Anglo American behind $100m platinum fund
James Wilson, Mining correspondentAuthor alerts
Anglo American is investing $100m in companies that use platinum and associated metals to try to spark more demand for commodities that are crucial to the financial health of the mining group.
The plans are akin to venture capital investments by the world’s largest platinum producer with hopes that small companies and start-ups will develop technologies based on little-known metals such as ruthenium and iridium as well as platinum.
Anglo’s attempts to accelerate the investments come as platinum miners are struggling to restructure their operations in the face of weak demand with prices flat over the past five years, even amid a period of labour unrest.
Anglo is trying to sell a cluster of its older South African mines while it and the other two largest producers were this year hit by a five-month strike that halted most output.
Platinum is used mainly in jewellery and in vehicle catalytic converters but recent market weakness has intensified efforts by platinum producers to try to foment demand.
Anglo and other leading producers last week launched an industry promotional body to try to increase interest in the precious metal as an investment. Other so-called “platinum group metals” have wide industrial applications.
“We think there is a need to continue to encourage the development of high-tech applications,” said Andrew Hinkly, executive head of marketing at Anglo American Platinum, the miner’s South Africa-listed subsidiary. “The companies we invest in are those which will create demand for our metals.”
The direct investments are part of a shift of marketing strategy by the miner, which last year ended a two-decade-old marketing agreement with Johnson Matthey, the refiner and distributor of platinum.
A revised supply deal eliminated discounts given by Amplats on platinum sales in return for Johnson Matthey’s marketing services.
Mr Hinkly said Amplats had not been seeing the market develop as much as it had hoped. “We thought we could do better ourselves,” he said.
Amplats has so far invested almost $29m in six companies. It is targeting minority investments for about three years and says the carrying value of its investments up to now is almost $44m, in line with a targeted return of at least 30 per cent.
Among the companies to have received investments is Ballard, a US-listed fuel cell producer, which is testing fuel cell home generators in South Africa.
Anglo’s fund has also invested in Primus Power, a US battery maker that uses PGMs such as iridium and ruthenium.
Water treatment, medical devices and electronics are other areas where Anglo expects to invest.
Platinum accounted for about one-sixth of Anglo’s revenues and about 11 per cent of underlying earnings last year.
The production is part of Anglo’s significant presence in South Africa, which some investors and analyst think is one of the political risks weighing on the company.
Anglo’s attempts to sell some South African mines – at Union and at Rustenburg – are set to come under further scrutiny at presentations for investors next month.
Mark Cutifani, chief executive, has warned that a sale or spin-off is likely to take until next year.