Amplats’ plan to sell mines delayed by falling prices
TUMBLING metals prices are delaying Anglo American Platinum’s (Amplats) plan to divest its labour-intensive Rustenburg and Union operations, with the miner yet to decide between a sale or flotation, it said yesterday.
Amplats, the world’s biggest platinum producer, wants to rid itself of the mines – the epicentre of an often violent five-month strike last year – to improve profitability and focus more on mechanised mining.
But its attempts have been hindered by a drop in precious metals prices, with platinum dropping as much as 5 percent yesterday to $942.49 an ounce, its weakest since February 2009. A rising dollar has hit precious metals hard.
Amplats’ chief executive Chris Griffith said an initial public offering was the most probable option for Rustenburg and Union, probably in early 2017, but the company was still talking to potential buyers.
“We had hoped by now we’d be able to be more definitive… But the process is largely dominated by the difficult market environment,” he said.
Griffith said the two operations made progress in the first half of the year.
“Rustenburg generated operating free cash flow of R261 million and Union generated R72m. So both of these mines have turned positive,” he said.
But platinum’s fresh fall has pulled them back into the red.
“At a $1 000 an ounce the company can still make money, but Rustenburg and Union will not be profitable under those conditions,” Griffith said.
Shares in Amplats, a unit of global mining group Anglo American, were down 4.4 percent at R257.20 by 12.30pm, close to 10-year lows struck earlier this month. Analysts were not impressed by the delay. Citi said in a note to clients: “Rustenburg and Union – all talk, no action. The poor quality of these assets and current market conditions will make it difficult for Amplats to rid itself of these assets.”
Rustenburg employs more than 16 000 workers and Union about 6 800, between them about half of the workforce of Amplats,
The volatile labour situation on South Africa’s restive platinum belt, which sits on about 70 percent of known global reserves, is bound to give potential investors pause.
Wage talks with the hardline Association of Mineworkers and Construction Union, which led last year’s stoppage, will take place again next year when the current deal expires.
Sibanye Gold, which also operates labourintensive and deep mines in South Africa and so knows the terrain well, is one of only a handful of companies bidding for the assets.
Amplats’ first-half headline earnings came in at R2.47 billion, in line with what the company previously flagged and up 15-fold, largely reflecting the impact of last year’s strike.
Griffith said the company’s strategy for remaining profitable included “delaying very substantial amounts of capital”. – Reuters