglo American continues to streamline its portfolio by divesting non-core assets, including coking coal and nickel, with a sale of its De Beers diamond business also ongoing. BofA stated it does not believe these disposals would detract from the value perception of the combined, copper-focused company.