Lonmin Share Discussion Threads

[typo56] 06/8/2015 14:48

Heavy selling? really? Today?

[goldenfish2010] 06/8/2015 14:18

heavy selling. wondering if RI details leaked?

[goldenfish2010] 06/8/2015 13:43

will it break the 40p level today? looks like it.

[goldenfish2010] 06/8/2015 10:35

it is written 20p all over it. even much lower tbh. i am trying not to be so cruel but reality is kicking in.

[pro_better] 06/8/2015 10:11

LOL. made my day your post.



careful
6 Aug'15 - 09:27 - 2092 of 2095 0 0


Why should they be in a hurry to raise cash?
There is no serious cash problem just yet.

[hectorp] 06/8/2015 09:36

careful, they have to raise cash, there is a large repayment of debt due mid 2016. Of course they can and are reducing costs and overheads , but they can't make any profit on plat or pal, they are EBITDA negative as they have said themselves. Look at POG for a fairly similar situation all be it in gold - and its present valuation.

[careful] 06/8/2015 09:36

down 4% on almost no volume.
only 0.65m shares traded (out of 583m)
that is 0.11% of the total.

[buywell3] 06/8/2015 09:29

Chart capitulation is not a pretty sight


Buying V the chart and market is strictly for numpties .... ru 1 ?

[careful] 06/8/2015 09:27

Why should they be in a hurry to raise cash?
There is no serious cash problem just yet.
they must ignore the insanity of the share price, it is irrelevant.

I hope they use the present situation to reduce overheads and capex and to downsize the business for the long haul.
I am sure they will be doing that after reading the latest business update.

Raising cash from the suffering shareholders too early will only encourage employees and other parties to delay the inevitable

[hectorp] 06/8/2015 09:17

LMI on the next leg of it's drift . Why no announcement of fund raising?

[lazyhisnibs] 05/8/2015 22:02

"nice reading"

Madness.

I read previously that a million civil servants had been employed over a number of years but the country couldn't afford to employ more. Now this:

"Now Economic Development Minister Ebrahim Patel has announced that the government is launching a huge jobs drive to take on extra workers in all state departments for maintenance, not infrastructure, jobs — presumably at the newly increased wage packages. He didn’t say by how much that would deepen public sector losses."

No wonder the Rand is plummeting. No danger of deflation there!

hxxp://www.xe.com/currencycharts/?from=GBP&to=ZAR&view=5Y

[pro_better] 05/8/2015 21:28

no bank in the world, even in Africa, will extend the debt facilities of a company with negative EBITDA, debt of c.$400m at end of 2015 and with all kinds of different problems they have.

the rights issue is the only way.

here is hoping investors back up the co with the RI and try to save it while they wait for the 3 year anticipated downwards commodity cycle come to an end.

[adon] 05/8/2015 21:16

Mining index rises today but, Lonmin still down.Looks bad.

[pro_better] 05/8/2015 21:13

nice reading.


hxxp://www.bdlive.co.za/opinion/columnists/2015/08/05/at-home-and-abroad-time-for-business-labour-to-talk-as-economic-crisis-looms

[lazyhisnibs] 05/8/2015 19:34

That meeting

hxxp://www.702.co.za/articles/4356/mineral-minister-scrambles-to-mitigate-mining-jobs-bloodbath

hxxp://www.iol.co.za/business/companies/save-jobs-urges-govt-1.1895904



Surfing found a short video clip of someone from one of the unions (gold negotiations related I think) saying something like it was time for "the capitalists" to pay fair wages. It reminds me of characters like Arthur Scargill and Red Ken from our deep past. There'll be no Maggie T in SA's socialist paradise though.

PS: there has been contradictory surveys about how well or badly miners are paid in SA. Not so much compared to other workers in SA but miners in other developing nations.

[hectorp] 05/8/2015 14:47

insider, there is a " platinum glut.. etc and no inflation to counter gold"
A curious phrase, it implies that without inflation , gold will rise and rise, I am sure he means the opposite. Of course gold can also rise in DEflation - there is no decent return from stocks.

Bit of a plunge from +110 to -12 on the dow in the last hour or so.

[pro_better] 05/8/2015 14:35

the more i read about platinum, LMI and SA the clearer to me is that LMI is going down big time.

[lazyhisnibs] 05/8/2015 14:09

Articles.

For a change of perspective I post the following:



In the one that follows what their CEO said about the balance sheet struck a cord with me:

hxxp://www.pressreader.com/south-africa/the-mercury/20150805/282235189375038/TextView

Careful,

Good points there especially if buying very near the RI induced lows. POG has been as low as just over 4p since the RI but because of virtually no liquidity at that level the RI price of 5p means more. That one's been as high as about 7.6 since, I suppose 7.4 (ish) out.

