Scotia Bank has initiated coverage on Anglo American plc (AAUKF.US) with an "Outperform" rating and a price target of £52 per share, following the company's roughly $35 billion acquisition of Teck Resources. The bank believes the stock is poised for a significant valuation re-rating, driven by the company's sharpened focus on copper, including an attractive and relatively low-risk medium-term copper growth outlook.

Analyst Orest Vovkodav noted that the combined entity, referred to as "Anglo Teck," holds a portfolio of large-scale, long-life Tier 1 mining assets across the Americas. This portfolio could also make the merged company a potential acquisition target for one of the global diversified mining giants.

The analyst projects the combined company's pro-forma net debt will reach $11.6 billion (or $6.71 per share) by the end of 2026, before declining to $7 billion (or $4.02 per share) by the end of 2027. At that point, the net debt-to-EBITDA ratio would sit at just 0.5 times.

Vovkodav forecasts strong free cash flow of $4.4 billion and $4.5 billion for 2027 and 2028, respectively, representing free cash flow yields of 4.6% and 4.6%, compared to the peer average of 3.7% and 4.2%. This is expected to be achieved despite the need to fund significant copper growth, providing a solid foundation for potentially generous future shareholder returns once the transaction is completed.