Anglo American's Production Declines: A Buying Opportunity Amid Strategic Rebalancing and Long-Term Copper Demand Growth?

In the volatile world of mining equities, Anglo American (GB:AAL) has faced recent headwinds, with production declines in its platinum group metals (PGM) division and operational setbacks at key mines. Yet, beneath these short-term challenges lies a compelling narrative of strategic rebalancing and alignment with one of the most critical metals of the 21st century: copper. For investors, the question is not just whether Anglo American can weather its current turbulence, but whether this dip in performance represents a unique entry point into a company poised to benefit from a structural shift in global energy demand.

Short-Term Operational Challenges: A Temporary Setback

Anglo American's Q2 2025 production report revealed a 15% decline in PGM output to 464,100 ounces, driven by severe flooding at the Amandelbult mine and a tragic incident at Unki Mine. While these disruptions are significant, they are not indicative of systemic failure. The company's safety metrics—reflected in an improved total recordable injury frequency rate (TRIFR) to 1.28 per million hours—demonstrate a commitment to operational excellence. Moreover, the demerger of Valterra Platinum, now a standalone entity, is streamlining Anglo American's portfolio and redirecting focus toward higher-margin commodities.

Copper, however, remains the linchpin of the company's strategy. In Q2, copper production held steady at 168,900 tonnes, with Quellaveco in Peru and Los Bronces in Chile offsetting declines in other regions. The joint venture with Codelco to optimize Los Bronces and Andina is projected to unlock $5 billion in net present value (NPV) pre-tax, a move that underscores Anglo American's ability to extract value from its existing assets without massive new capital expenditures.

Strategic Rebalancing: Copper as the Energy Transition's Lifeline

The global energy transition is accelerating demand for copper at a pace that outstrips even the most optimistic projections. Electric vehicles (EVs), renewable energy infrastructure, and smart grids are all copper-intensive technologies. An EV contains roughly three times the copper of a conventional vehicle, and wind turbines require up to four times more copper than fossil fuel-based power plants. Anglo American's copper reserves, including the 30-year-life Quellaveco mine and the high-grade Los Bronces operation, position it as a critical supplier to this decarbonization wave.

The company's decision to prioritize copper is not just operational but existential. With PGMs facing a long-term secular decline due to hydrogen fuel cell adoption and catalytic converter innovations, Anglo American is pivoting toward a commodity that is inescapably tied to the future of energy. Its Sustainable Mining Plan and FutureSmart Mining™ initiatives further reinforce its commitment to low-carbon production, aligning with regulatory and investor demands for environmental accountability.

Long-Term Copper Demand: A Structural Tailwind

The data is unequivocal: copper demand will grow at a compound annual growth rate (CAGR) of 2.6% from 2025 to 2035, driven by electrification and decarbonization. By 2050, the energy transition alone is expected to account for 23% of global copper demand, up from 7% today. Anglo American's Tier 1 assets—Quellaveco, Collahuasi, and the recently designated Sakatti project in Finland—are uniquely positioned to meet this demand.

The company's collaboration with Codelco is a masterstroke. By leveraging Codelco's expertise in Chile's copper belt, Anglo American is minimizing capital outlays while maximizing output. This partnership, combined with its focus on operational efficiency (e.g., increased throughput at Mogalakwena and Mototolo), ensures that Anglo American can scale production without sacrificing margins.

Investment Implications: Buying the Dip or Avoiding the Doldrums?

For value-oriented investors, Anglo American's current valuation offers an intriguing opportunity. The stock trades at a discount to its peers, reflecting near-term production risks but not the long-term potential of its copper assets. Analysts have assigned a “Hold” rating with a price target of £2,952.04, suggesting that the market expects a gradual recovery rather than a sharp rebound. However, given the structural tailwinds in copper demand and Anglo American's strategic clarity, this could be a conservative estimate.

The key risks remain operational: further disruptions at Amandelbult or Unki could delay the company's production rebound. However, these are short-term concerns in a business with a 160-year history of weathering commodity cycles. For investors with a 3–5 year horizon, Anglo American's disciplined portfolio simplification, strategic partnerships, and alignment with the energy transition make it a compelling case for a “buy the dip” strategy.

Conclusion: A Copper-Driven Future

Anglo American's production declines are a temporary blip in a broader narrative of transformation. While the company faces immediate challenges in its PGM operations, its strategic pivot to copper—backed by world-class assets and a clear-eyed focus on the energy transition—positions it as a beneficiary of one of the most significant economic shifts in modern history. For investors who can look beyond the near-term noise, Anglo American offers a rare combination of resilience, reinvention, and long-term growth potential.

In the end, the question is not whether Anglo American can overcome its current hurdles—but whether it can be bought at a price that reflects its role in the copper-driven future. For those willing to take the long view, the answer may be a resounding yes.