Lonmin faces graver risk than Marikana censure

LONMIN CEO Ben Magara has said his company wants the Marikana report released as soon as possible so it can put the event that “changed our lives forever” behind it.

While the world’s third-largest platinum company could find itself on the wrong side of the findings of Judge Ian Farlam’s commission, over how it handled the events in August 2012 that left 44 people dead, Magara said the company wanted to see “what we can take from it”.

President Jacob Zuma has said he will release the report at the end of the month, but lawyers for the Association of Mineworkers and Construction Union have gone to court to argue he should release it now.

These delays are frustrating Magara, too. “Yes, I want the report to come out and take what I can and learn from it. And we as a country must learn from it. The weeks in which Marikana played out changed our lives forever.”

But analysts have warned that the company’s strategy of cutting costs and jobs could mean the death of Lonmin entirely.

Over the past five years, Lonmin has lost 73% of its value on the JSE as the platinum price plunged and it battled a five-month strike. For the year to September last year, Lonmin made a R4-billion loss, partly because of the strike. Since 2011, platinum has lost more than 40% of its value.

On Friday, Lonmin’s shares dropped by 4.8% after global com- modities giant Glencore unbundled its 23.9% in Lonmin to shareholders.

Experts say Lonmin’s strategy of putting its $300-million (about R3.7billion) capital spending plans on ice because of the platinum price spells danger. Stanlib fund manager Kobus Nell said: “History has shown under investment in mines leads to lower flexibility and increased costs.”

CIBC, a London-based investment company, said Lonmin’s “strategy — if ‘hope’ can be called a strategy — needs to change. Lonmin needs to call on investors for funding now. Without this . . . we believe Lonmin has very little hope of remaining a major player.”

CIBC said that if prices picked up, Lonmin’s plan to slash investment would leave it “so far behind on the capital development that it will be extremely unlikely to make any free cash flow for a number of years”.

Three years of falling platinum prices have left Lonmin at a record low, valued at $1.3-billion — a far cry from $12-billion at its peak in 2007.

Although the company recovered partly after the 2012 shootings, the strike last year played havoc with its cash flow. Lonmin could also face civil action from the families of those killed.

Even so, Lonmin is one of the cheapest platinum shares, and Nell said it could be a target for a takeover.

An option that CIBC raised was a sell-off of elements of Lonmin. For example, Northam Platinum might be interested in buying Lonmin’s smelting and refining capabilities.