Strike-hit Lonmin to raise $800 million for recovery
By Clara Ferreira-Marques and Tiisetso Motsoeneng
LONDON/JOHANNESBURG (Reuters) - South African miner Lonmin (LMI.L: Quote), the world's third-largest platinum producer, is to raise $800 million from shareholders to cut debt and finance a recovery after weeks of strikes in which dozens were killed.
It will use the underwritten rights issue to restructure the balance sheet as soon as possible, the company said on Tuesday.
In August, Lonmin's Marikana mine was the scene of South Africa's most violent episode since the end of apartheid, when police shot dead 34 people involved in wildcat stoppages battering the country's already beleaguered platinum industry.
Most of Lonmin's miners have since returned to work, but the producer - which even before the walkouts and illegal strikes had one of the most stretched balance sheets in the platinum sector - said it had lost 110,000 ounces of production and scaled back long-term plans to boost output and sales.
Lonmin said efforts to ramp up activity after weeks of strikes were progressing better than expected, but the return to business as usual would take months and, along with the rebuilding of stocks, would swell its debt in the short term.
That meant it would have breached current loan covenants at the end of March - even if higher-than-expected sales of stockpiled platinum help it meet a test this November; so the miner has turned to investors for a cash boost.
"We believe $800 million is the right quantum to support the plan we have in place," acting chief executive Simon Scott told reporters. "It will put the company in a position where it can reduce its current debt levels and manage the business on a stable platform."
Analysts had speculated that Lonmin could raise as much as $1.5 billion - virtually its current market value - after it warned in August that it could turn to investors for cash. Continued...