Lonmin Share Discussion Threads

[careful] 05/8/2015 12:33

this important producer of PMG's is today valued at £266m.
The platinum price is depressed, probably due to excessive speculation as well as fears about demand.
At some point serious long term investors will balance the risk of short term difficulties with the longer term potential, maybe after a rights issue.

What will the value of this company be in 5 years time? These are important metals and demand is bound to increase from the World and its £7bn population including India and China.

I am prepared to invest a small % of my portfolio into higher risk investments such as LMI.I will take up my full rights if and when they occur. Experience teaches me that it is shares such as LMI where the real gains can be made.
There is the chance of an occasional total loss however, A classic risk/reward situation.

[lazyhisnibs] 05/8/2015 12:10

No one here would benefit if all holders who look in on the BB sold on the same day and deep down everyone knows that.

Some of us booked losses and wonder if at some point it will be a buy again despite the risks. Even with good timing rather than previous terrible timing there's no guarantee of that with any share particularly one in a situation like Lonmin finds itself.

And there is the matter of it simply being interesting and a vehicle to learn with. I venture that most of us where quite naïve when we bought our first mining share. Reading BB' like this one probably isn't the best way of addressing that but it is one way which some of us enjoy in an excruciating way.

[nomdeplume] 05/8/2015 11:40

No problem. I just wondered why someone who doesn't hold LMI wound undertake such an analysis.

[hectorp] 05/8/2015 11:35

bobsidian - good points Earlier. The level of fund raising will have to be favourable indeed to those wishing to invest, even current shareholders.

Also, the problem with mining management when it is a mature company not a young explorer is that management tends to get very conservative and stuck in their simple track. Instead of acting quickly things drift.

[goldenfish2010] 05/8/2015 11:17

it is a forum for discussing shares. pros and cons.

what is your problem exactly??

[nomdeplume] 05/8/2015 11:13

It's very nice of the doom mungers to warn us of the potential problems. I assume they do not hold LMI, so I can only wonder why they are taking the trouble. Is it a case of "Please sell your shares so that I can buy them at an even cheaper price!"?

[lazyhisnibs] 05/8/2015 10:49

It's better at Royal Bafokeng Platinum but they've had to curtail their expansion. Here's an interview with their CEO. Inter alia he discusses the new pricing/margin reality which isn't only about revenue.

hxxp://www.businessdaytv.co.za/shows/newsleader/2015/08/04/rbplat-swings-to-h1-loss

The link that follows is a short video about a legal dispute the SA Government has escalated with Glen seemingly in a way that pushes the envelope regarding the application of the relevant (i.e. mining and resources) act.

hxxp://www.businessdaytv.co.za/shows/newsleader/2015/08/04/glencore-told-to-shut-optimum-over-job-cuts

Goldenfish,

Thanks for your illustrative post above but on just one matter was not their net debt distorted in last year's financials as a result of the strike? (I don't dispute they have a material amount of debt now; that it is growing and that the rate of growth will accelerate while the status quo persists.)

[pro_better] 05/8/2015 09:50

sp wont go down in a straight line. it will have its small blue days along the way.


survival is the word here. cash burn is extremely high. they are loss making. shareholders will pay the price of it.


"Whether they can survive is going to depend on platinum prices and on whether they can fix themselves for a new reality of lower margins," Murray* said. "They have to hold discussions with the government and with the unions to try to save what was a national treasure which is now a shambles."

*Stuart Murray, the former head of platinum producer Aquarius, who has also held roles at Impala Platinum and other mining firms.

[goldenfish2010] 05/8/2015 09:40

some of the issues some may want to discuss:


cash burn at $250m pa!

net debt end of year c $400m!

operations at $948 platinum prices are unprofitable and on top increase the daily cash burn rate!

platinum oversupply concerns with massive stockpiles waiting to be sold!

lower demand from the automotive and jewellery sectors!

renew of $560 million bank loan maturing in 2016 impossible at current market and company conditions!

market believes the only solution for survival is a rights issue which will be very painful for existing shareholders!

platinum prices at $948 with the tendancy of pushing further lower!

thousands of job cuts will provide ground for strikes, unrest and many in SA believe extreme violence will be the norm!

wholde industry and country are in big problem and there is no coordination and collective actions to tackle the issues!

[goldenfish2010] 05/8/2015 09:17

$948 platinum now.

[the_insider] 05/8/2015 08:26

i wouldnt give food to the shorters.

[the_insider] 05/8/2015 08:21

well, wait.....

[audigger] 05/8/2015 08:19

Blue at last, bottom reached so pile in everyone! Cautiously!

