Ever since shrugging off repeated bids from rival Australian miner BHP, Anglo American has been promising shareholders a major restructuring.
The FTSE 100 mining giant pledged to deliver a “radically simplified” portfolio that would focus on its core mining divisions, copper, premium iron ore and crop nutrients.
The sweeping restructuring, which was a condition of many shareholders if they were to back Anglo’s decision to reject BHP’s near $50bn offer (£38m), left little room for the miner’s more frivolous divisions.
Anglo’s diamond business De Beers, seen by some analysts as a black sheep relative to its sootier counterparts, was put firmly on the chopping block by chief executive Duncan Wanblad in an update to shareholders in May. In the same statement, Anglo also lined up a spin-off of its platinum mining group, Anglo American Platinum (Amplats).
On Monday, Anglo said Amplats would be the first division to go as it doubled down on plans to spin off the firm as an independent entity next year and, in a boost watchers of London markets, revealed it was cooking up plans for an secondary listing in the UK’s capital.
Craig Miller, Amplats’ CEO, said in the announcement alongside its half year results that “the planned demerger will create a more focused, independent global leader in the [platinum mining] industry”.
And a London listing, Miller’s logic went, would help it to attract a wider pool of investors, almost a quarter of a century on from its departure from the London Stock Exchange in 2009.
Was Amplats right to list in London?
While the merits of the move are yet to be proven, one major shareholder in Anglo believes the decision is a step in the right direction.
“I think it’s the right decision,” he told City A.M. “It’s part of a multi-step process to enable Anglo to free itself up to become a more attractive investment proposition.
“I think for Amplats [having a primary listing on the Johannesburg listing and a secondary listing in London] was probably the only choice,” he added.
“Obviously there’s an option just to stick to Jo’burg, but It was a good idea to do a secondary listing in London because you’ve got precedent in [platinum miner] Lonmin on the London exchange. People know the platinum industry in London.”
Flowback factor?
But while the demerger may make sense from an Anglo perspective, analysts worry that shareholders in Amplats’ latest incarnation might be in for a bumpy ride due to the risk of severe ‘flowback’.
The phenomenon, which occurs when a demerged firm’s shareholders, unable or uninterested in holding the spun off firm’s stock, sell off their shares and push its price down, can be hugely damaging for the prospects of a new stock. And the jury is out on whether it will come to pass with Amplats.
In a note to investors, analysts at Berenberg said that the fact the Amplats won’t be granted indexation “is not a major surprise”, it “confirms [their] view that flowback will likely be a headwind” for the miner.
But a shareholder told City A.M. that while people were understandably “concerned about the flowback risk” a London listing would help negate much of the liability.
All eyes on Anglo American’s results
Shareholders will hope for clarity on all this and more at Anglo American’s half-year results on Thursday, with many opting to keep their counsel on the restructuring until more meat is put on the bones of the sweeping revamp.
Dates, tangible plans and a timeline are all on the wish list. Whether they will rewarded though, is yet to be seen.