Glencore’s Platinum Disposal Signals Anglo American Sale Dilemma
(Bloomberg) — Glencore Plc’s decision to distribute its stake in Lonmin Plc to shareholders is indicative of how difficult it will be for Anglo American Plc to attain a favorable price for the mines its platinum unit is selling.
Glencore opted against seeking buyers for its 23.9 percent stake in Lonmin as this “would not be in the best interest of shareholders,” it said on Wednesday. Anglo American Platinum Ltd. is seeking to dispose of four South African mines and will pursue a separate listing for the assets over its preferred option of selling them should bids not meet its valuation of the operations. Platinum, used in devices that cut vehicle emissions and for jewelry, fell to a five-year low in December.
“Looking at what Glencore did, one could easily infer it will be difficult for Amplats to get what they’re really looking for,” Sibonginkosi Nyanga, an equity research analyst at Johannesburg-based Imara SP Reid Ltd., said by phone on Wednesday. This “put the second option on the table that they might end up listing their mines,” he said.
The valuations of the world’s largest platinum miners in South Africa suffered under low metal prices and the fallout of a five-month pay strike that crippled operations last year, Nyanga said. Buyers would be hesitant to value these mines on a potential future rally in metal and equity prices, he said.
Potential bidders for Amplats’ Union and three Rustenburg mines started due-diligence studies last month, Chief Executive Officer Chris Griffith said on Feb. 9. It will take a decision before the end of June whether it may separately list the Rustenburg mines, he said.
Get Feeling
“By then we’ll get a feel that we’re either fairly close and we can negotiate our way to an answer that will work for both parties, or we’re so far away we’re unlikely to get closer,” Griffith said in an interview.
Sibanye Gold Ltd. is “part of the process” to acquire some of the Amplats mines, the Johannesburg-based gold producer’s CEO, Neal Froneman, said in an interview Wednesday.
“This is not a desperate attempt to get into platinum,” Froneman said. “As long as we acquire platinum assets at the right price.”
Sibanye is looking for mines valued by their owners at about 5 billion rand ($422 million) to 10 billion rand even though he isn’t planning on paying as much, Froneman said last year. Standard Bank Group Ltd. valued the Union mine at 3.14 billion rand, it said in an investor note on Nov. 7.
Investors’ Determination
An unbundling of Amplats’ assets will enable investors to determine their own exit, Michael Kavanagh, an analyst at Noah Capital Markets (Pty) Ltd. in Cape Town, said by phone.
When “you’re not going to find a meeting of minds between buyers and sellers, then unbundling is probably the most effective way to deal with it,” Kavanagh said. “This might be the only way they can defend the value to shareholders.”
An unbundling poses its own risk to achieving value because some institutional shareholders could be barred by their funds’ mandate to hold a stake in the new entity, Nyanga said. A subsequent sell-off of shares will weigh on prices, he said.
“For Amplats, it’s a catch-22 situation,” he said. “If you argue we’re still a little way from the platinum price improving, I’m not seeing guys paying market price for these assets.”
To contact the reporters on this story: Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net; Kevin Crowley in Johannesburg at kcrowley1@bloomberg.net To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Ana Monteiro, Dylan Griffiths
