The post-Covid boom in demand for industrial metals seems to have dissipated in the past few months, to the detriment of a host of FTSE 350 mining stocks, including Anglo American (LSE:AAL).
The diversified global mining giant has seen its share price collapse by 22.95% in the last month, and 12.45% in the year to date, as central banks turn increasingly hawkish to counter ballooning inflation, particularly in energy markets where costs are soaring due in part to the war in Ukraine.
Holding out hope for Anglo
Despite the bearish shift in the mining industry of late, it would be wise to factor in long-term structural demand trends for the mined materials that will be key to powering the net-zero economy.
Anglo American produces a number of these strategically important minerals and metals, including copper, platinum group metals (PGMs), nickel and manganese, in addition to a staple of traditional metals like coal, iron ore and gold.
Since taking the reins from long-standing chief executive Mark Cutifani late last year, Duncan Wanblad has pledged to make further investments in projects targeting the above-mentioned critical minerals and deliver company-wide carbon neutrality by 2040.
The signs looked good earlier in the year, when Anglo posted record full-year earnings for 2021 and bumped up shareholder payouts to total $6.2bn for the year.
However, weak Q1 production figures and darkening projections for the global economy have dented investor confidence in Anglo and its mining peers on the London market.
While the prospect of a worldwide recession could certainly impact demand for industrial metals, particularly in ‘key commodities’-consuming China, this slowing demand picture is tempered by the world’s need to electrify major areas of the global economy – and fast.
Well positioned for the copper boom
Take copper for example. The red metal is required in significantly greater quantities in the making of an electric vehicle (EV), as opposed to an internal combustion engine car.
And with the majority of car-manufacturing companies now putting all of their eggs in the EV basket, the demand story for copper looks very rosy. This is without even considering soaring copper demand from the renewable energy sector.
In June, Anglo started commissioning its vast Quellaveco copper mine in Peru – a $5.3bn project that will produce 300,000 tonnes of copper per year for the first 10 years at full production.
And earlier this week, Anglo reported first production of copper concentrate from the sizeable project, which was delivered on time and on budget.
Having held a small shareholding in Anglo for several years, I will be looking to increase my stock position during the current dip, based on Anglo’s delivery of Quellaveco and its diversified commodity portfolio, which could prove to be a rewarding endeavour in the long term.