Earlier this year, when BHP, the Australian mining giant, proposed acquiring its London-listed competitor Anglo American for £39 billion, the Anglo board dismissed the offer, labeling it as “highly complex and unattractive.”

The rejected offer spurred shareholders to urge Anglo American, a prominent name in the FTSE 100, to streamline its intricate operations. The question now arises: how much value can be realized from this historic 107-year-old mining company?

In a swift move, Anglo has begun restructuring. Recently, it announced the sale of its 33% interest in the Jellinbah Group, a joint venture holding a 70% stake in steelmaking coal mines located in Queensland.

Anglo American’s portfolio spans various commodities, encompassing iron ore, steelmaking coal, copper, and nickel, in addition to a substantial operation in platinum group metals like palladium and rhodium, along with its diamond business, De Beers. Stakeholders argue that by simplifying this structure, Anglo could significantly strengthen its investment proposition, particularly by orienting about 60% of its focus towards copper. The company’s copper mines in Peru and Chile have the capacity to produce approximately 760,000 tonnes annually.

With the increasing demand for copper due to its crucial role in manufacturing processes, a heightened focus on this metal appears beneficial in the long run. Copper is vital for developing technologies essential for the shift to a low-carbon economy, notably in sectors such as electric vehicles, wind turbines, and energy infrastructures.

Anglo American’s recent trading performance has been robust: in its latest third-quarter report, the company confirmed that its copper production in Chile is expected to meet annual guidance, with a projected 13% reduction due to the planned closure of the Los Bronces facility. Moreover, output from Peru is anticipated to increase in the fourth quarter due to improved grade and recovery rates. The company also mentioned forthcoming announcements regarding a steelmaking coal sale, while the anticipated demerger of Anglo American Platinum, or “Amplats,” remains on track for completion by mid-2025.

This analysis recommended buying Anglo American shares back in December, highlighting the potential for increased interest from acquirers and a stock re-evaluation should the company simplify its operations. Since then, the stock has surged by an impressive 52%, significantly outperforming the FTSE 100’s return of just 12%, and also outperforming other major British miners such as Rio Tinto and Glencore, which yielded returns of 12% and a negative 2%, respectively.

However, Anglo American’s shares now trade at over £24, compared to just above £17 a year ago, giving prospective investors reason to consider the risks involved in such large-scale restructuring. Analysts from Jefferies have expressed concerns that value could be compromised during this transition, particularly regarding capital gains taxes and the potential for foreign investors to exit their positions due to cross-border mergers or acquisitions.

Additionally, BHP may re-enter the bidding arena, as UK takeover regulations allow for a new proposal after the six-month period, which concludes on November 29. The initial £3.1 billion all-share offer was seen as undervalued and involved several complexities. Nonetheless, this has placed Anglo on the acquisition watchlist with the potential for other interested buyers to emerge.

For shareholders concerned about the ongoing restructuring, it may be reassuring to note Jellinbah’s sale occurred at a respectable premium, with a price to net asset value ratio of 1.15 times alongside forecasted adjusted cash earnings of 4.9, outperforming other recent transactions in the steelmaking coal sector, including BHP’s sales of Blackwater and Daunia. This evidence suggests that as Anglo simplifies its operations, the share price could realize further opportunities for growth. Additionally, a recovery in platinum and diamond prices, currently hovering around cyclical lows, could also enhance the stock’s performance.

Advice: Buy | Rationale: Strong progress in simplification

Henderson International Income Trust

Investing in an income portfolio can be easily achieved through Britain’s stock market, boasting a variety of banks, insurers, and energy firms listed on the FTSE 100 that offer substantial cash dividends. Yet, diversification across geographies is vital for building a robust income portfolio. This principle underpins the value proposition of the Henderson International Income Trust, identified by its ticker, HINT.

With a market capitalization of £326 million, this investment trust has consistently raised its dividends for 12 consecutive years, averaging a 5.3% annual increase. For the 2024 fiscal period, it has confirmed dividends leading to a yield of 4.4%, positioning it among the highest in its peer group.

As one of the smaller entities within the sector, HINT’s market size contrasts with larger competitors, such as the JPMorgan Global Growth and Income Trust, which stands at £2.8 billion, and the Murray International Trust, valued at £1.5 billion.

Over the past year, the JPMorgan fund has outperformed both competitors, delivering a total return of 26%, compared to 14% from Murray and 12% from HINT.

The fund is currently noted for its double-digit discount, with its shares trading 10.7% below net asset value, while the average discount among its rivals sits at 4.5%.

This appealing discount may attract value-focused investors, as the fund possesses stakes in numerous prestigious and high-value companies, including industry giants like Microsoft and France’s Sanofi.

Despite its respectable dividend reliability, HINT has faced challenges, as some of its lower-yielding shares have outperformed higher-yielding ones, hindering overall performance. Looking ahead, the trust has indicated an intention to potentially draw upon its £97.6 million distributable reserves to supplement dividends, thereby granting it flexibility for investing in growth assets without compromising on dividends. Achieving this balance could prove to be a complex task.

Advice: Hold | Rationale: The double-digit discount stems from inconsistent performance