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Platinum miner Lonmin (LSE:LMI) had asked Kris Kringle for only two things for Christmas: platinum in its stocking and peace on earth, especially at its Marikana mining site in South Africa. Given the rough year that Lonmin had in 2012, it didn’t seem too much to ask.
With the economy being as it is, Santa was not able to afford the cost of 110,000 ounces of platinum to make up for the loss incurred by Lonmin as a result of the miners’ strike at Marikana in August. The strike became violent and 46 people died. Not to minimize the loss of life, but it is difficult for any company to put a positive spin on the loss of life for investors. It didn’t help the status of the company that, also in August, CEO Ian Farmer stepped aside temporarily while in hospital for treatment of what was called a serious illness.
The loss of income resulting from the strike necessitated a move by Lonmin to look to investors in November to raise $817 million USD to avoid breaching lending covenants. Today, the company announced that Ian Farmer has resigned his position as CEO as he continues to undergo treatments for his illness. Simon Scott, acting CEO, will remain in that position until a new CEO is hired by the board. At that time, Mr. Scott, will return full-time to his former position as CFO. A company spokesperson said that an executive search is already underway and suggested that it could take as long as six months to find a replacement.
Lonmin’s share price dropped to a 13-year low this year, bottoming out at 246.00 on 05 December. The share price at 14:30 today was at 280.10, still a long way from this year’s high of 1,142.00.
It still looks like there may be some rough days ahead as labour unrest continues in South Africa. The negotiated wage settlement with the workers there was apparently not clearly understood by the workers. The increase in their paychecks was less than what they expected because they did not understand that the negotiated increase included an already scheduled increase. The misunderstanding has left the workers disgruntled, and that prevailing attitude could lead to further confrontation.
Regardless of who becomes the new CEO, major shareholder Xstrata (LSE:XTA) has already called for a management restructuring based on what it sees as inept handling of the issues stemming from Marikana incident.
There are possibly a lot of people who are tempted to jump ship when a company faces these trials. But, just as it is hard to beat a guy who keeps getting back up, you have got to admire Lonmin. They refuse to stay down for the count. That bodes well for the long run. In the meantime, with the share price and circumstances being as they are, the company is a decent takeover target.
In the meantime, Ian Farmer fights his battle in hospital. We wish you well, Ian. Keep getting back up.
