[miningmx.com] – DESPITE the widely expressed view six months ago that restructuring in South Africa’s platinum sector was imminent, it has yet to materialise.
Anglo American Platinum (Amplats) was the first to respond to tough trading conditions in the platinum sector saying it would sell its Rustenburg shafts, as well as its Union facilities and its investments in the Pandora Joint Venture, which it shares with Lonmin, and Atlatsa Resources.
The word on the street, however, is that Amplats is not exactly rushing through the sale process even though at current prices the Rustenburg assets may be the cause of some cash burn. Sibanye Gold, linked with a bid for platinum assets, said that until very recently Amplats had not opened a data room.
Asked why Lonmin had not sought to sell assets, the UK-listed firm’s CEO, Ben Magara, commented: “I’m hearing a lot about selling and buying but I’m not seeing many transactions’.
“When the world says “sell, sell, sell’ it forgets that there has to be a “buy, buy, buy’’, he added. Does that mean there is actually very little interest in accessing South Africa’s platinum market?
Perhaps a clue as to why six months after the conclusion of the devastating platinum strike, which reportedly cost the industry between R25bn to R30bn, there has been little evidence of the imminent restructuring is the peformance of the US dollar price of platinum, down 17%.
Sellers are reluctant to dispose of assets at what they perceive to be the foot of the market while buyers are perhaps hesitant there’s further pain in the platinum price to come.
Seten Naidoo, an analyst for Standard Bank Group Securities believed that at current market prices, Amplats will find it difficult to sell Rustenburg and Union without having to resort to a write-down first, which it would be unwilling to do. He values the assets at about R9.6bn (Union at R3.1bn and Rustenburg at R6.5bn), although a decline in reserves would affect this price.
“Evaluating the current market, we believe that few serious buyers exist, creating an almost impossible situation for Amplats to achieve a premium or even fair value for the assets,’ Naidoo said.
“We believe Amplats will find it difficult to find a buyer for the assets in the near term without Amplats itself taking a potential write-down of the assets,’ he said.
Asked if Lonmin would be a buyer of the shares in the Pandora Joint Venture it doesn’t already own, Magara said: “There needs to be a willing seller and a willing buyer. There must be an appropriate time for it’.
“Geographically, it is the right place to be in the Lonmin portfolio and it fits the Lonmin picture,’ he said. “It remains a great opportunity for us but we need to see the sale first,’ he said. Magara confirmed Lonmin has a pre-emptive right over the shares in the Pandora Joint Venture.
Amplats is reputed to have the strongest balance sheet of all the platinum majors and therefore can afford to wait for market conditions to improve, but there’s a question as to when that would be.
Magara was optimistic about a recovery in the platinum price saying that the fundamental market was still intact, and that there were limits to the extent recycling could plug the expected supply deficit presented by lower South African production over time. It’s a view other platinum producers share, including Amplats.
But with Amplats’ Rustenburg still essentially the same assets they were when the group wanted to sell them, it’s possible that time is not on its side.
“We believe PGM commodity prices are likely to remain depressed for the next 12-18 months due to our view that there appears to be no immediate catalyst for an accumulation of speculative positions which have determined platinum commodity prices year to date,’ said Naidoo.
