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  • Future of PGMs in SA is in the spotlight

    Thu May 16 2024


    The long-term viability of platinum group metals (PGMs) in South Africa has come into question after Anglo American announced plans to spin it off its PGMs assets on the back of rejecting the multibillion-rand takeover bid by BHP.

    The global mining company with a portfolio that spans diamonds, platinum, copper, iron ore and more, this week said it will spin off Anglo American Platinum (Amplats), which produces a third of global platinum, amid a bid for Anglo from BHP.

    Anglo American said that following its February announcement that it was reconfiguring Amplats, it would be separating from the company in which it holds a 79% stake, adding that its portfolio and structure were simpler without Amplats.

    This, it explained, was because retaining it would limit “the ability of both Anglo American and Anglo American Platinum to achieve their full potential”.

    “As a standalone business, Anglo American Platinum will be best positioned to set its own priorities to deliver its full potential, with Anglo American’s shareholders able to participate in full through the demerger,” it said.

    Seleho Tsatsi, a mining analyst at Anchor Capital, yesterday said that spinning off Amplats was being considered before the BHP bid, although the offer could well have sped up the decision.

    Anglo American shares were up 0.4% lower to R601.00 while Amplats’ stocks rose 3.9% to R745.57 per share by 4pm yesterday.

    Anglo American has twice spurned a bid from BHP to buy it, excluding its South African assets such as Amplats, saying the latest proposal from BHP “again fails to recognise the value inherent in Anglo American”.

    Umthombo Wealth Equity fund manager and analyst, Matthew Zunckel, said Anglo American’s strategy update showed that, given BHP’s proposed merger conditions, both parties clearly had doubts over the long-term viability of the platinum group metals industry.

    “Clearly, Anglo American needs to make a long-term call on the metal group, and with yesterday's announcement, it looks like management has taken a dim view on long-term demand,” Zunckel said.

    Amplats owns and operates five mining operations in South Africa's Bushveld complex, including Mogalakwena, Amandelbult and Mototolo, as well as the Unki mine, in Zimbabwe.

    Zunckel said the spin out, if it happens, could mean short-term selling pressure from those Anglo American shareholders that do not wish to hold Amplats shares directly.

    “Longer term, Amplats may benefit from a more diverse shareholder base and more financial flexibility from not being tied to a greater group,” he said.

    “The share price may also benefit in the longer term from better liquidity, which comes with having a higher free float.”

    Platinum prices have been volatile lately, moving from about $1 000 (R18 354) a gram in January to $920 in February, before recovering somewhat to just more than $1 000 again this month.

    This is well off its five-year high of just more than $1 300 in February 2021.

    Analysts forecast prices for the metal to remain flat for the year, with volatility in-between, and that there will be difficult for it to get back to the pandemic high when there were shortages.

    The World Platinum Investment Council has already forecast that South Africa’s platinum supply to global markets will decline 2% this year.

    Zunckel said that short-term fundamentals for platinum remain slightly positive with the market expected to be in deficit, which concurs with Johnson Matthey saying there will be a lack of supply.

    Miners in South Africa, where the world’s largest platinum reserves are held, have been battling.

    Sibanye-Stillwater recorded a $2.58 billion (R47.5bn) loss for 2023.

    Impala Platinum could well shut some shafts after half-year profits for the period to the end of December 2023, slumped to R1.7bn compared to R14.8bn a year earlier.