[miningmx.com] – AN investment report by JP Morgan in August 2013 posed the question as to whether the successful restructuring of Aquarius Platinum at that time was a case of “as good as it gets’ for the company.
The view was that Aquarius CEO, Jean Nel, had scored a coup in resuscitating the firm, but that in the wake of improved platinum group metal (PGM) prices, the company had nowhere to go but sideways or down.
It’s a demonstration of the market torpor that market participants are still waiting for the PGM market to recover two years later, but at least shareholders in Aquarius will derive a payout.
This is following Sibanye Gold’s R4bn all-cash takeover proposal – an offer that at R2,66/share represented a 56% premium to Aquarius’ closing share price of R1.70/s the day prior to the bid.
At the time of the JP Morgan report, Aquarius was trading at about R7/share; in other words, 72% higher than the current share price and 62% higher than Sibanye’s offer. The bank was right about where the Aquarius share was heading.
Investec Asset Management, however, doesn’t like the offer and is considering its options (although it seems likely it will seek to vote down the proposal). It owns about 13.9% of Aquarius Platinum.
“The sad thing is that since about 2013, Jean has continued to push costs down further and instil very good labour relations. I think that means the company has the ability to weather the storm,’ said Hanre Rossouw, portfolio manager at Investec.
“The business can wash its face even at the current spot price and whilst Lonmin has a pile of debt in it, Aquarius has cash and is cash flow positive. Sibanye has got a free option on the platinum price,’ he said.
The market thinks Sibanye has driven a good deal.
Whilst shares in Aquarius were about 36% higher at the time of writing, Sibanye Gold was trading 8.7% higher. “I think that Sibanye being up significantly on the back of it is the best indicator of the broader market’s view,” said a UK analyst.
“Also, all cash is a real sign that Sibanye think there is more value to get otherwise they would have paid shares like they did in the Rustenburg deal,” he said. Last month, Sibanye bid R4.5bn in either shares or cash for Anglo American Platinum mines.
Rossouw thinks Sibanye has been opportunistic; but it is also betting on a market recovery sooner rather than later. “We do sense we’re near the bottom of cycle,” said Froneman in response to questions today.
Nel’s view might be quite different, however. Apart from the exhaustion factor of running Aquarius hard during the past three years, he might feel less enthusiastic about market prospects, otherwise, why sell, especially given his own exposure.
Nel announced in September 2013 that he would take up to 70% of his salary and any bonuses due in shares. Rossouw reckons Nel’s in-price is far below Sibanye’s offer.
“I don’t know how well you know Jean, but he is quite a realist and more a glass half empty guy,” said Rossouw. “That’s the the reason he has done so well – whilst flying economy class and taking shares as salary – in restructuring his business.
“In contrast you have the other CEO [Neal Froneman] telling you how quickly the market will turn,” he said.
For its part, the next six to 12 months will be an interesting period for Sibanye which is currently having to sign, seal and deliver three relatively large corporate deals – the third is the bid for control of Waterberg Coal Company – with a value of about R9bn in either shares or cash.
“We have got a lot of depth and we had positioned ourselves for this,” said James Wellsted, head of corporate affairs for Sibanye.
“We have been talking to these companies for two years. Obviously we get a lot of experience with the acquisition, but we have a lot of in house experience,” he added pointing to non-executive director, Barry Davison, formerly CEO of Amplats, and Shadwick Bessit, formerly COO of Impala Platinum.
Froneman said the next week would be spent talking to Nel about taking up a position at Sibanye Platinum, Sibanye Gold’s newly styled platinum division. “I think Jean Nel is a catch if they can keep him too,” said a UK analyst.
