Crisis-hit Lonmin may seek cash to survive crunch
PLATINUM miner Lonmin – the rump of the vast conglomerate once described as ‘the unacceptable face of capitalism’ – may need to make a cash call on its shareholders to avoid a funding crunch.
City experts said the loss-making firm remains ‘precarious’ since it warned late last month that it would delay its financial accounts, which were due to be released tomorrow.
The group’s auditors warned in May of a ‘material uncertainty’ over its ability to continue as a going concern. It said last month ‘it will not be appropriate’ to publish its quarterly report and end-of-year production figures and that it required ‘additional time to complete the audit’.
The share price has dropped 98 per cent in the past five years as the company has been buffeted by currency swings and labour disputes.
The worst of those came in August 2012 when more than 30 people were killed after police opened fire with assault rifles on striking miners. Lonmin said at the time it deeply regretted the incident.
But it has also been left at the mercy of a slump in platinum prices and a squeeze on profit margins. Mining expert Johann Steyn at investment bank Citigroup said Lonmin, which is also considering a sale of assets to help support the business through its funding crisis, could struggle to meet debt covenant requirements and that ‘yet another rights issue is likely’.
He said in a research note that the company has already sought to raise cash from its shareholders three times since 2009. The most recent of those was in 2015.
Lonmin is the rump of the mining division of Lonrho which was synonymous with its chief executive Tiny Rowland for more than three decades until 1994.
The maverick businessman counted several African despots among his associates and friends and he and his firm were never far from controversy at a time when Lonrho became a symbol of bucchaneering capitalism.
Negative publicity over his dealings in Africa drew fire from many quarters, including Prime Minister Ted Heath who coined the phrase ‘the unpleasant and unacceptable face of capitalism’ to describe the firms excesses.
Rowland’s conglomerate at one point tried to acquire Harrods department store before it was eventually snapped up by Mohammed Al Fayed in 1985.
He was quoted as saying that ‘you can never have enough enemies’ and indeed seemed determined to make one of Al Fayed – notably over a spat over missing gems from Rowland’s safety deposit box. But the feud cooled enough for the pair to famously pose for a photograph with a model shark in the Harrods food hall.
Lonrho spun off the mining assets that became Lonmin. The parent group, still called Lonrho became a slimmed-down list of interests in agriculture, hotels and airlines, acquired in 2013 for £175 million by a Swiss firm.
Lonmin now has until January to publish its accounts. It said the delay in the results was due to ‘areas of material accounting judgement like impairment of assets, the basis of preparation of the accounts’ and the impact of its current operational review.’
It said in a statement: ‘The objective of the Operational Review is to achieve a properly funded viable business plan based on potential disposal proceeds, new debt capital and the continuing support of existing lenders which may include obtaining their consents and waivers of any future potential covenant breaches.’
The company said there were ‘potentially significant outcomes’ from the review which ‘continues to demand management’s undivided attention’.