Anglo American PLC

The stable outlook on Anglo American reflects our view of the limited upside, due to the sovereign rating on South Africa, but at the same time, limited downside given the comfortable financial headroom. Under our base-case scenario, we forecast an adjusted funds from operations (FFO) to debt will be above 100% (using proportionate consolidation) in the coming years. We continue to view 60% as commensurate with the current rating under midcycle conditions, and 45% for the bottom of the cycle. As of today, prices for some commodities in Anglo American's portfolio, such as copper and iron ore, are currently traded at the top of the cycle. We see limited downside to Anglo American's stand-alone credit profile in the next 12-24

...We expect another record year of earnings in 2021, thanks to strong iron ore, copper, and platinum group metal (PGM) prices, allowing Anglo American to maintain ample headroom under the rating as it continues with its growth projects. Tight iron ore supply and a better-than-expected recovery in China pushed iron ore prices to unprecedented levels of more than $170/ton, compared with the already elevated average price of slightly more than $100/ton in 2020. Under our price working assumption of $130/ton for the rest of the year, we expect Anglo American's underlying EBITDA to be $17.0 billion-$17.5 billion in 2021, with additional upside if iron ore and copper prices remain at current levels (as of early April the commodities were traded around $165/ton and $9,000/ton ). With very low debt level (reported net debt of $5.6 billion as of Dec. 31, 2020), and relatively sizeable growth capex in the coming two years, we expect Anglo American to allocate record high returns to its shareholders....

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