Andre Janse van Vuuren and Kevin Crowley
GLENCORE’S decision to distribute its stake in Lonmin to shareholders is indicative of how difficult it will be for Anglo American to attain a favourable price for the mines its platinum unit is selling.
Glencore opted against seeking buyers for its 23.9 percent stake in Lonmin as this “would not be in the best interest of shareholders”, it said on Wednesday.
Anglo American Platinum (Amplats) is seeking to dispose of four local mines and will pursue a separate listing for the assets over its preferred option of selling them should bids not meet its valuation of the operations. Platinum fell to a five-year low in December.
“Looking at what Glencore did, one could easily infer it will be difficult for Amplats to get what they’re really looking for,” Sibonginkosi Nyanga, an equity research analyst at Imara SP Reid, said. This “put the second option on the table that they might end up listing their mines”, he said.
The valuations of the world’s largest platinum producers in South Africa had suffered under low metal prices and the fallout of a five-month pay strike that crippled operations last year, Nyanga said. Buyers would be hesitant to value these mines on a potential future rally in metal and equity prices, he said.
Potential bidders for Amplats’ Union and three Rustenburg mines started due diligence studies last month, chief executive Chris Griffith said on February 9.
It would take a decision before the end of June whether it might separately list the Rustenburg mines, he added.
Gut feeling
“By then we’ll get a feel that we’re either fairly close and we can negotiate our way to an answer that will work for both parties, or we’re so far away we’re unlikely to get closer,” Griffith said.
Sibanye Gold was “part of the process” to acquire some of the Amplats mines, the gold producer’s chief executive, Neal Froneman, said.
“This is not a desperate attempt to get into platinum,” Froneman said. “As long as we acquire platinum assets at the right price.”
Sibanye was looking for mines valued by their owners at about R5 billion to R10bn even though he wasn’t planning on paying as much, Froneman said last year.
Standard Bank valued the Union mine at R3.14bn, it said in an investor note on November 7.
Investors
An unbundling of Amplats’ assets would enable investors to determine their own exit, Michael Kavanagh, an analyst at Noah Capital Markets in Cape Town, said.
When “you’re not going to find a meeting of minds between buyers and sellers, then unbundling is probably the most effective way to deal with it,” Kavanagh said. “This might be the only way they can defend the value to shareholders.”
An unbundling posed its own risk to achieving value because some institutional shareholders could be barred by their funds’ mandate to hold a stake in the new entity, Nyanga said.
A subsequent sell-off of shares would weigh on prices, he added.
“For Amplats, it’s a catch-22 situation,” he said. “If you argue we’re still a little way from the platinum price improving, I’m not seeing guys paying market price for these assets.” – Bloomberg