Lonmin dips 17% on news of 6 000 job cuts
Lonmin plunged to a record low on Friday on mounting concerns that the platinum miner will need to raise funds and after it announced plans to cut up to 6 000 jobs.
Lonmin is the world’s third-largest platinum producer and its shafts near Marikana were at the centre of the wildcat strike that led to police shooting dead 34 protesting mine workers in August 2012.
The projected job cuts will affect about 16% of Lonmin’s staff and contractors as the company closes its Hossy and Newman shafts, and mothballs three others while reducing its annual platinum output by 100 000 ounces, said the company.
The planned job cuts include staff who took voluntary redundancy packages offered in May. Chief executive officer Ben Magara also said the company would announce before November whether it would review its capital structure and how it would refinance its debt facilities. Lonmin shares dropped by as much as 17%. Companies, including Anglo American Platinum and Impala Platinum, the two biggest operators, are reducing costs as profit margins shrink with tumbling metal prices.
Platinum has been in a bear market for two years and South African producers are losing money on about three of every four ounces they mine. “Losing jobs is not pleasant, but everyone is having to take significant short-term pain,” said Magara.
“Our cost-minimisation plans are designed to improve this position as much as possible,” said Lonmin.
“The consequence of these decisions will be that the remaining shafts will allow for a smaller, more sustainable and agile business.”
Lonmin had net debt of $282 million (R3.5 billion) and committed debt facilities of $563 million at March 31, it said in May.
The shaft closures are a step in the right direction, said Numis Corporation analysts, including Cailey Barker, in an emailed note.
“As the marginal player in the space, in our view Lonmin will have its work cut out to survive through this low price cycle,” they wrote.