LONDON (ShareCast) - UBS (Berlin: UBRA.BE - news) has reiterated its 'neutral' rating and 1,860p target price for mining giant Anglo American (LSE: AAL.L - news) saying Tuesday's announced shake-up of its platinum division is a necessary step.
Anglo American Platinum, otherwise known as Amplats, said that it would reduce platinum production by around 250,000 ounces per annum, equal to 4% of global supply, by mothballing four loss-making Rustenburg shafts, selling its Union mine ("at the right time") and closing two concentrators.
The restructuring was met with a public backlash in South Africa, causing shares to drop 3.7% yesterday afternoon, as politicians and unions alike expressed their disapproval of the plans which affect some 14,000 jobs. The stock was down a further 4.3% this morning, trading at 1,877p, compared with the 2,050p level seen over the past few days.
Analyst Myles Allsop from UBS said: "Amplats has set out a 'comprehensive' social plan to ensure all employees impacted will be re-employed (c33% at Anglo operations/other mines in SA).
"It has engaged other stakeholders (eg government, unions) as much as possible, though initial reaction by Mines Minister is a concern."
South African Mineral Resources Minister Susan Shabangu said yesterday that the government had been "blindsided" by the company's shake-up. She said that the company hadn't properly consulted the Department of Mineral Resources (Other OTC: MALRF - news) on the decision.
Allsop said: "We see a risk of strikes near-term."
UBS maintained its cautious stance on the stock, with Allsop saying that Anglo's "value, EPS momentum/growth, heightened South Africa risk and Minas Rio challenges make the risk/reward less compelling than for other diversified UK miners".