PLATINUM producer Lonmin saw its shares plunge by 8.3 per cent yesterday after mining giant Glencore announced that it was divesting its 23.9 per cent stake in the company.
Glencore is proposing to make a “distribution in specie” to its shareholders, which means the asset will be distributed in its present form, as opposed to being sold and the proceeds then distributed.
According to Glencore, a straightforward market disposal of the Lonmin stake at this time would not be in the best interests of its shareholders but the distribution in specie will “enable shareholders to manage the investment for their own account”.
If the divestment goes through, Gary Nagle and Paul Smith, Glencore’s nominated representatives on the Lonmin board, will step down.
Ivan Glasenberg, Glencore chief executive, said the Lonmin stake has “always” been regarded as non-core because Glencore’s “investment philosophy” is to hold investments in production assets in the commodities in which it trades.
“As we do not trade platinum and have no special insight into the market, we believe that it is better to leave to our shareholders the decision as to how to manage the Lonmin shares,” he added. “Our desire to distribute the Lonmin shares therefore reflects our philosophy, not a view on Lonmin or platinum.”
Lonmin stated that Glencore’s proposal is a “constructive way forward” which enables Glencore shareholders to continue their participation in the company’s future. The firm added that it “welcomes the supportive statements from Glencore chief executive Ivan Glasenberg concerning Lonmin”.
Lewis Sturdy, a dealer at London Capital Group, said the move showed Glencore taking a pragmatic view “after a rather swashbuckling history”.
Shares in Glencore dipped slightly by 0.37 per cent yesterday.