Managers back Resilient’s style
• Lonmin CEO paints a positive picture despite dismal numbers including $1.05bn impairment
Fund managers have quashed suggestions that the Resilient group of companies owns or has exposure to overrated assets in SA and eastern Europe, saying that its peers have actually tried and failed to acquire a number of them.
The delayed and dismal full-year numbers including a $1.05bn impairment, presented by platinum miner Lonmin stood in stark contrast to the positive message CE Ben Magara strove to project on Monday as Sibanye-Stillwater advanced its friendly takeover of the firm.
While analysts concurred there was nothing in the numbers that would dissuade Sibanye, an aggressive gold and platinum miner with a penchant for deals, to drop its all-share bid, Lonmin finance director Barrie van der Merwe conceded that the company’s financial position was not ideal.
Quizzed by Patrick Mann of Deutsche Bank during the results presentation about what the consequences might be for the Sibanye deal of Lonmin sliding into a net debt position and being unable to repay a $150m loan, Van der Merwe said: “We are comfortable with liquidity. We are aiming to keep this at least cash neutral … there are no hard consequences of being in net debt but one could understand that anyone buying a business would prefer it to not be in a net debt position.”
Lonmin recorded a $1.05bn impairment following the implementation of a business review process in August 2017 ahead of the close of its financial year at the end of September.
Lonmin delayed its results in November 2017, outlining a strategy of inviting buyers for a number of its assets, bringing in partners for growth projects and selling spare smelting and refining capacity.
The impairment pushed the tangible net worth of Lonmin to $674m, well below the $1.1bn that has been stipulated by lenders in its debt covenants.
However, the lenders have agreed to suspend the clause until February 2019 when the Sibanye deal lapses.
Shareholders in both companies need to approve the transaction, as do competition authorities in SA and the UK, where Lonmin is listed. The impairment meant Lonmin reported a post-tax loss for the year to end-September of $1.15bn compared with a $400m loss the year before.
Lonmin would have to pay $150m if it breached the covenants. It had $235m of cash and cash equivalents at the end of a year in which it had negative cash flow of $67m compared with an outflow of $31m in the previous year.
Magara acknowledged that the first four months of the 2017 financial year had been tough, but he focused on the remaining eight months and highlighted the strong operational performance in the first quarter of 2018 at the three key mines that generate 80% of production. Lonmin reported revenue of $1.17bn for 2017 compared with $1.12bn revenue in 2016.
Sales in platinum-group metals fell to 1.38-million ounces from 1.41-million ounces recorded the year before.
Lonmin’s auditors have flagged “material uncertainty” about the firm as a going concern, but the board said it was addressing these issues as part of an operational review, including the closure of old shafts.
Magara has said 12,600 jobs would be cut, bringing the company’s workforce down to 20,000 people.
“Lonmin continues to be hamstrung by its capital structure and liquidity constraints,” Magara said.