We have seen large cap mining equities converge so that premium valuations (Glencore) and historical discounts (Anglo American) have trade at narrower valuation multiples. Across all these equities, we see no significant reasons to stay away as FCF yields are high, dividends are growing, net debt is low and capex is contained and not expected to rise significantly. Risk averse management teams mean acquisition activity is limited (except Glencore) and still net sellers of assets as they optimize portfolios.
We increase target prices: Glencore £4.45 OP, Rio Tinto £43 OP, BHP Billiton £14.3 Neutral and Anglo American £15.5 Neutral.