Lonmin results plunge into red
THE extent of the financial distress within Lonmin, a major platinum group metal producer, was highlighted in delayed results released yesterday.
The results showed a heady plunge into a deep loss and a breach of temporarily suspended debt covenant conditions.
The results were the clearest demonstration yet of why Lonmin is a takeover target by gold and platinum miner Sibanye-Stillwater.
Lonmin’s lenders have agreed to waiver their covenant conditions until February next year, the latest date by which the assets should have a new owner.
The price of the waiver was an immediate freeze on further debt provision and loan facilities to Lonmin.
Lonmin reported an annual post-tax loss for the year to end-September of $1.15billion (R13.9-billion), compared with a $400million (R4.8-billion) loss the year before.
The company recorded a $1.05-billion (R12.7-billion) impairment of nonfinancial assets during the year, almost equivalent to the tangible net worth value of $1.1billion (R13.3-billion) it was not allowed to go below in terms of its covenants.
After the 2017 impairment, the tangible net worth of Lonmin was $674-million (R81.5-billion), which was $426-million (R5.2billion) below the covenant threshold.
Lonmin would have to pay $150-million (R1.8-billion) if it breached the covenants. It had $235-million (R2.8-billion) of cash and cash equivalents at the end of a year in which it had negative cash flow of $67million (R810.5-million), compared with an outflow of $31-million (R375-million) the year before.
The company reported revenue of $1.17billion (R14.2-billion) compared with $1.12billion (R13.6-billion) revenue the year before.
Lonmin’s auditors flagged “material uncertainty” about the company as a going concern, but the board said it was addressing these issues as part of an operational review, including the closure of old shafts.
Lonmin CEO Ben Magara has said 12 600 jobs would be cut, bringing the company’s workforce down to 20 000 people.
Sibanye’s all-share takeover bid is not a certainty, with approvals needed from shareholders of both companies and South African and UK competition authorities.