Analysts slam new Lonmin share plan

LONMIN shareholders are reluctantly expected to vote today in favour of manag proposal for a deeply discounted rights issue to raise $400-million (R5.6-billion) – but analysts are doubtful that the rights issue is the best option for the company or for the platinum market.

Lonmin is proposing to issue 26.9-billion new shares at 1p or 21.4c each to its existing shareholders on the basis of 46 new shares for every one held.

The pricing represents a discount of up to 94%. According to the prospectus‚ Lonmin has an underwriting agreement in place that provides confidence that at least $369million net will be raised from the rights issue. Chief executive Ben Magara and executive directors Simon Scott and Ben Moolman had committed to follow their rights‚ a Lonmin spokesman confirmed.

Spot platinum was trading at a six-year low of $865/oz on Tuesday‚ tracking a weak gold price depressed by expectations of an imminent rate hike in the US.

An analyst‚ who asked not to be named‚ said the dilution that would result from the rights issue was so great that shareholders who did not follow their rights would lose much of the value of their existing stakes.

He said the rights issue would not provide Lonmin with growth options‚ so it was “only another bucket of blood when it might be kinder to switch off the machine”. — BDLive