Valterra Platinum makes its debut on the London Stock Exchange on Monday after it was officially set free from Anglo American on Friday evening. The market will be closely watching how many of the Anglo American shareholders who received Valterra shares in the spin-off hold on to these in coming weeks.
Valterra, formerly Anglo American Platinum, celebrated its new name and new JSE “ticker” at the JSE on Wednesday, with CEO Craig Miller blowing the traditional kudu horn to open the Johannesburg bourse, where it will retain its primary listing. Anglo American has spun out the platinum business as part of the radical restructuring it announced last May, soon after Australia’s BHP launched its hostile bid.
Valterra’s London listing is a secondary listing, which aims to make it easier for Anglo shareholders with restrictive mandates to hold on to the Valterra shares they have received in the demerger, minimising the “flowback” that is expected to weigh on the platinum group metals (PGM) company’s share price in the near term.
Valterra is a cornerstone of the global PGM industry, with a market value of about R200bn, R100bn in annual revenue, more than 39,000 employees and more than 100 years of PGM resources. Now that it is no longer tightly held by Anglo it becomes the 15th largest share on the JSE’s top 40 index, up from 34th.
Miller said last week that he expected no more than 8%-10% of the market capitalisation would be sold by offshore index funds, whose mandates do not allow them to hold Valterra shares, which were distributed by Anglo to its shareholders in the form of a dividend in specie.
However, the offshore selling by Anglo investors will be countered by domestic buying, because passive index tracker funds will have to increase their holdings in line with the more than doubling of Valterra’s weight in benchmark JSE indices. “We expect more buyers than sellers in the next three months,” Miller said.
The separation has been completed in record time since Anglo announced plans to “simplify” its portfolio, which will narrow its global focus to just copper, iron ore and fertiliser, leaving Kumba Iron Ore and wine farm Vergelegen as the group’s only businesses in SA.
As part of the demerger process Valterra had to declare a huge R16.5bn dividend in February, two-thirds of which went to Anglo American, which is understood to have demanded an even higher payout but was negotiated down.
Neither Anglo CEO Duncan Wanblad nor any of the group’s London-based executives attended Valterra’s celebrations in Johannesburg last week, though Kumba CEO Mpumi Zikalala was much in evidence as was Nolitha Fakude, head of Anglo’s corporate office in SA.
The name Valterra — value from the earth (val and terra) — was decided on after extensive consultation. Miller said last week Valterra had plenty of growth opportunities in its own rich portfolio of assets, particularly at its Mogalakwena mine, and did not plan to make acquisitions or expand outside PGMs.
“We’ve been quite clear that given the endowment we have and the scale of the resources and ... quality of the assets we have within the portfolio, our opportunity is really to leverage the value of our existing core assets. So we’re not looking at expanding the number of assets we have,” he said.
Dividends
After February’s mega-dividend, the company plans to go back to annual dividend payouts of 40% of headline earnings as a base level. It has committed to remain disciplined about capital allocation, despite shedding its big parent. But after it has looked at “investment in the ground”, if it generates additional cash it will return that to shareholders, Miller said.
Higher prices could trigger that because a 10% uplift in PGM prices adds about R7bn to Valterra’s earnings. Valterra was positive on the outlook for PGMs given global supply deficits and anticipated future constraints on supply, Miller said.
Anglo has held on to 19.9% of Valterra, saying it will sell this down responsibly over time. The rest of the Valterra shareholding after the demerger is about a third South African, a third UK and Europe, and a third US. The Valterra share closed at R704.72 on the JSE on Friday, down slightly from the R724 at which it traded on Wednesday.
London analysts do not expect aggressive selling of the sort that weighed on Thungela Coal’s share price after that company was demerged from Anglo American in 2021. Some believe Valterra could be worth as much as 3,200p per share, significantly higher than its implied value ahead of the London listing.
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