Anglo American will avoid rushing the spin-off of its South African-based platinum division to ensure the best possible deal for shareholders and workers, the chief executive of the business has said.
Amplats boss Craig Miller made the promise as the parent company comes under growing pressure to implement its plan to break itself up after fending off a £39bn takeover bid by BHP.
The Australian miner’s pursuit of its London-based rival caused Anglo to accelerate plans to reorganise itself, with a separate listing of Amplats, the world’s biggest platinum producer, at the centre of its proposals.
“What we need to do is to make sure that the demerger process and the separation process is very well done and executed,” Miller told the Financial Times.
“However long it takes, it’s important that we do it right from the very beginning because we are going to be a separate listed PGM [platinum group metal] company for many, many years to come.”
Some investors and analysts think the demerger of the platinum business, which is 78.5 per cent owned by Anglo, could help revive the sector as it battles depressed prices in what some say is a “sunset” industry.
The main use for platinum group metals (PGMs), which includes platinum and palladium, is in catalytic converters for combustion engine cars, which are being phased out in the clean energy transition.
With high interest rates and sluggish global growth undermining demand and adding to costs, the platinum price has fallen 25 per cent to $964.10 per ounce since February 2021.
Amplats share price has also tumbled nearly 80 per cent since March 2022 with earnings dropping 71 per cent last year, forcing the company to announce 3,700 job cuts, almost a fifth of the workforce.
The dire market and financial performance means clarity over the company’s direction is key for some investors, particularly after the collapse of the BHP talks.
Anglo chief executive Duncan Wanblad blamed the takeover failure on the deal’s “highly complex and unattractive” structure, concluding the company should break itself up instead.
The separation was one of the few things the two groups agreed on in their acrimonious discussions.
Now Wanblad must deliver on that strategy. Although his first priority is likely to be the sale of the coking coal business in Australia, the focus in South Africa is on the country’s main platinum producer.
“There is probably a lot less patience [about Anglo’s future] because there has been this alternative plan from BHP,” explained Dawid Heyl, portfolio manager at Anglo shareholder Ninety One. “They do have good assets and people should not be worried about Amplats as a standalone.”
Miller said there was “tangible excitement” within Amplats about its future as a separate company, insisting he can convince investors that holding the group’s shares is a “no-brainer”.
However, this may be a tough task as the phasing out of combustion engine cars has clouded the future for platinum and other PGM metals.
As well as platinum, the company also mines the other five PGM metals palladium, ruthenium, rhodium, osmium and iridium.
“It [the industry] has to be pragmatic and that means cutting production and taking the hit as that window of autocatalyst demand [catalytic converters] is shrinking by the day,” said Ben Davis, a mining analyst at investment bank Liberum Capital.
Nicky Shiels, head of research and metals strategy at MKS Pamp, added that the sector needs to consolidate as it cannot sustain large mines producing metals that the “world needs less of”.
There are also worries over possible forced selling of demerged Amplats shares as certain investor fund mandates forbid exposure to emerging market countries such as South Africa, particularly one with a struggling economy and facing political uncertainty after elections, say analysts.
However, Miller shrugged off the negatives, saying he can win round shareholders.
“What’s important for me is informing people around what Anglo Platinum [Amplats] is all about and the opportunities for us in the energy transition world. Once you start to answer all those questions, it will be a no brainer for people to be invested.”
One clean energy source that could boost demand for platinum and palladium is hydrogen. Although technology is still being developed, the precious metals are key in the making of green hydrogen and fuel cells that use the gas, which could then power cars and even aircraft.
Others point to slower than expected sales of purely electric cars that has propped up demand for combustion engine models and PGMs.
“Internal combustion engines [still] dominate the world’s parking lot” while hybrid vehicles [which use hydrogen] are increasingly important as a technology “that gives [us] the best of both worlds”, said Phoevos Pouroulis, chief executive of platinum producer Tharisa.
Liberum’s Davis added: “There will still be a future for PGMs [because] they are very useful elements whose properties are very difficult to otherwise replicate.”
But he thinks the demerger will have little immediate impact on the industry’s prospects as it is just one company that “doesn’t have the ability to exert market control”, despite its size with about 30 per cent of global platinum production.
For the company, though, independence will give it the freedom to invest in its own growth and plans, rather than paying dividends to fund far-off projects of its parent, such as Anglo’s fertiliser mine in Yorkshire in northern England.
“It will have its own strategy, driven purely by PGMs without the cloudiness of other decisions inside the diversified [group],” said Paul Dunne, chief executive of Northam, South Africa’s fourth-largest producer of PGMs.
Arnold Van Graan, head of market research at Nedbank CIB in Johannesburg, agreed a spin-off should benefit shareholders as it will make Amplats “the master of their own destiny”.
“It will also be unbundled in a manner and timeline of Anglo’s choosing, which should help better manage the separation.”
However, he warned the demerger comes at a difficult time. “The PGM sector is not in great shape and that adds to the challenge.”
Additional reporting by Harry Dempsey in London