Anglo net debt may spur Amplats sales

[miningmx.com] – THERE’S been some debate about Anglo American’s timing regarding the sale of its non-core platinum assets held in listed subsidiary, Anglo American Platinum (Amplats) after first flagging 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 firm’s initially conservative timeline saying the group would “have a feel’ for the trade sales before mid-year.

The assets up for sale are the recently restructured shafts in 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 a sale price can’t be agreed, 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 whilst others who’d at first expressed interest in the assets, are not. “We’re not going to bid for anything,’ Steve Phiri, CEO of Royal Bafokeng Platinum told Miningmx 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 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 Miningmx, 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 inflow] which we think is reasonable value,’ he said.

“If we can get reasonable value [for platinum and coal assets] that any value leakage from the sale will be relatively small,’ he said. He also commented that if Amplats were to take the listing route for its non-core assets it may be necessary to “back it into something,’ he said.

Anglo American’s net debt situation is also a concern. The group’s year-end figures, published on February 13, showed net debt was higher year-on-year and rising. Even assuming the sale of Tarmac, its aggregates business, 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,’ he said.