Lonmin rebuffs Xstrata proposals to take control

By Clara Ferreira-Marques and Sarah Young

LONDON (Reuters) - Lonmin (LMI.L: Quote) has rejected a reverse takeover proposal from its largest shareholder, Xstrata XTA.L, which questioned the ability of the strike-hit platinum producer's current bosses to keep their loss-making group alive.

At the center of a wave of strikes at South African mines that have left dozens dead, Lonmin highlights the difficulties facing a platinum industry under pressure from low prices, rising costs and a restive labor force.

Lonmin on Friday detailed a discounted $817 million rights issue to repair its balance sheet - its second cash call in three years - and said it had slid to a $698 million full-year loss.

But it was the news of investor and one-time suitor Xstrata's efforts to remove current management and, under at least one plan, take control of Lonmin, that came as a surprise.

"The proposals from Xstrata were conditional proposals, with terms that did not favor all of our shareholders," Lonmin's acting chief executive, Simon Scott, said.

Xstrata, which holds a 25 percent stake as a result of a failed 2008 takeover attempt, said the aim was not to take control, only to protect the value of its investment. It took a $514 million write-down on its Lonmin stake in August.

But it also did little to ease the tension that has marked the four-year relationship between the two companies.

"Lonmin has suffered longstanding operational problems and we are concerned that the business does not have the management capabilities to ensure a sustainable future, even if short term funding issues are resolved," an Xstrata spokesman said.