LONDON (ShareCast) - Jefferies is 'becoming more positive' on Anglo American (LSE: AAL.L - news) after the mining giant reported better-than-expected results for 2012 on Friday morning.
"While we have been concerned about structural cost pressures in South Africa, operational challenges in most of Anglo's businesses, and the risk of further delays and capex overruns at the company's Minas Rio iron ore project, it is possible that the worst is now over for Anglo American, and we are becoming more positive on Anglo shares."
Even including the impact of strikes in South Africa during the second half, the broker said that underlying earnings still beat consensus estimates, helped by better-than-forecast results in iron ore, metallurgical coal and thermal coal.
"We believe the market's expectations for Anglo were low coming into earnings, and we expect this morning's results to lead to near-term outperformance for Anglo American shares."
Anglo recorded impairment charges worth $4.6bn in 2012, $4.0bn of which related to its Brazilian Minas-Rio project, which was found to need $8.8bn more in capital expenditure after a detailed cost and schedule review.
Jefferies said that while the Minas Rio project still has risks, upside potential to the revised capex budget is minimal.
Meanwhile, the broker said that incoming Chief Executive Officer Mark Cutifani would likely look for opportunities to create value at Anglo, "and there is a possibility that the merged Glenstrata attempts to acquire the company at some point."
While Jefferies has maintained its 'hold' rating for the shares, the broker said that it sees upside risk to its 2,050p target price.