Anglo American Shares Pause Near Highs as Overbought Signal Flashes

Anglo American's share price (LON:AAL) opened lower today, taking a slight downturn after a strong year-to-date performance, with technical indicators suggesting a potential period of consolidation. The resource giant's stock opened lower, currently trading at 2,812p, as the Relative Strength Index (RSI) on the daily chart reached 81, signalling overbought conditions.

The stock's impressive 36.6% gain year-to-date reflects strong momentum, but the high RSI reading suggests that markets may be poised for a breather. This technical indicator implies the stock may be overvalued in the short term, potentially leading to a price correction or period of sideways trading as markets digest recent gains.

Anglo American's recent strategic initiatives have been a key driver of market sentiment. The proposed $53 billion all-stock merger with Teck Resources, announced in September, aims to create a copper mining behemoth. The combined entity is projected to produce 1.2 million tons of copper annually, targeting a 10% output increase by 2027. This move positions the company as a major player in the copper market, a critical metal for emerging technologies like data centers and renewable energy infrastructure.

However, these strategic shifts haven't been without complications. The spin-off of Anglo American’s platinum division into Valterra Platinum in May led to a significant foreign direct investment outflow from South Africa, totaling 73.5 billion rand ($4.26 billion) in the second quarter of 2025. This spin-off reflects the company's focus on core assets like copper and iron ore, but it also highlights the financial implications of restructuring.

Further complicating matters, Anglo American has initiated arbitration proceedings against Peabody Energy following the collapse of a $3.78 billion deal for its Australian steelmaking coal assets. The deal fell apart after a fire at the Moranbah North mine in April, leading Peabody to invoke a “material adverse change” clause. This setback underscores the operational risks inherent in the mining industry and the challenges of divesting non-core assets.

Analyst sentiment surrounding Anglo American remains mixed. The Royal Bank of Canada lowered its price target to GBX 1,900 with a “sector perform” rating in August. Conversely, JPMorgan Chase & Co. raised its price target to GBX 2,080 in July, assigning a “neutral” rating. These differing views reflect the market's uncertainty regarding the company's future performance and strategic direction.

Operationally, Anglo American faces challenges, including the impact of the Moranbah North mine fire and planned production cuts of approximately 4% across diamonds, platinum group metals, copper, and iron ore. These cuts are intended to streamline operations but may impact near-term revenue.

The mix of a high RSI, strategic realignments, and operational headwinds suggests that Anglo American's share price may experience increased volatility in the near term. Markets will likely be closely watching how the merger with Teck Resources progresses, the outcome of the arbitration with Peabody Energy, and the impact of production cuts on the company's financial performance. A period of consolidation could be on the cards, but sometimes momentum is simply too hard to shift.