Why Glencore shares are still undervalued

There’s been a partial recovery over the past few weeks, but the mining company remains significantly cheaper than these analysts’ price targets. Graeme Evans has the details.

11th June 2025 13:24

Graeme Evans from interactive investor

Glencore shares remain in deep value territory, a City firm declared today after it reviewed the outlook for the mining giant in the wake of its 20%-plus rebound from April’s lows.

The support of Deutsche Bank is echoed by counterparts at Jefferies after the US bank said Glencore (LSE:GLEN) still appears undervalued despite its recovery from a “deep trough”.

Jefferies said: “We expect the sector to be volatile in the near-term, but we see scope for a significant further re-rating in Glencore, which is one of our top picks in Global Mining.”

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Shares rose 4.3p to 294.3p in today’s session, having been 230.5p at the 7 April closing bell and 233p when finance boss Steven Kalmin bought a £1.4 million stake in the teeth of the rout.

The slump came as the prices of copper, thermal coal and other key commodities in the Glencore portfolio were hit by fears over the demand impact of tit-for-tat tariffs by the US and China.

The de-escalation of trade tensions has returned shares to where they were before Donald Trump’s “Liberation Day” announcement.

Deutsche Bank reckons there’s further to go based on a price target of 400p, while Jefferies is at 380p. The latter’s sum-of-the-parts valuation is 477p, which Glencore last traded at in July.

The group’s marketing operation accounts for 190p of this estimate, with copper’s valuation of 159p-a share the largest element of the industrial part of Glencore.

Jefferies said recent headwinds to the investment case have included a disappointing operating performance, with volumes falling and costs rising in some segments including copper.

The bank also highlighted Glencore’s leverage to coal in a weakening price environment, declining liquidity in its shares and a normalisation of earnings in Marketing.

It said: “Based on our analysis, these headwinds have culminated in a valuation level at which we believe the trade-off between risk and reward is now heavily skewed to the upside.”

Streamlining the portfolio by demerging coal and ferroalloys into a separate listed entity in Australia or the US is seen as one possible path to unlock value.

Glencore had considered this after it acquired steelmaking coal business Elk Valley Resources from Teck last year but decided via a shareholder vote against pursuing this strategy.

Jefferies said: “Based on more recent developments, this strategy could be viable once again as the standalone value of RemainCo would likely materially re-rate.

“It is also possible that RemainCo could be an acquisition target or merger partner for another major miner.”

Noting that Glencore’s management has often said that “M&A is in our DNA” and that everything is for sale at the right price, Jefferies said this could now mean “selling assets in addition to opportunistic acquisitions.”

Deutsche Bank said the break-up speculation came as Glencore prepared to host a trip for analysts to its recently acquired coking coal assets in the Elk Valley of British Columbia.

Ahead of that event, the bank reiterated a Buy recommendation.

It said: “Although the shares have recovered more than 20% from the April lows, they remain in deep value territory, coal prices appear to be bottoming out and cash flows should improve sequentially through this year and in 2026.”

The Swiss miner said in February it is considering whether to move its primary listing from London, with New York the most likely destination.

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