[miningmx.com] — WAS ANGLO PLATINUM guilty of voting with its ego? Its decision at an emergency board meeting on October 7 declining to sell its 33% stake in Bafokeng Rasimone Platinum Mine (BRPM) surely paints the platinum producer into a tight corner.
The bidder for BRPM – which will now be listed as Royal Bafokeng Platinum or RBPlat as it is known – was Impala Platinum. The motive for Impala’s interest in BRPM, which also includes the Boschkoppie and Styldrift properties, is that they would have provided Impala new expansion options in lieu of spending billions of rands on its own capital developments.
Folding BRPM into Impala would also have opened an important chapter on mining property consolidation in the platinum sector which many hoped would begin this year. It’s an ongoing theme in the sector that, not unlike the South African gold industry in the Nineties, farm boundaries don’t well describe the underlying geology.
Sometimes, there are different miners accessing an orebody that would be better accessed by a single owner.
But no. The sticking point, pure and simple, seems to be Anglo Platinum’s reluctance to sell mining properties to its long standing rival or its “dribbling cousin’ as one platinum executive once unkindly personified Impala’s supposed inferiority to the larger Anglo Platinum.
Since Impala’s bid for BRPM was a 100% offer, Anglo’s refusal to play ball was enough to scupper the deal entirely, even though Royal Bafokeng Holdings (RBH), the investment vehicle of the North West province’s Bafokeng Nation, owns the controlling 67% in the mine. However, here’s where it gets interesting.
The view among RBH was that RBPlat’s mineral holdings are always likely to attract a takeover offer, Impala especially, in the long run (although the RBH was surprised a bid came in before listing RBPlat, but more of that later).
In other words, since RBH is well disposed to selling of BRPM, it’s highly possible Impala Platinum is sufficiently encouraged to return with a bid for RBH’s 67% stake. This would leave Anglo Platinum up the creek as a minority in a valuable vehicle its competition owns.
Not so fast, analysts say, however.
The possibility of Impala Platinum proceeding with another bid for BRPM is muddied ever so slightly by the fact Anglo Platinum owns the smelting contract over all platinum group metal ore the mine produces. This gives Anglo Platinum a degree of important operational leverage were it to find Impala the controlling shareholder in BRPM.
“Impala Platinum can make a bid for RBPlat at a later stage when its listed, but don’t think it’s as easy as that,’ says Leon Esterhuizen, an analyst at RBC Capital Markets in London. “In fact, you can be sure Anglo Platinum won’t make it easy for Impala,’ he says. He also believes that Anglo Platinum, recognising RBH is such a willing seller of BRPM, might be now keen for the inking of a pre-emptive deal protecting it in the event of an outside bid.
In the meantime, RBH returns to the prospect of a listing RBPlat on the JSE, and now with a spring in its step. The market chit-chat is that the IPO wasn’t going swimmingly; that its internal valuation of between R20bn to R15bn wasn’t overwhelmingly supported by the institutions, which is why Impala moved prelisting with an opportunistic bid.
Sources at RBH comment that Impala’s bid was, in fact, “fancy’, well in excess of the IPO expectation. On balance, analysts think a R17bn by Impala would have been very full. Whatever the case, potential investors in RBPlat should view the upcoming listing as having been given a nice little bid underpin. It’ll be interesting to see where RBPlat is priced eventually.
And what of Anglo Platinum? Failing to get its head around an offer by Impala Platinum may have been at least partly based on some economic sense. “It would have given Impala some cost competitiveness over Anglo,’ says an analyst. But then couldn’t Anglo Platinum have taken the cash from Impala to plough back into its own assets?
Perhaps the answer to Anglo Platinum’s decision to vote down the Impala offer is based in London, not Johannesburg. As an 84% shareholder, Anglo American ultimately calls the shots, more so since Cynthia Carroll, Anglo American CEO, took the unusual step of having herself elected chairperson of Anglo Platinum in an appointment she specifically wanted to happen, Anglo sources say.
But if ever there were an argument against dual officerships in two listed but intertwined companies, this would be it. Did Carroll preside over a board meeting informed by what was important for Anglo Platinum, or for Anglo American?
