Sehelo Tsatsi, an investor researcher at Johannesburg Anchor Capital, said yesterday that the platinum sector has been ripe for M&A, given the amount of pressure it has been under.
“That has played out over the past few years as we’ve seen quite a bit of acquisition activity in the platinum industry.
“If the rand platinum group metal (PGM) prices remain low, we could see further M&A in 2018. The evolution of diesel in Europe and the emergence of electric cars will be important to watch next year,” he said. Tsatsi added that the platinum mining sector in South Africa, with the exception of Anglo American Platinum (Amplats), had been loss-making.
Lack of support
The Chamber of Mines previously said about 60% of the platinum industry was loss-making and blamed the Department of Mineral Resources for a lack of support.
The volatile platinum price environment, increasing costs and low profit margins have resulted in many retrenchments in the industry over the past 12 months.
Platinum and gold producer Sibanye-Stillwater earlier this month announced a R5 billion proposed takeover of Lonmin, the world’s third-biggest platinum producer, which has been battered by financial headwinds.
The proposed takeover of Lonmin, which would result in Lonmin owning 11% of Sibanye and Sibanye owning 89%of Lonmin, has been described as a lifeline for the platinum producer.
Lonmin’s cash crunch saw it consider the sale or introducing joint venture partners into its Akanani mine together with exploring options to introduce funding partners into K4.
Lonmin reported in October that it would place a number of its marginal shafts under care and maintenance, affecting 1139 workers including contractors.
Among the disposals in the platinum industry over the past two years was Amplats’ sale of its Rustenburg operations to Sibanye-Stillwater. Sibanye-Stillwater also acquired Aquarius Platinum in 2015.
Amplats earlier this month said it had finalised the sale of a 42.5% interest in the loss-making Pandora joint venture to Lonmin for a deferred cash payment of no less than R400million and a maximum of R1bn based on 20% of free cash flow over six years.
Amplats also announced the completion of the disposal of mineral resources within the Amandelbult mining right to Northam Platinum for R1bn, which it used to reduce net debt.
Amplats said it had been granted competition approval for the sale of its 85% interest in Union Mine and 50.1% exposure in the Masa chrome mine to a subsidiary of Siyanda Resources. It said it had also received consent in terms of the Mineral and Petroleum Resources Development Act for the disposal.
Peter Major, director of mining at Cape Town-based Cadiz Corporate Solutions, said Sibanye-Stillwater’s takeover of Lonmin had been inevitable.
“It is a natural evolution. The industry is shrinking but it is better to shrink than to die. Unfortunately, Eskom has also made it difficult for mining companies through steep electricity price increases. The government and communities have also threatened sustainability of mining companies,” Major said.