[miningmx.com] – ANGLO American Platinum (Amplats) may be keeping a watchful eye on how BHP Billiton’s demerger works out especially as companies created from unbundlings have a mixed track-record.
Chris Griffith, CEO of Amplats, said in July that if the company could not attract decent offers for the Rustenburg shafts it wants to sell, as well as the Union section, it may demerge the assets and separately list them.
Speaking at the interim results of Amplats’ parent company, Anglo American, Griffith pointedly said listing the business was a real option for the group. He sounded slightly affronted almost as if he was responding to scepticism when he first raised the idea at Amplats’ interim results presentation a few weeks earlier.
The question is whether investors would view marginal, mature assets with a track-record of labour disruption as an investible option to the likes of Royal Bafokeng Platinum or Ivanhoe Mines were that to list its Platreef project on the JSE?
The theory behind demergers is that shareholders will better understand both companies as their respective structures will be simpler, and that the installation of focused management will better serve the assets, the demerged ones in particular.
Demergers also de-bunk the popular myth in the mining sector, and in other sectors, that big balance sheets are best at attracting capital when, in fact, it’s often harder for conglomerates to finance weaker assets in their portfolio.
From a track-record perspective, demergers present a mixed picture. African Barrick, the company listed on the London Stock Exchange after its assets were demerged from Barrick Gold Corporation, which kept a 73% stake in the company, saw its share price dip 84% over four years.
In the case of Sibanye Gold, a Johannesburg-listed created from the 2012 demerger of Gold Fields’ South African mines, the opposite was true.
After some initial wobbles, Sibanye Gold is now trading at just over double its initial public offering whereas the “parent’, Gold Fields, has struggled.
Commenting on the BHP Billiton demerger, Macquarie Research said that: “Overall, while we are not convinced that the spin out will create significant value, the strategic positives are clear’. It added, however that the positives of the demerger had been overlooked.
Des Kilalea, an analyst for RBC Capital Markets in London, suggested Anglo American might be taking notes regarding the success of BHP Billiton’s demerger.
“It might even want to group together some other assets in its portfolio and spin them out separately,’ he said.
