When I started in financial journalism in 1980, the JSE hosted easily the most exciting mining sector on earth. Investors could choose from highly leveraged gold stocks like Bracken, Leslie and Loucas Pouroulis’s Cons Modder, through to any number of small and large coal shares – and even the dreaded asbestos twins Gefco and Msauli. Then came the Great Consolidation where mining houses bought out minorities and left investors with just a handful of options. With scale came efficiencies, but as they tend to do, head offices soon added layers of management. That brought risk aversion highlighted in their continuous folding to outrageous demands from labour (where else in the world are wage increases and productivity unrelated?). For years the commodity price boom hid some rather obvious underlying problems. Not that this has reversed, mining companies are once more starting to see the benefit of more nimble, focused entities. First we had BHP Billiton spinning off South32. Now comes Anglo American’s move on its beleaguered platinum mines. Investment bankers will be licking their lips at dawning of this new fee generating trend. The more things change, the more they stay the same. – Alec Hogg
By Silvia Antonioli
LONDON, April 23 (Reuters) – Anglo American favours a listing of some South African platinum mines as the most likely route to divesting those assets, the mining group’s chief executive said.
Platinum has been a problem for London and Johannesburg-listed Anglo American for some time, due to recurrent strikes and stubbornly weak prices.
Anglo American Platinum has said that it would divest several assets, including some in Rustenburg, which was at the centre of a five-month strike last year. This is part of a plan to switch to more mechanised mining.
“We are still in negotiations with some parties regarding a potential trade sale but from our point of view, at this stage, the preferred option is an IPO,” chief executive Mark Cutifani said at the company’s annual general meeting, referring to a stock market listing.
Anglo’s sale price expectations are struggling to meet the offers from the potential buyers, according to sources familiar with the process.
South African precious metals mining firms Sibanye Gold and Northam Platinum as well as community-owned firmBaroka Platinum are among the parties which have shown interest in buying some of these assets.
Talks between Amplats and Baroka are ongoing, a source familiar with the matter said.
Chairman John Barker, responding to a shareholder question at the meeting about the company’s weak share price performance versus peers, said the share performance had been disappointing and blamed this, at least in part, on the costly Minas Rio iron ore project in Brazil.
“I think we have had a lot of headwinds in a number of areas. Without doubt Minas Rio has been a huge drag on the company’s balance sheet, a huge drag on the share price until it can show a clean yield,” Barker said.
After a slump in iron ore price, Anglo took a $3.5 billion impairment earlier this year on Minas Rio, which started exporting some iron ore in late 2014.
The project, which will cost about $8.4 billion, has been plagued by delays and cost overruns since Anglo bought it in 2007-2008 for about $5.5 billion.
“Today with the currency moving in our favour and some operational improvements we are around break even. In the next 12 months the team has set some aggressive targets to try and create some space (to come down to) the low $40s,” Cutifani said.
Due to its high quality, Minas Rio’s iron ore fetches a premium of about $5-8 dollar to the iron ore benchmark, which is currently at around $50 per tonne.
