- Summary:
- BHP Chairman announced on Wednesday that the company had decided against bidding. However, there's more against Anglo American share price.
Anglo American share price declined sharply on Wednesday, dropping from near four-month highs of GBX 2,503 seen on Tuesday, to GBX 2,417. The stock was down by 2.6 percent in the opening hour of trading, snapping a four-day winning streak. The decline was precipitated by news that mining rival BHP had decided against placing another takeover bid.
Beyond the collapsed BHP bid, the company faces headwinds in the diamond sector, where demand has declined significantly. De Beers, the South Africa-based diamond mining company 85 percent owned by Anglo American, recently announced that low demand, especially in China, coupled with an oversupply in the market, continues to hurt its revenues.
As a result, the company stuck to its earlier production reduction target of 3 million carats for the full year. Third quarter production reduced by 25 percent to 5.6 million carats year-over-year. Nonetheless, De Beers maintains its full-year production target at between 23million-26 million carats.
However, the biggest setback for Anglo American (LSE: AAL) share price in the near-term is the BHP decision. BHP chairman Ken MacKenzie said on Wednesday at the company’s annual meeting that after having seen three bids rejected, BHP had decided against proceeding with the venture.
The BHP bid has been a strong tailwind behind Anglo American share price uptrend in recent days. As per UK regulatory laws, BHP had to wait for six months before placing another bid, following the rejection of the previous bid. That waiting period was to elapse in November, raising hope among investors that another bid would follow. However, with BHP walking away, Anglo American share price could experience a period of decline in the near-term.
Anglo American share price prediction
Anglo American shares will likely trade downwards if resistance persists at 2,420. That could see the establishment of the first support at 2,387, but a stronger downward momentum could break below that level to test 2,357.
On the other hand, the buyers will be in control with a move above 2,420. That could see the first resistance come at 2,446. However, if the buyers extend their control, it could break above that level to test 2,472. Also, the break above the first resistance would invalidate the downside narrative.
