ANGLO American is to sell new shares in its 78.5% owned subsidiary Anglo American Platinum (Amplats) in a bookbuild starting immediately that is worth R7.55bn at the subsidiary’s current share price.
The UK listed group said on Tuesday the bookbuild would help lower the risk of a share flowback when it demerged Amplats, as per a restructuring announced in May. This would be achieved as a greater proportion of shares would be held in South Africa.
Some non-South African institutions are not mandated to hold shares directly in companies with a primary listing and headquarters in places such as Johannesburg.
Anglo American added that the proceeds from the bookbuild would be allocated to reducing its net debt which stood at $11.1bn (1.1x net debt to Ebitda) as of June 30.
Some 13 million shares would be placed in an accelerated bookbuild. Amplats shares are currently trading at R570/share.
“This is probably a good time of the cycle to be placing shares in Amplats for those long-term investors,” said Arnold van Graan, an analyst for Nedbank Securities. Shares in Amplats are 39.5% weaker year-to-date and 8.5% lower over the last 12 months owing to a heavy decline in platinum group metal prices last year.
“Through this Placing we are moving proactively to distribute some of our Anglo American Platinum shares into the hands of a wider range of investors ahead of the planned demerger,” said Duncan Wanblad, CEO of Anglo American in a statement.
“This is expected to increase share trading liquidity in the near term as well as mitigate the impact of flowback following the demerger as a result of fewer Anglo American Platinum shares being distributed to Anglo American’s shareholders,” he said.
PGM prices have not staged a recovery this year despite expectations that the above ground stocks are beginning to deplete following the Covid pandemic. The electrification of the drivetrain is also unlikely to materialise as first forecast which will likely to see a greater proportion of combustion engine and hybrid electric cars being produced in the short to long-term.
Commenting in its second quarter report today, the World Platinum Investment Council said platinum demand would exceed supply by an expected 1.03 million ounces in 2024. Despite this, the platinum price, and those of its sister metals palladium and rhodium principally, have failed to gather traction.
“It’s dificult to put hand on heart and say now is the time we are going to see that switch,” said Ed Sterck, director of research for the WPIC. “But the longer it goes on the more dramatic the response is likely to be.”
