Hot Features
Premium
Register to chat with like-minded investors on our interactive forums.
“The publication of today’s results closes a painful chapter in Lonmin’s history,” Roger Phillimore, Chairman of the Board of major platinum producer, Lonmin plc (LSE:LMI), began his message in the release of the company’s 2012 final results that drilled the company into a loss greater than that during the height of the global financial crisis in 2009, following the tragic events at its Marikana mines in South Africa.
Ten days ago, Lonmin had already said it lost about 110,000 ounces of the platinum in the seven-week standoff between its employees who downed tools to extract higher pay, but the tragedy, which the company refers to now as “Events at Marikana”, brought the company to a pre-tax loss of US$698 million, as lost revenue was coupled by weak commodity pricing and higher operational cost.
Not Your Usual Annual Report
Lonmin’s annual report, however, was not one of the usual reports you read, in that a significant space was devoted to the company speaking once and for all to clarify its position and role in the events that put the company in the spotlight in recent months.
“There is no way to begin our Annual Report this year without addressing the terrible events which took place at Marikana in August and September,” the joint statement of Chairman Phillimore and acting Chief Executive Simon Scott read.
“Much has been written by others about those weeks, some of it moving, some insightful but, sadly, much that is wholly inaccurate,” they said, with both or either of the two defending the company’s actions in resolving the labour unrest that has rocked South Africa’s mining industry since violence occurred in August and left 46 lives lost, most of whom Lonmin employees.
“We believe we did the right thing both for this Company and for South Africa in helping bring the dispute and associated violence to an end,” they said, rejecting the accusation that the unrest sprung from the industrial action at their Marikana mines, adding that the labour action revealed “deep-rooted issues of poverty and inequality” that go beyond mining.
Good Corporate Citizen
Lonmin’s annual report sounded more like a political campaign for the importance of the mining sector and capitalism in general, particularly in South Africa, where expensive resources are being mined, while saving tables and figures at the latter part of the document.
The company defended the business and the business sector as a whole for their role in alleviating issues of poverty by providing jobs “so desperately needed” by the South African populace.
“It is business which will help to deliver much of the growth which, in turn, will help to provide the economic, educational and social platforms for change,” Lonmin stated.
According to Lonmin, mining, which it admitted to be a dangerous business, will be a key part in delivering growth in the country.
Lingering Effects
But while Lonmin hopes to put a full stop on what happened at Marikana through its annual report today, next year’s production guidance still sees a lingering effect as it is set lower than this year’s total production of a little over 700,000 ounces of the carbon emission component.
Cost is also expected to increase while the company is to reduce its capital expenditure for next year from US$408 million the newly concluded year spent to about U$175 million in 2013, with the hope that price of platinum increase as a result of lower global supply.
Lonmin’s after tax loss of US$550 million is to be met by a rights issue to raise a net of US$777 million to reduce debt, at US$421 million, and keep the company afloat.
The rights issue will add over 365 new shares to the existing 203 million shares priced at 140 pence, a 69% discount to yesterday’s closing share price of 452.80 pence.
Shares were down 3.3% to 437.70 pence by 10:45 PM GMT, following the two announcements.
