Lonmin unveils rights issue plan

THE free fall in Lonmin’s shares continued unabated on Tuesday as shareholders clambered out of the stock‚ sending it 33% lower just a day after the world’s third-largest platinum miner presented a hugely discounted rights issue proposal.

Lonmin‚ which has a heavy debt burden of about $500million (R7-billion) falling due in the next 12 months‚ has to secure shareholder approval for the fully underwritten issuance of nearly 27-billion shares at a 94% discount to restructure that debt.

Lonmin shares have fallen 60% in the past week.

Analysts have said shareholders not following their rights would be “diluted into obscurity” and that this unprecedented discount was designed to force investors into following their rights‚ ensuring Lonmin raised $407million before costs.

“The deep discount reflects the difficulty in getting this rights issue away although it is fully underwritten‚” Carole Ferguson‚ a senior research analyst at SP Angel in London‚ said.

“Unless there is a rally in platinum prices‚ I don’t see how the long-term economics work out for this business where operational costs are being met‚ but little internal free cash-flow is being generated‚” she said.

If shareholders do not approve the rights issue‚ derailing the debt amendments‚ Lonmin would speak to its lenders about refinancing existing facilities or dispose of some or all of its assets or seek a merger‚ with no certainty these options could be settled in time. — BDLive