Lonmin urges support for its rights issue
PLATINUM miner Lonmin has warned that it will be in a “highly vulnerable position” if its shareholders do not agree to the $817m (£514m) rights issue to shore up its balance sheet in the wake of industrial action at Marikana.
Last week, Lonmin rejected several proposals from its largest shareholder Xstrata, which holds 25 per cent of the miner. Xstrata, which is in the final throes of a merger with commodities giant Glencore, wrote to the Lonmin board to say it would underwrite a $1bn rights issue, but on the condition that it would replace Lonmin management with that of Xstrata, which Lonmin rebuffed.
Lonmin stressed yesterday that without the rights issue, it could breach its banking covenants next March, which would make itself vulnerable to another Xstrata proposal.
As a result, it said it is “imperative” that Xstrata shareholders vote in favour of the rights issue at the company’s AGM on 19 November, so the rights issue can be completed before 31 December, it said.
As of 31 October, the group’s net debt stood at around $550m and this is forecast to rise further in the next few months as it ramps up production back to normal levels.
The strikes, which took place at South African mine Marikana, helped drag Lonmin to a full-year pre-tax loss of $698m.