[the_insider] 05/8/2015 13:56

shorters paradise this share.

[the_insider] 05/8/2015 13:53

“The commodities slump will be prolonged as long as there’s dollar strength,” Rob Pietropaolo, a trader at Vunani Private Clients, said by phone from Johannesburg. “There’s an oil glut, a platinum glut, a steel glut and there’s no inflation to counter gold. Everything together, if you take the slowdown and the stronger dollar, bodes very badly for commodities in the medium- to long-term. You need growth for commodities to go up.”

Platinum on Tuesday weakened to the lowest level since January 2009 as output in South Africa, the largest producer, improved. Gold gained for the second time in three days. The metal, which fell to a five-year low of 1,075.57 on July 24, may decline to below $1,000 on rising interest rates, Goldman Sachs Group Inc. said in a report on Monday.

[the_insider] 05/8/2015 13:24

there is a gap unfilled at 45.5p.

amazing, on a blue day this looks so weak.

[goldenfish2010] 05/8/2015 13:05

fwiw.....not my words!!


hxxp://www.thefiringroom.com/mining/lonmin-plc-value-buy-or-value-trap/

The recent slide in commodity stocks has been uncomfortable for shareholders in many companies, but devastating for those owning shares in South African platinum miner Lonmin Plc (LON:LMI).

The firm’s shares have fallen by 54% to 57p over the last month, taking their 12-month decline to 77%.

Lonmin shares now trade at an 80% discount to the firm’s latest reported book value. In this article I’ll ask whether this is a deep value opportunity, or simply a value trap.

1. Book value

Let’s deal with the question of book value first. According to Lonmin’s interim results, the firm had a tangible net asset value of 311p per share. At last night’s closing price of 57p, that puts Lonmin shares on a price/tangible book ratio of just 0.18.

As with anything that seems too good to be true, this is.

Lonmin announced plans to suspend operations at some of its mine shafts on Friday. Unless we see a platinum bounce or the firm manages to find a way of operating these shafts at much lower cost, I suspect the value of these assets will have to be written down sharply when Lonmin’s accounts are next made up.

Most of the big miners have been forced to write down the book value of some of their assets. Lonmin’s discount to book value is, in my view, a reflection of likely impairments and the firm’s lack of profitability.

2. Cash flow and profits?

Value investing is all about finding investments that are cheap enough to offer a margin of safety — protection from permanent loss of capital.

Lonmin admitted on Friday that its operations are currently “EBITDA negative”. Translated into English, this means the firm is operating at a loss, probably quite badly. It seems fair to assume that cash flow is negative, too.

During the first half of the year, underlying EBITDA was only $8m. Since the start of Lonmin’s H2, platinum has fallen by a further 14%, from $1,126 to its current level of about $980 per ounce.

Lonmin is attempting to staunch the losses by closing the high cost Hossy and Newman shafts and focusing on the cheapest, most easily mined reserves. However, there’s no guarantee that this will be enough to return the firm to positive cash flow or EBITDA.

Based on its perilous earnings and cash flow situation, Lonmin isn’t a value buy.

3. Cash reserves?

Companies can afford to run at a loss for a while if they have a strong balance sheet, and/or cash reserves. Lonmin has neither.

The firm’s interim results showed that by 31 March, Lonmin had net debt of $282m, meaning that the firm had used up half of its $563m of borrowing facilities. Net debt is almost certainly higher today, and in Friday’s update Lonmin confirmed that it is “reviewing the appropriate capital structure” for the company in the light of “the need to re-finance our debt facilities”.

An update is expected by the time of Lonmin’s full-year results in November. Whatever combination of debt or equity is agreed on, my view is that it is likely to be heavily dilutive for shareholders, unless they are willing to put in a substantial amount of fresh cash.

As a result, Lonmin fails as a potential value investment on balance sheet strength.

Conclusion

In my view, Lonmin fails on all three core tests of value: assets, earnings and cash flow, and cash/debt.

I’m not surprised Glencore dumped its shares in the miner: as a major shareholder holding 23.9% of the stock, Ivan Glasbenberg’s trading giant was probably keen to avoid the risk of being on the hook for any cash in a placing or rights issue.

From here, Lonmin shares could easily triple or fall to zero. Buying Lonmin stock today is a punt, not an investment, in my view. As such, I’m going to continue to avoid it.

[nomdeplume] 05/8/2015 12:57

Careful - point well made. I bought Lloyds at 25p when everyone was talking it down. Risk and reward often go together, IMO.

[goldenfish2010] 05/8/2015 12:45

at current platinum prices the company is overvalued. they even owe to the banks hundrends of millions.

if and when the platinum prices rise again above breakeven points then the company shall be valued accordngly.

for the time being it is overvalued imho.