[the_insider] 05/8/2015 08:12

good morning, with plat prices at $950 there is not much confidence and positive thinking around.

[goldenfish2010] 05/8/2015 07:59

morning

lets see what market thinks today.

[the_insider] 04/8/2015 20:48

debt as of end of year is estimated to reach c. $400m.

At current plat prices and loss making, it will be extremely difficult for any bank to renew LMI's debt facilities.

So if they have to repay debt as well then we are looking for a figure closer to $700m IMHO

[lazyhisnibs] 04/8/2015 20:20

Politics impacting companies in a struggling industry in a struggling country.

Representatives from certain miners have been 'summoned' by the South African mining minister for a meeting tomorrow regarding proposed job losses. A word picked up by the media in SA is 'inhumane" in respect of Glen and a coal mine they want to close.

I accept that their Government have to ask certain questions but to what extent should they be involved beyond that is all the more important.

[grlz] 04/8/2015 19:11

Employee payoffs + working cap to keep the lights on + capital investment = RI could be well north of £250m

[bobsidian] 04/8/2015 18:05

careful

"We are reviewing the appropriate capital structure for the Company in the new pricing environment as we consider the need to re-finance our debt facilities. The Board is considering the full range of options available to secure long term capital and expects to update the market by the time of our full year results in November 2015."

We know only too well just how aggressive market forces can be when they smell blood. The management of LMI are perhaps playing in to the hands of these forces by providing too much of a time window.

"Lonmin is highly geared to PGM prices. At current metal price levels, the Company is EBITDA negative and our cost minimisation plans are designed to improve this position as much as possible. Since our interim results in May, the platinum price has fallen by 14.4% from $1,126 per ounce at 31 March to $964 at 22 July."

Take a look at what happened to NWR - one of the biggest suppliers of coal in Europe. Its share price was utterly destroyed when it confirmed its coal mining operations were "uneconomic". Much as NWR management would have liked to raise capital by way of a rights issue or an open offer its major shareholders ultimately refused to back any such capital raising exercise. Were operations to have been at least EBITDA positive then the NWR management may have been successful in garnering shareholder support. In the end the bondholders and other creditors enforced a highly dilutive capital restructuring.

Are the LMI management going to be able to reduce costs at a faster pace than ongoing declines in the market price for Platinum ? If not then a similar fate to NWR may befall LMI.

It is shocking what is going on in the mining sector as the majors accelerate output of all commodities regardless of end demand. Were sense to prevail then there may be a place for all existing mining entities. But the majors are being so cut throat that they seem to be seeking the failure of the "uneconomic" entities to at least preserve their respective market shares. LMI are far from being the only possible failed mining entity. AAL look vulnerable too with its share price trawling 13 year lows.

[lazyhisnibs] 04/8/2015 17:53

The underwriters and lenders will, I presume, mostly be interested in the viability of the business particularly future cash flows so I suppose it suits them to watch awhile to see how the talks around redundancies go and if PGM prices at least consolidate. But if the underwriters are also holders then perhaps some urgency is going on behind the scenes as I cannot see what is in it for them to watch the price over time fall more than it bounces.

With Petropavlovsk those posters who held come-what-may were constantly banging on about being OK dilution-wise provided one follows all their rights. Those diehards' were mainly going to do that but all but a few changed their minds and mostly followed just a proportion in the end.

The strangest thing was that after the heads up on an RI most seemed to know the price would almost certainly fall most of the time until the salient details were announced but still they held. There was even talk of the RI price being higher than the prevailing before the company firmed up with the salient details. I understand that is theoretically possible but in the real world it wasn't going to happen and even if it had the dilution was still going to be horrible.

I acknowledge that an announcement that there won't be an RI would be a set up for one hell of a bounce. That would be fleeting most likely as the only other alternative I see is a lot of expensive debt. Assuming that is still an alternative with PGM prices down here,

Bottom line: management have already left it too long.

-----An article providing a read across on costs and other horrors-------



The first link in the article takes one to an FT article without the usual tedious sign-in process.

[the_insider] 04/8/2015 16:23

from today's trading pattern i see bulls have no power to even partialy turn intraday the share price

tomorrow we may see 40p i am afraid.

[goldenfish2010] 04/8/2015 16:18

rebound to where? 150p? 200p? and when??

fwiw i believe share price will make a stop in the teens, a RI then and after some years if platinum prices are above break even point share price will reflect that. until then .......

for now one thing i am confident : once again shareholders are shafted for good.

[careful] 04/8/2015 15:52

but i cut my losses at tw. and sold at 10p.
smart move, they are 194p today.
chances of a rebound here, longer term, slightly less than 50% .