Anglo Platinum Seen Facing Protracted Aging Mines Exit

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Anglo American Platinum Ltd. could face a protracted exit from the South African mines it wants to divest amid a plunge in metal prices that’s hurting asset values and investors’ appetite for deals.

Amplats, as the largest producer of the metal is known, is expected to provide an update on how it will dispose of four aging, labor-intensive mines when it releases results on July 20. The company said in February it will decide by June whether to sell or separately list the operations should bidders not meet the producer’s valuations for the assets. Parent Anglo American Plc was leaning toward a listing, Chief Executive Officer Mark Cutifani said in April.

Amplats plans the disposals amid a 34 percent drop in the platinum price in the past 12 months and as costs increase. The most likely scenario is that it will spin off the assets as an independent company while selling shares for a portion in the new entity, said Ben Davis, a mining analyst at Liberum Capital Ltd. in London.

“I certainly won’t hold it against them that they didn’t get the sale away when platinum prices are where they are today,” Davis said. “I don’t regard a listing as a great idea either because I don’t see how anyone could ascribe any real value to it.”

The company will reduce its exposure in the assets over time after listing them separately, Franz Stehring, head of mining at the UASA union, said by phone following a meeting with the company June 17.

Platinum Decline

Platinum lost 1.1 percent to $999.03 an ounce by 5:07 p.m. Friday in Johannesburg, the lowest in more than six years. Amplats fell to a 10-year low on July 8. It declined 1.4 percent to 269.01 rand at the close Friday.

“Our objective is to exit Union and Rustenburg mines in the most appropriate manner, whether separately or together through either a sale or public-market exit, aiming to maximize value for shareholders and to achieve a clean and sustainable exit,” said Mpumi Sithole, an Amplats spokeswoman.

A piecemeal divestment will offer Amplats the best chance at attaining a reasonable price for the assets, said Simon Hudson-Peacock, a money manager at Momentum Asset Management in Johannesburg.

“One understands the desire for a clean cut but I don’t think they’ll get a value that will make them or their shareholders happy with an outright sale -- not now anyway,” Hudson-Peacock said. An unbundling or initial public offering “gives them a little bit more time.”

Market Value

Anglo’s Cutifani undertook to dispose by 2016 assets across the group’s operations that don’t return 15 percent on capital employed.

Amplats “would’ve done well” if it gets a market value of $500 million for the Rustenburg mines through a sale of shares and will struggle to find new investors given market conditions and the history of labor unrest at the assets, Liberum’s Davis said.

An outright sale of the mines may still be on the cards.

Sibanye Gold Ltd. remained in talks with Amplats after expressing its interest in the mines earlier this year, said James Wellsted, a spokesman for the producer.

“We want to be an owner-operator, not an equity stakeholder,” Wellsted said. “We’re still interested in purchasing the assets at the right price.”

Amplats won’t attract good bids for the mines as they are likely to be unprofitable at current prices, said Hanre Rossouw, who helps manage $120 billion of assets at Investec Asset Management in Cape Town.

Anglo has “been pretty desperate at selling assets, so far we haven’t seen much,” Rossouw said. “It’s not the sort of market that’s easy to sell assets in.”

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