SHANDUKA ON LONMIN: ‘WE CHOSE NOT TO PAY’
As Lonmin goes cap in hand to beg for a $400m bailout from shareholders in order to keep its struggling operations afloat, BEE partner Shanduka said it will walk away from its stake in the company, which is held through Incwala Resources.
shanduka will not repay the £200m loan to buy its effective 9% stake in Lonmin and will forfeit its stake, leaving the platinum miner without sufficient black economic empowerment shareholders and a financial hole.
Mmabatho Ma boy a, Shanduka’s stakeholder relations manager, says Shanduka “chose to exercise its independent business decision to not repay the loan and face the consequences of the loan conditions. The loan condition[s] state that Lonmin has the right to take over the investment if the loan is breached, and Shanduka Group will forfeit both the investment stake and its initial R300m investment into Incwala Resources [Lonmin’s BEE partner].”
On 2 November, Lonmin warned that it will impair $1.85bn to $2bn of assets for the year to September, but made no mention of the Shanduka/Incwala issue. It has only recorded an $80m impairment on the loan so far. The struggling platinum miner also plans to raise $400m from shareholders, the third such exercise in six years, and restructure debt in an attempt to shore up its balance sheet.
reported in its 29 October issue that Lonmin’s deal with Shanduka, which was started by deputy president Cyril Ramaphosa in 2001, was in jeopardy as it had failed to meet the five-year deadline to repay any of the £200m loan, which was R2.3bn at the time but is now over R5.5bn due to the rand’s devaluation and interest. Since publication, Shanduka has indicated it will not repay the loan, which arises from its 2010 purchase of a 50.03% stake in Incwala.
Shanduka disputed that the investment now sits in Pembani, saying it technically remains with Shanduka as its merger with Pembani has not been finalised despite it having received all the necessary regulatory approval.
Lonmin’s financial results, due out on 9 November, will show an operating loss of $207m before the impairment charge, which is “primarily driven by lower PGM [platinum group metal] prices and the Business Plan, which has an impact on future discounted cash flows over the life of mine business plan across the group’s operations”.
The business plan refers to Lonmin’s strategy to adapt its operations to the lowprice environment for PGMs. It includes
Shanduka “chose to exercise its independent business decision to not repay the loan and face the consequences of the loan conditions”.
measures such as a reduction in capital expenditure, placing i ts Newman and Hossy shafts in care and maintenance, cutting 6 000 jobs, raising new equity and restructuring its debt.
Maboya would not say why Shanduka was not repaying the loan. “Shanduka Group, like any other company, has the right to exercise its independent business decisions without explaining them to any other party.”
finweek reported in the October issue that Shanduka had not repaid despite getting the original loan, an additional R175m loan, and its share of various dividends, advanced dividends and loans by Lonmin since its 2010 investment (see box). But Shanduka has disputed this, saying payments made by Lonmin to Incwala were “solely meant” for the repayment of loans Incwala already had when Shanduka invested in the company in 2010.
Lonmin’s annual reports refer to dividends, advanced dividends and loans to Incwala, but Maboya says loans to Incwala “were to service debt and meet certain covenants arising from loans that were in place prior to Shanduka’s investment in Incwala in 2010. These loans were paid to prevent Incwala from defaulting on its loan obligations to its lenders, which would have jeopardised the BEE structure and endangered Lonmin’s mining licence and ongoing operations”.
She says that Shanduka did not receive any share of dividends declared.
Maboya says that finweek suggested Shanduka was unable to meet its obligation to Lonmin, but this was not the case.
David Ngobeni, Shanduka’s chief financial and investment officer, says there were preexisting loans to Incwala as well as operational debt, largely in Lonmin’s Akanani project, in which Incwala had a 25% interest, and that is what any subsequent loans were for. He adds that Incwala paid no dividends to its shareholders since mid-2010.
According to Ngobeni, Shanduka wrote off its investment in Lonmin in 2012, but did not walk away as it tried to keep the BEE structure in place.
Lonmin’s Marikana platinum mine in the
David Ngobeni Chief financial officer at
Mmabatho Maboya Stakeholder relations manager at Shanduka