Amplats willing to give up top ranking

‘Being the biggest guy by ounces and not a profitable company is not a solution’ – CEO.

Anglo American Platinum Ltd. said it would be willing to sacrifice its status as the world’s largest producer of the metal as it puts some mines up for sale.

Amplats, as the Johannesburg-based Anglo American Plc unit is known, is seeking buyers for four mines and possibly stakes in two joint ventures after first-half profit dropped 88% because of a five-month pay strike, it said on Monday. Assets earmarked for disposal contributed one-third of 2013 production.

“It is not important to us” to be the biggest, Chief Executive Officer Chris Griffith said on Monday in a telephone interview. “Being the biggest guy by ounces and then not being a profitable company that you can invest in, that’s not a solution and that’s not a desire for us.”

The strike by more than 70 000 miners at Amplats, Impala and Lonmin Plc cost workers R10.6 billion in wages by the time it ended on June 24. The stoppage pushed South Africa’s economy into contraction in the first quarter as mining output plunged in the country that accounts for more than two- thirds of the platinum extracted globally.

Amplats has had “a number of suitors” for the assets, Griffith said on a conference call. “We are in the early stages of the process, so there’s no specific timeline to completion at present,” he said.

Amplats will retain the Mogalakwena open-cast mine, the company’s largest, three other operations and four stakes in joint ventures.

Fewer employees

The company said in January 2013 it planned to sell the Union mine and concentrators, north of Rustenburg. It has yet to find a buyer for those assets. The proposed sales will cut its workforce by more than half, reducing the headcount of 50 000 by about 27 000, Griffith said.

Amplats rose as much as 5.2%, the biggest intraday gain in more than three months, and closed 4.69% higher at R478.74 in Johannesburg. The stock has advanced 22% this year.

“I don’t think there will be that many buyers going around,” Albert Minassian, an analyst at Investec Ltd. in Cape Town, said by phone. “Even if they sell at a reduced price, the shares may rise because they’re getting rid of something that’s problematic.”

The assets earmarked for sale accounted for 34% of the company’s attributable output of 2.3 million platinum ounces in 2013. Impala Platinum Holdings Ltd., the second-largest producer, had output of 1.6 million ounces in the year through June 2013.

Government talks

“This is not a decision to exit these assets as a result of the strike,” Griffith said during a separate presentation on Monday. “This is a continuation of the restructuring and the repositioning of our portfolio.”

Amplats has opened talks with the South African government on the disposals, Griffith said. Mineral Resources Minister Ngoako Ramatlhodi told reporters in Cape Town on July 15 that he wasn’t overly concerned about Amplats offloading some of its mines, because the shafts would be sold as going concerns and wouldn’t be lost to the economy.

Amplats intends to exit its three Rustenburg operations and the Pandora joint venture. It will retain the remaining smelting and refining assets at Union and in Rustenburg, today’s statement shows. It will consider selling its stake in the Bokoni venture with Atlatsa Resources Corp.

“This is not a fire sale,” Griffith said. “We would prefer to sell the assets and we think that there is a realistic market there, but it clearly isn’t the best time in the world to be trying to sell assets.”

Listing option

Amplats may consider a separate listing for the assets if it can’t find a buyer, Griffith said.

FirstRand Ltd.’s Rand Merchant Bank is advising Amplats on the disposals, Griffith said.

Earnings per share excluding one-time items fell to 60 South African cents in the six months, from R5.14 a year earlier, Amplats said on Monday. Net income dropped to R157 million from R1.3 billion in 2013, it said.

Platinum sales decreased to 1.04 million ounces from 1.07 million ounces a year earlier as output slumped 39% to 715 200 equivalent refined ounces. Amplats used stockpiled metal to meet its commitments to users during the strike.

©2014 Bloomberg News


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