UP­HILL BAT­TLE AHEAD

Financial Mail - - EDITORIALS -

Lon­min CEO Ben Ma­gara is bat­tling to keep the com­pany go­ing in the face of at least four pow­er­ful “en­e­mies”: low com­mod­ity prices, a huge debt pile, bloated staff lev­els and vi­o­lence on the plat­inum belt. It can con­trol only two.

First, Lon­min can — at a stretch — re­duce its debt pile of US$154M. But it can do this only if in­vestors, who have al­ready lost 96% of their in­vest­ment in the past five years, ac­cept yet an­other rights is­sue. In the six months to March Lon­min paid $34m to ser­vice this debt and other fi­nanc­ing ex­penses. Which leads to the sec­ond fac­tor. In an at­tempt to keep go­ing, the com­pany last week an­nounced yet an­other round of re­trench­ments, aim­ing to cut 1,139 jobs by De­cem­ber. It has al­ready lost more than 5,000 in the past five years. The tar­get is to re­duce over­head costs by R500m by fi­nan­cial year-end Septem­ber. Unions won’t make this task easy. But Lon­min is fully aware it will have to do more.

A num­ber of peo­ple have been killed on the plat­inum belt in the past three months, in vi­o­lence that may be re­lated to union ri­valry. While the com­pany and gov­ern­ment can­not im­me­di­ately do much to con­trol the plat­inum price, which has re­mained at the $900/oz level, gov­ern­ment can do much more to end the vi­o­lence in the res­i­den­tial ar­eas that the com­pany can’t re­al­is­ti­cally po­lice.

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