Johannesburg - Diversified mining firm Anglo American might sell its platinum assets in South Africa, valued at $1.4 billion (R15bn), next year, Deutsche Bank speculated yesterday in a note.
A sale would increase fair value for Anglo’s stock by 13 percent to £17.50 (R318 at yesterday’s exchange rate), said Rob Clifford, a Deutsche Bank mining analyst.
Sibanye Gold, South Africa’s second-largest gold producer, might be interested in the company’s three mines in Rustenburg, while an offer from platinum peers was unlikely, he said. “We think this offers Anglo the cleanest exit, minimising legacy closure and employment obligations.”
Subsidiary Anglo American Platinum (Amplats), the world’s largest platinum producer, had been rocked by the strike at its Rustenburg and Union mines since January 23.
Anglo planned to switch to mechanised open-pit mining from labour-intensive underground excavation, the chief executive, Mark Cutifani, said in April.
The company was seeking to exit its high-cost, low-return mines in Rustenburg in 2015, Clifford said. “There is an opportunity for a new owner of the Rustenburg mines to take out costs. Some industry participants are looking in general at mergers and acquisition opportunities in the platinum industry. The ongoing strike may bring some of those opportunities to fruition.”
Anglo should keep offloading underperforming platinum assets, including the Union mine, after 2016 and focus on its Mogalakwena open pit, he said.
Yesterday, Pranill Ramchander, the head of corporate communications at Anglo American SA, said it was open to all options that created value for its shareholders. “The industry is facing significant headwinds to realise the levels of returns that we would view as acceptable, so we are examining how we could reconfigure the portfolio to drive returns, particularly taking into account the opportunity presented by our unique and world-class open pit, Mogalakwena.”
About 37 percent of Anglo’s assets are in South Africa and generate 55 percent of operating profit. They include Kumba Iron Ore operations, the Venetia Diamond Mine in Limpopo and the Zibulo Colliery in Mpumalanga.
Amplats announced its plan to cut output by 400 000 ounces a year as part of its restructuring programme with the sale of the Union Mine last year. The plan included reconfiguring the Rustenburg facilities into a 320 000 ounce to 350 000 ounce platinum producer operating three mines. Four unsustainable high-cost shafts – Khuseleka 1 and 2 and Khomanani 1 and 2 – were put on long-term care and maintenance.
Sibonginkosi Nyanga, an analyst at Imara SP Reid, said speculation about the sale of the platinum assets had always been there. “The question is if they will want to sell after the recent restructuring exercise.”
He added that the price of platinum might be depressed now, but that did not mean in three years it would still be depressed.
Nyanga cited Euro 6, the EU’s standard for limiting emissions, which is expected to be enforced from September for private cars and next September for light commercial vehicles and will increase demand for platinum.
Nyanga said the resumption of production following the five-month strike could take up to three months.
“Some of the mineworkers are undernourished and it will take time for them to be certified fit to return underground”.