Dim PGM outlook forces Anglo’s hand into R7.5bn Amplats bookbuild

Anglo American is restructuring its operations after rebuffing BHP and this includes the disposal and demerger of its PGM and diamond operations, among others, as it seeks a bigger play in copper. Picture: Supplied

Anglo American is restructuring its operations after rebuffing BHP and this includes the disposal and demerger of its PGM and diamond operations, among others, as it seeks a bigger play in copper. Picture: Supplied

Published Sep 12, 2024

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Anglo American plc may have quickly moved to place shares in Anglo American Platinum (Amplats) on the market after completing a bookbuild that raised R7.5 billion earlier this week as a result of persistently lower platinum group metals (PGM) prices and a less rosy outlook on demand.

The London and Johannesburg-listed group, which rebuffed an unsolicited offer from BHP earlier this year, on Tuesday sold 13.9 million ordinary shares in Amplats at R515 per share.

This represents about 5.3% of the South African PGM producer’s total issued ordinary shares that plunged by 8.27% in afternoon trade on the JSE yesterday to R523.39.

Analysts have told Business Report that Anglo American may have felt pressured to place some shares in Amplats on the market ahead of the planned demerger of the PGM producer.

Anglo American is restructuring its operations after rebuffing BHP and this includes the disposal and demerger of its PGM and diamond operations, among others, as it seeks a bigger play in copper.

“Management may also be thinking that the pressure on the PGM basket price will continue and as they wait to conclude the Amplats demerger. It was an opportune time to place some shares in the market (although) they still hold 73.3% of Amplats post the deal,” Bruce Williamson, mining and resource analyst at Integral Asset Management, told Business Report in an interview.

Williamson added that investors and market players will be watching how Anglo American further reacts to the continued weakness in PGM prices ahead of the demerger of Amplats.

“If Anglo American think that the PGM basket price will remain under pressure, it will be interesting to see if they will consider placing another parcel of Amplats shares in the market. It will also depend on how long it will take to conclude the demerger,” explained Williamson.

While the placing by Anglo American had raised gross proceeds of R7.2bn, it said yesterday that Amplats was not a party to the share placing “and will not receive” any of the proceeds. Settlement of the placed shares is expected to occur next week.

On Tuesday, Anglo American said the placing of shares in Amplats was “intended to broaden the free float of Anglo American Platinum, reduce the number of shares distributed to Anglo American shareholders upon demerger and thereby reduce flowback” following the demerger.

With the demerger of Amplats “well underway and on track,” the placement by Anglo American will also help with its fundraising as it considers a secondary listing in London for the PGM producer.

“Through this Placing we are moving pro-actively to distribute some of our Anglo American Platinum shares into the hands of a wider range of investors ahead of the planned demerger,” said Duncan Wanblad, Anglo American’s CEO.

“This is expected to increase share trading liquidity in the near term as well as mitigate the impact of flowback following the demerger as a result of fewer Anglo American Platinum shares being distributed to Anglo American’s shareholders.”

He added: “The proceeds from the Placing will also reduce our net debt as we continue to implement our portfolio transformation to focus on copper, premium iron ore and crop nutrients – and thereby drive sustainably attractive returns.”

Williamson said Amplats was well structured from a technical, financial and administrative perspective “to run the company independently of Anglo although it “just needs to sort out a range of shared services that were coordinated at a group” level.

BUSINESS REPORT