Anglo American’s platinum spinoff debuts as Valterra

Valterra Platinum (JSE: VAL), formerly Anglo American Platinum (Amplats), began trading as a standalone entity on the Johannesburg Stock Exchange on Wednesday, marking the official demerger from parent company Anglo American (LSE: AAL).

The miner, the world’s biggest producer of the precious metal by value, will also have a secondary listing on the London Stock Exchange from next Monday.

The move is part of Anglo American’s broader restructuring strategy, announced last year to counter a $49 billion takeover bid from BHP (ASX: BHP). Anglo America plans to spin out its diamond unit De Beers and has sold coal and nickel assets. It’s now focused on iron ore and copper, after receiving a substantial dividend from its platinum subsidiary before the split.

Valterra’s debut on the JSE was marked by volatility. The stock fell 1.5% to close at 736.81 rand apiece (C$56.71) on Wednesday in Johannesburg. 

Platinum traded at $1,084 per oz. on Wednesday, extending gains from last week as supply shortages translated into higher prices, BMO metals analyst George Heppel said in a note on Friday.  

Higher prices

“Platinum market deficits are universally expected by the analyst community for the foreseeable future, driven by growing jewelry demand and a renewed interest in plug-in hybrid electric vehicles, with additional upside potential arising from the chance of tighter emissions standards in the future,” Heppel said. 

“However, the main challenge facing PGMs continues to be the lack of a compelling and holistic investment story for investors, something that is not helped by the presence of less alluring demand narratives such as fuel cell vehicles or potential monetary demand.”

Market deficits for PGMs and their potential use in the energy transition suggests prices should climb further, Valterra CEO Craig Miller told Bloomberg News on Wednesday.

Growing pains

The spinoff closes a chapter spanning over two decades in which platinum-group metals (PGMs)—including palladium, rhodium and iridium—powered both Anglo American’s growth and South Africa’s mining economy, overtaking gold as the country’s primary mineral export.

Despite the recent higher metal prices, Valterra steps into independence amid serious headwinds for  PGMs as electric autos displace the need for catalytic converters with platinum or palladium as fossil fuel vehicle pollution controls. There’s been a sharp reversal from the record profits South African PGM miners posted just a few years ago.

A recent UBS report warned Valterra is expected to enter net debt of 8.4 billion rand by the end of June due to demerger costs and lost output following severe floods in February. Production at the Tumela mine in Limpopo province was suspended last month after heavy rains disabled the site’s pumping systems. Miller said Tumela is expected to resume operations by mid-year.

 

CEO Craig Miller. Image courtesy of Valterra Platinum

To ease investor concerns about post-spinoff instability (or flowback), Anglo will retain a 19.9% stake in Valterra for now. The London listing is also intended to broaden the company’s investor base and maintain liquidity.

Valterra is now the world’s fourth-largest platinum miner. Its launch adds momentum to Anglo’s wider asset reshuffle, which includes selling its coking coal operations in Australia, offloading nickel mines in Brazil, and evaluating options for its struggling De Beers diamond division.

Still, uncertainty lingers. Some investors said if Anglo’s valuation doesn’t significantly improve, the company could face renewed takeover interest.

“The spin-off of Valterra removes the key hurdle and increases the probability of another M&A approach,” UBS analysts said in a research note on May 21. “The potential for M&A increases further as or when Anglo exits De Beers.”