Johannesburg - Anglo American Platinum (Amplats) could face a protracted exit from the South African mines it wants to divest amid a plunge in metal prices that is hurting asset values and investors’ appetite for deals.
Amplats is expected to provide an update on how it will dispose of four ageing, labour-intensive mines when it releases results today.
The company said in February that it would decide by June whether to sell or separately list the operations should bidders not meet the producer’s valuations for the assets. Parent Anglo American was leaning towards a listing, chief executive Mark Cutifani said in April.
Disposal plans
Amplats plans the disposals amid a 33 percent drop in the platinum price in the past 12 months and as costs increase.
The most likely scenario was that it would spin off the assets as an independent company, while selling shares for a portion in the new entity, said Ben Davis, a mining analyst at Liberum Capital in London.
“I certainly won’t hold it against them that they didn’t get the sale away when platinum prices are where they are today,” Davis said. “I don’t regard a listing as a great idea either because I don’t see how anyone could ascribe any real value to it.”
The company would reduce its exposure in the assets over time after listing them separately, Franz Stehring, the head of mining at the Uasa union, said following a meeting with the company on June 17.
Platinum lost 0.2 percent to $1 008.38 (R12 454.80) an ounce early on Friday in Johannesburg. It reached the lowest in more than six years on Thursday. Amplats dropped to a 10-year low on July 8. It declined by 1.43 percent to close at R269.01 on Friday.
“Our objective is to exit Union and Rustenburg mines in the most appropriate manner, whether separately or together through either a sale or public-market exit, aiming to maximise value for shareholders and to achieve a clean and sustainable exit,” Mpumi Sithole, an Amplats spokeswoman, said.
A piecemeal divestment would offer Amplats the best chance at attaining a reasonable price for the assets, Simon Hudson-Peacock, a money manager at Momentum Asset Management, said.
On the cards
“One understands the desire for a clean cut, but I don’t think they’ll get a value that will make them or their shareholders happy with an outright sale – not now anyway,” Hudson-Peacock said. An unbundling or initial public offering “gives them a little bit more time”.
Anglo’s Cutifani undertook to dispose by 2016 assets across the group’s operations that don’t return 15 percent on capital employed.
Amplats “would’ve done well” if it received a market value of $500 million for the Rustenburg mines through a sale of shares and would struggle to find new investors given market conditions and the history of labour unrest at the assets, Liberum’s Davis said.
An outright sale of the mines may still be on the cards.
Sibanye Gold remained in talks with Amplats after expressing its interest in the mines earlier this year, James Wellsted, a spokesman for the producer, said.
“We want to be an owner-operator, not an equity stakeholder,” Wellsted said. “We’re still interested in purchasing the assets at the right price.”
Amplats would not attract good bids for the mines as they were likely to be unprofitable at current prices, said Hanré Rossouw, who helps manage $120 billion of assets at Investec Asset Management.
Anglo had “been pretty desperate at selling assets; so far we haven’t seen much”, Rossouw said. “It’s not the sort of market that’s easy to sell assets in.”
Bloomberg