We are maintaining a Hold recommendation on Anglo American Plc. (AAUK) after the company?s first half results. The company is benefiting from strong demand for commodities around the globe and increased production. However, risks to global economic growth remain, and as inflation moderates the need to hedge against it using commodity stocks is less attractive.

The management is confident that commodity prices will remain strong this year and ruled out a slowdown in demand from China. We are also pleased by the company?s restructuring program in which involves Anglo?s gold, steel and paper manufacturing divisions. The stock is trading at 11.5x our 2008 EPS estimate, a multiple similar to that of its closest peers. We therefore maintain our Hold recommendation and our six-month target price is $28.

The company said that its plans for a "full de-merger" of its paper and packaging division were progressing, and that it was continuing with a phased exit strategy from its 41.8% stake in Anglogold (AU).

The main negatives facing producers are rising electricity/energy costs, which is the largest cost facing a mining company. In addition, the slowdown in the U.S. auto and housing markets remains a negative issue facing key producers.

While the company has grown successfully through acquisitions thus far, we believe this strategy certainly carries risks such as a shortage of acceptable opportunities to acquire and integration risks. The combination of exchange rate unpredictability and acquisition uncertainty will make it difficult to forecast earnings. As such, it would increase the company?s risk premium, and hence reduce the amount investors are willing to pay for its shares.