J.P. Morgan sees room to run in EMEA metals and mining, highlights Rio Tinto

J.P. Morgan maintains a positive outlook for Europe's metals and mining sector, emphasizing selective stock picking due to rising valuations. The firm recommends Rio Tinto as its sole "overweight" pick, raising its price target to £61.70 and placing it on positive catalyst watch, citing copper growth and potential shareholder initiatives. Conversely, Glencore was downgraded to "neutral" due to elevated event risk from ambitious copper output targets and increased capital expenditure, while Anglo American remains "neutral," with its valuation tied to a potential $57 billion merger with Teck Resources. Macro tailwinds, including a projected rise in copper prices above $11,000/ton by 2026, anticipated Chinese fiscal stimulus, and a seasonally strong iron ore period, led J.P. Morgan to increase its 2026 copper and aluminum price forecasts.

Analysis

Bitcoin price today: muted near $122k after record highs; US shutdown drags on Investing.com -- J.P. Morgan in a note dated Thursday said Europe’s metals and mining sector has potential for continued gains but emphasized that stock selection is becoming more nuanced as valuations rise. The brokerage recommended Rio Tinto as its only “overweight” pick among European diversified miners, while downgrading Glencore to “neutral” and maintaining Anglo American at “neutral.” Mining has been Europe’s second highest returning sector since Aug. 1, rising 22%. J.P. Morgan noted that mark-to-market earnings per share momentum has accelerated faster than consensus upgrades over the same period, showing more than 15% upside to 2026 EPS expectations. The brokerage expects third-quarter reporting to act as a trigger for positive earnings revisions, with 2026 EPS forecasts rising 6% for Rio Tinto, 25% for Glencore, 17% for Anglo American, and 12% for BHP. Rio Tinto is trading at 5.4/4.8x EV/EBITDA for 2025/26 and offers free cash flow yields of 5%/8%. J.P. Morgan set a Dec. 2026 price target of £61.70 per share, up from £54.50, and placed the stock on positive catalyst watch ahead of its capital markets day on Dec. 4. Analysts cited potential shareholder value initiatives, including copper volume growth of more than 30% by 2028 to roughly 920,000 tons, a re-evaluation of lithium strategy and capital expenditure, and possible resumption of share buybacks currently restricted by Chinalco’s near-maximum <15% stake. Glencore was downgraded to “neutral" with a Dec. 2026 price target of £4 per share, up from £3.70, and placed on negative catalyst watch ahead of its third-quarter results on Oct. 29 and capital markets day on Dec. 3. J.P. Morgan cited elevated event risk due to the need for roughly 50% higher copper output in the second half of 2025 to meet guidance of 850,000-890,000 tons, along with expected higher long-term capital expenditure for greenfield projects in Argentina, which may limit capital distributions. Anglo American was rated “neutral” on a standalone basis at £27.60 per share. The bank said the proposed merger with Teck Resources would create a $57 billion copper producer, the world’s fourth largest, with an implied 2027/28 EV/EBITDA of 7.5/6.5x and free cash flow yield of 4%/6%. J.P. Morgan estimated the merger could support valuations of $60-65 billion at 8x EV/EBITDA or $68-70 billion at 10x. Interloper risk is low, and the merger reduces pressure on Anglo to increase its offer following Teck’s production downgrade. Outside the diversified miners, J.P. Morgan maintained overweight ratings on Antofagasta, citing it as the top European copper pure play, and Fresnillo in gold. Macro factors support the sector. Copper is forecast to rise above $11,000 per ton in 2026, partly due to a projected 270,000-ton production loss at the Grasberg mine, owned by Freeport. China’s upcoming economic strategy announcements, including potential fiscal loosening exceeding RMB 500 billion targeting infrastructure and technology, could further support metals demand. Iron ore enters a seasonally stronger period, historically rising in 10 of the last 15 Nov.-March periods due to supply disruptions in Australia, Brazil, and China. J.P. Morgan revised its Q3 commodity forecasts, raising 2026 copper by 5% to $10,500 per ton, aluminum by 2% to $2,675 per ton, and leaving iron ore unchanged at $95 per ton. Is RIO a bargain right now? The fastest way to find out is with our Fair Value calculator. We use a mix of 17 proven industry valuation models for maximum accuracy. Get the bottom line for RIO plus thousands of other stocks and find your next hidden gem with massive upside. J.P. Morgan maintains a moderately positive outlook on Europe's metals and mining sector, citing potential for continued gains despite rising valuations necessitating nuanced stock selection. The firm designates Rio Tinto (RIO) as its sole "overweight" pick among diversified miners, raising its December 2026 price target to £61.70 from £54.50 and placing it on positive catalyst watch ahead of its December 4th capital markets day. This positive stance is underpinned by RIO's attractive 5%/8% free cash flow yields for 2025/26 and anticipated shareholder value initiatives, including over 30% copper volume growth by 2028 and potential share buybacks. Conversely, J.P. Morgan downgraded Glencore (GLEN) to "neutral," citing elevated event risk associated with the need for a 50% increase in H2 2025 copper output and higher long-term capital expenditure for greenfield projects which could constrain capital distributions. Anglo American (AAL) remains "neutral" on a standalone basis, with its valuation significantly influenced by a potential $57 billion merger with Teck Resources, creating the world's fourth-largest copper producer with robust implied EV/EBITDA and FCF yields. The broader sector benefits from significant macro tailwinds, including J.P. Morgan's forecast for copper prices to exceed $11,000 per ton by 2026, partly due to a 270,000-ton production loss at the Grasberg mine. Anticipated Chinese fiscal loosening exceeding RMB 500 billion towards infrastructure and technology, alongside a seasonally strong period for iron ore, is expected to further bolster metals demand. Consequently, J.P. Morgan revised its 2026 copper forecast up 5% to $10,500 per ton and aluminum up 2% to $2,675 per ton.

Key Decisions for Investors

• Consider overweighting Rio Tinto (RIO) given its strong free cash flow yields, potential for copper growth, and upcoming positive catalysts.
• Maintain a neutral stance on Glencore (GLEN) due to execution risks tied to ambitious copper production targets and potential capital distribution constraints from high capital expenditure.
• Monitor developments regarding Anglo American's (AAL) potential merger with Teck Resources, as successful integration could significantly enhance its copper exposure and valuation.
• Leverage exposure to copper through preferred pure-play options like Antofagasta, given J.P. Morgan's bullish long-term price outlook and China's anticipated fiscal stimulus.