Anglo American’s platinum assets debate
There’s been some debate about Anglo American’s t i ming regarding the sale of its noncore platinum assets held in l i sted subsidiar y Anglo American Platinum (Amplats) after first f lagging end-2015 as an appropriate deadline.
Speaking at Amplats’ full-year results presentation in Cape Town earlier this month, CEO Chris Griffith appeared to have adjusted the company’s initially conservative timeline saying that it would “have a feel” for the trade sales before mid-year.
The assets up for sale are the recently restr uctured shafts i n Rustenburg (reduced from five mines to three) and the Union section, as well as its stakes in joint ventures with Atlatsa Resources (49%) and the Pandora joint venture with Lonmin (49%). If an agreement cannot be reached on a sale price, the group has mooted a listing of the Rustenburg assets through an unbundling.
“A decision on the exit mechanism will be made in the first half of this year,” said Griffith. “In the second quarter, we will get a feel for the route we can take,” he said, acknowledging that unbundling the assets may take longer.
In any event, the data room was opened in December and interested parties “are going through their due diligences”, Griffith said. Sibanye Gold is a bidder, while others who’d at f irst expressed interest in the assets, are not. “We’re not going to bid for anything,” Steve Phiri, CEO of Royal Bafokeng Platinum, told Finweek on the sidelines of the Mining Indaba.
The timing may have much to do with how Amplats and its parent company view the notion of fair value as well as its comfort with its balance sheet. Outgoing CFO Bongani Nqwababa said that there was plenty of headroom on the balance sheet even though net debt at R14.6bn was R3.2bn higher.
Said Seten Naidoo, an analyst for Standard Bank Group Securities: “We believe Amplats’ insistence on achieving fair value for its assets may result in the potential sale of assets being delayed materially.”
Comments from Mark Cutifani, CEO of Anglo American, indicate perhaps that isn’t the case. Speaking to Finweek, he said the group wasn’t intent on extracting “the last dollar” from interested bidders for assets.
“When we started the conversation [about asset sales] we had a target of $3bn to $4bn. We’ve since secured the 50% sale of the $3bn Tarmac [an aggregates business providing Anglo with a $1.5bn inf low], which we think is reasonable value.”
Anglo American’s net debt situation is also a concern. The group’s year-end figures, published last week, showed net debt was higher year on year and rising. Even assuming the sale of Tarmac for $1.5bn, net debt is expected to peak at $13.5bn to $14bn.
“The balance sheet will be the single biggest focus area for investors from these results,” said Kieran Daly, an analyst for Macquarie Research. “If prices stay at current spot levels the net debt number could be much higher.”
“We believe Amplats’ insistence on achieving fair value for its assets may result in the potential sale of assets being delayed materially.”