Amplats ‘leaning to’ a listing of non-core assets

[miningmx.com] – ANGLO American Platinum (Amplats) is favouring a listing of its Union and Rustenburg assets in preference to a trade sale as the group hasn’t received a suitable monetary offer thought to be set at about R10bn.

Industry sources told Miningmx that the Anglo American-owned platinum producer had turned its attention as to how it would structure a potential listing of its non-core assets given that a number of potential suitors had dropped out of the running.

African Rainbow Minerals, Royal Bafokeng Platinum, and Northam Platinum have all discounted themselves as bidders for either the Union or Rustenburg assets while a fourth potential bidder, Sibanye Gold, was thought to disagree on a selling price, although it still had a potential interest in making some kind of offer.

As a result, Amplats was favouring – but had not finally decided upon – a listing similar in concept to BHP Billiton’s de-merger of its non-core assets into South32 which may be listed in Perth as well as London and Johannesburg pending shareholder approval.

In both cases, neither the seller nor the potential buyers of the assets in the companies could agree a price so it would be better to let the market independently decide a valuation which would then be available for a takeover at a later stage.

Unlike BHP Billiton, however, Amplats is likely to retain a substantial stake in the Union and Rustenburg assets whilst selling a portion to a black economic empowerment entity and the remainder through a book-build.

However, some analysts believe a listing of the assets could prove disastrous because having failed to attract a favourable offer via trade sale, investors would be doubly cautious of buying exposure to the assets on the open market.

“Anglo must have thought an IPO threat would put pressure on the buyers to up the ante. But it did not work and now the proposed IPO mix – leaving them still holding the tar baby – is looking like something they should much rather drop,” an analyst said.

Ultimately, the fortunes of a separately listed platinum firm, in which Amplats retains a stake, turns on the future price of platinum. Amplats is the most optimistic of all the South African platinum producers believing the market will revive sooner rather than later, whilst Northam and Impala Platinum are following a ‘lower for longer’ approach.

“I’d love to be more optimistic – looking for another “Sibanye’ type of trade, but no matter how hard I try, these assets just don’t work unless your metal price assumption is much higher,” an analyst said.

There is some debate among analysts regarding the value Amplats could attract from the market for its IPO of anywhere between R8.25bn to R4.8bn. If the former were achieved, the book-build would have to equal up to R3.2bn.

The other factor deciding value is whether the market believes Amplats when it says its Rustenburg assets are truly cash flow positive.

“Anything is worth buying at the right price but Anglo just needs to prove that Rustenburg is a going concern,” said an asset manager.

“Most of the Rustenburg assets are said to be cash generative but does this include capex and include a proportion of head office costs?” he said.