Conventional investment wisdom is that commodities are risky. This is because their prices are set in an international market which the mining company has little or no control over.
With Anglo American this risk has be mitigated in a number of ways. Firstly the company has diversity of different minerals which will reduce the impact of any one mineral entering a bear trend. Secondly, in some markets, like the diamonds market, Anglo is such a large player through De Beers that it is possible to control pricing to some extent. Thirdly, the traditional mechanism to avoid risk is to have a very strong balance sheet with plenty of “headroom”. That way, if things turn bad you can ride out the storm. Read More