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Lonmin loses 90% of market value in London on funding

Banks and shareholders likely to withdraw if miner ‘cannot stop the cash-burn’.

Lonmin’s shares fell in London, bringing the decline in its market value this year to 90% on concerns the world’s third-largest platinum miner will struggle to refinance its debt.

The company has to renegotiate $544 million of debt facilities by the middle of next year as weak platinum prices, down by half since a peak in 2011, mean its operations are burning through cash. It already drew down a $400 million facility amid talks with bankers to restructure debt, two people familiar with the matter said this month. Lonmin may cut as many as 6 000 jobs and annual output by 100 000 ounces, the company said in July.

“The priority for banks and equity holders to bail out a platinum company must be pretty low at this point,” Ben Davis, a mining analyst at Liberum Capital, said by phone from London on Wednesday. “It’s going to be pretty tough for them unless the platinum price increases miraculously.”

Lonmin fell as much as 5.3% and was down 1.3% at 18.75 pence by 12:52 pm in London. It is the year’s worst performer on the FTSE All-Share Index of equities. In Johannesburg, where the company has a secondary listing, the stock has declined by 87% in 2015.

“One cannot see how banks or shareholders will support them if they cannot stop the cash-burn,” Hurbey Geldenhuys, a mining analyst at Vunani Securities in Johannesburg, said by phone.

James Clark, a spokesman for Lonmin at Cardew Group in London, wasn’t immediately able to comment when contacted by phone and said the company may respond later on Wednesday.

©2015 Bloomberg News

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