Bigwig shareholder vital to Lonmin rise

WITHOUT a controlling shareholder, the board holds sway on most matters relating to a company’s future.

Minorities just have to grin and bear it, taking the highs and lows that come with it.

And in a world of quarterly updates, trading statements and the litany of other regulated responsibilities that speak more to the short-term focus of investors, I guess there’s benefit in having a good management team at the helm, focused on the long game.

But the keyword here is “good”, and there have been some clear examples where this works, namely SABMiller.

For the longest time, the brewer existed without an outright controlling shareholder, and if you look at what AB InBev has bid for the company, shareholders can only applaud management.

But in the case of Lonmin, we have a clear example of what problems are posed by having an all-too-powerful board, with really no one holding it to account.

Since platinum’s peak in 2007, it has asked for three bail-outs from shareholders, with little evidence that the miner will, at some point, emerge stronger.

Most boards and management teams don’t survive a rights issue, let alone two.

In Lonmin, we may have seen a welcome change to the operational management of the company since the Marikana tragedy of 2012 — but pretty much the same board has been there through the catastrophic collapse in its share price since its 2007 peak.

Half of the eight-member board that was there before Marikana are still well entrenched. And even though much was made about moving the operational headquarters to Johannesburg, the truth is that decisions are still being made from premises overlooking Hyde Park Corner in London.

It’s baffling when the company’s only operating asset is in North West, 13 000km away.

There’s no argument for a London base on the basis of a diversified geographical spread. It proved a weakness as the company failed to deal with the rise of the Association of Mineworkers and Construction Union, which ultimately came to a head in 2012.

What Lonmin needs is a shareholder with a significant enough holding to give leadership on strategy, not an uninterested Glencore.

Because there isn’t one — and this will be cemented by the rights issue that will see a further 27 billion shares issued — shareholders that choose to remain invested will be subjected to much of the same.

Given its record, how can shareholders believe that the new business plan — the basis of the rights issue — will ensure that the miner can withstand weak platinum group metal prices?

Small shareholders have been quick to sell out of the company, with shares falling 13% on Monday, after details of the

It’s a bloodbath that has continued throughout the week

rights issue was announced.

It’s a bloodbath that has continued throughout the week, and the stock is 94% lower this year alone.

The share issue ensures that the company remains without a controlling shareholder, one that should be pushing for an overhaul given the $1.9-billion loss reported this week caused in the main by impairments.

That’s more than the company’s market cap.

As upset as the Public Investment Corporation is about MTN’s Nigerian wobbles, perhaps it’s time it took as critical a look at operations at Lonmin’s London address.

The only positive step taken by the board in the three years since Marikana has been the appointment of a mining man through and through. But it’s not enough.