LONMIN SUFFERS IN HAPHAZARD COMMODITY MARKET
Markets have gone a little crazy; we’ve seen commodity stocks doing double-digit percentage moves down one day and being up double-digit percentages the next. People have been saying they’ve never seen anything like this, but that’s only because they’re relatively new to the market. In 2008/09 we saw plenty of similar moves, as in 2001, both times mostly in commodity stocks. This does not mean we’re back in 2008/09 and in for a massive selloff, but it does mean we have uncertainty and fear around commodity stocks. Lonmin is perhaps hurting the most and, with a large debt to pay off next year, it really is between a rock and a hard place as it’ll struggle to roll over or renew the debt. A rights issue seems impossible with its market cap at around R4bn (less than the debt expiring in 2016). Will it survive? I have no idea, but understand that buying the stocks is high risk and akin to putting your money on red or black at the casino; you’re either going to make a lot or lose a lot and those are horrid odds for any investor.