Lonmin wants to raise $400 million in a share sale and $370 million in loan facilities from banks as it seeks to refinance debt amid a 21% slump in the platinum in the past year. The company’s shares have fallen 86% in London trading in 2015.
Shareholders will vote on whether to proceed with the rights issues and debt facilities at a meeting on November 19, Lonmin said in a letter posted on its website on Tuesday. If they reject the plans, “the group may have to cease trading and shareholders could lose the entire value of their investment,” Lonmin said.
The share sale will be at a “significant discount” to the price of Lonmin’s stock prior to the day that it enters an underwriting deal, the company said. Lonmin closed at 25.5 pence per share in London on Tuesday, giving it a market value of about 150 million pounds ($231 million.)
Lonmin’s plan to refinance its balance sheet comes after it embarked on cutting jobs, closing shafts and reducing expenses to stem cash losses. The terms of the share sale will be announced on November 9, Lonmin said when it first reported on the plan last month.
South Africa’s Public Investment Corporation, which has about a 7% stake, will support the sale and may underwrite a “material portion” beyond its entitlement, Lonmin said.
Raising the entire $400 million “is going to be tricky,” Ben Davis, a mining analyst at Liberum Capital in London, said by phone. “It certainly was a good win to get the PIC on board but it wasn’t explicit enough in how much it would underwrite apart from its own portion.”
Lonmin’s competitors such as Anglo American Platinum, the largest producer, and Impala Platinum Holdings have stronger balance sheets and offer investors better prospects for growth, Hurbey Geldenhuys, a mining analyst at Vunani Securities in Johannesburg, said by phone.
“The proposed business plan, which includes the plan to shut high-cost shafts, is unlikely to result in the group surviving the current low platinum-group-metal price environment,” Geldenhuys said in an e-mailed note to clients.
The Bapo traditional community in South Africa, which acquired a 2.24% stake in Lonmin last year as part of a so-called black economic empowerment deal, cannot pay for new shares, the producer said. Shareholders will be asked to approve the granting of new shares to the group to maintain the proportion of its holding, Lonmin said.
Regulations in South Africa require that mines should be owned at least 26% by black individuals or companies as part of a policy to redress economic imbalances created under whites-only apartheid rule.
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