Lonmin Share Discussion Threads

[mikemaxm] 18/11/2015 06:52

"""I know you got that figure from Table 5-1 but that is over the life of the mine and in real terms."""
Elvis do you think that current price of Pt $850 is not real?

[kojak78] 18/11/2015 06:39

The weakest company will go first.

Net debt per ounce of PGM production in 2018:

1. Lonmin $310
2. Implats $335
3. Sibanye $1090

[mikemaxm] 18/11/2015 06:14

"""2. Lonmin and Implats and Sibanye will go out of business within 3 years and the world will have to get by without 5.1m PGM ounces from those three companies"""

there is third possibility. One of these companies go down, price of Pt increses after that and other companies survive.

[elvisrocks] 17/11/2015 22:26

Kojak, I agree Post #5885.

I had forgot about the Glencore exit, that and "we are announcing an RI" would have finished Lonmin mid 2015. This has been the perfect storm on many fronts and I sometimes thought was Ron Series a request of the banks, but I think it was a Lonmin appointment via the non-execs and/or both together, and the amount of work to do all this can begin 15-18 months ahead of the bank renewal probably.

So they could have started say beginning of 2015, maybe did, but were held back by the Glencore exit.

[elvisrocks] 17/11/2015 22:19

Value of Rights (Macquarie)

Don't know if anyone saw Macquarie put out a note on Monday with a Neutral 0.40 target on it, but not clear whether this was 0.40p or $0.40. I can only assume it is their estimate of the value of a right, can't see it being today's closing price or another go at TERP.

Based on Careful's Post #5737, he estimated a TERP of 1.21p (on 10p closing price) and value of a right at 0.21p. Alexios1201 Post #5736 estimated a buy-in price of 1.5-2p, so Macquarie right estimate, I think, is 0.40p (not $) it seems.

[kojak78] 17/11/2015 22:10

Maybe my figures are even a bit conservative for Implats. And yes, it is right Ben Magara should have overseen finances and not have trusted his CFO. But he will not make this mistake again I guess. And please, when was that opportunity for the RI? When Glencore announced they wanted to spin-off their stake? There was no possibility since January and now is the time of maximum ETF liquidation, worst time in years. But it will mean OTHERS will not be able to do another RI. After Lonmin RI there is no opportunity left. No second chance for Lonmin, for Implats or for Sibanye.

But once again my message. Obviously we cannot know platinum prices of the future. Just assume nothing changes. Then ultimately Lonmin will run out of money. But not only Lonmin. Implats too. Sibanye too. So we only have these outcomes:

1. Lonmin RI is a success and 2-3 years is enough time for the market to normalize
2. Lonmin and Implats and Sibanye will go out of business within 3 years and the world will have to get by without 5.1m PGM ounces from those three companies

[elvisrocks] 17/11/2015 21:56

My point exactly Kojak, but I don't think Lonmin will run out of cash. 2018 or later.

The two keys numbers behind that are its EBITDA / LBITDA and Capx (effectively placed more under the control of the banks via the large impairment).

Lonmin is the strongest after the RI plus its competitive advantages (Pages 30-35 of the webcast slides). There has been huge thought gone into this Business Plan plus Lonmin has wiped the slate clean by halving the value of its balance sheet assets and writing everything off.

Graham did have a fair question, why did Lonmin or Magara not do this earlier. There is an answer, just thinking on it, but Magara is an Ops Man who probably relied too much on his Finance Team. They will now go plus most of the directors (and want to go) when PIC push for it.

EDIT

Kojak, what you are saying for a company double Lonmin's size, Impala, it's net debt got worse by $100m, when plat price went from £1200 to $850, and that's arguably when they have costs and recovery rates not as good as Lonmin if I understand that (from Rene Hochrieter).

[kojak78] 17/11/2015 21:44

Just a quick calculation for a rival company.

Annual 2015 (end of June) annual revenue R32bn
Average exchange rate R11.5
Average platinum price $1200
Cash flow neutral.
Net debt after RI which happened later in the year: $100m

Situation now:
Exchange rate R14.3
Platinum price $850
Annual revenue R28.2bn
Annual loss R3.8bn = $265
Net debt currently $200m

Net debt mid 2018: $870m

So if the current situation persists and Lonmin runs out of cash in mid 2018 Implats will have just short of a billion in net debt.

So the RI ensures Lonmin is not the weakest producer any longer.

[elvisrocks] 17/11/2015 20:55

Try again Graham, final paragraph of same article:

“It was always quite a real risk — they’ve got some debt that is maturing,” Young said by phone from Cape Town. “There is going to be some overhang on the share” until Lonmin announces how it will refinance the debt, he said.

I don't disagree with you, not sure 1-1 but better than 46-1. The 46-1 was eventually forced on them but market has trashed this share for the last few years, accelerating every year, that's now over. Watershed moment, kitchen sink been thrown at every number.

As to why they didn't announce earlier, I suspect there is a (good) reason. I'll think on it.

[graham2405] 17/11/2015 20:20

Yes, and a rights issue when shares were about £1 would not have wiped shareholders out.

If the market realised they needed one, why the hell didn't the current CEO realise it?

At £1 per share, the RI could have raised the cash at considerably less than 1-1, miles from the current 46-1.

[elvisrocks] 17/11/2015 20:08

Graham, a little something to help you sleep tonight with that post you did in 5868. Penultimate Paragraph:

"The possibility of a share sale shouldn’t be a surprise to the market, Neill Young, a money manager at Coronation Asset Management (Pty) Ltd., Lonmin’s fifth-largest shareholder, according to data compiled by Bloomberg".

That was in July 2015 when the price was what, about £1?

[elvisrocks] 17/11/2015 20:03

Not bad for a next attempt Graham, marks on a 1-10 scale, 1 being clueless.
About 1.5

Stopping for something to eat, may update later or tomorrow.
Fun this. Can I get you anything to help with your constipation?

[graham2405] 17/11/2015 19:59

Assumption Movement in assumption Reversal of impairment/impairment
Metal prices +/-5% $329m/($336m)

So, given the consensus and current price of $850, what is 25% mean in terms of impairment

$336m per 5% WOW!

so 25% = an impairment of, well it's a pretty big number!

[elvisrocks] 17/11/2015 19:57

Keep up the good work Graham like I say in Post 5874.
Have another try (or 600).

[graham2405] 17/11/2015 19:55

What has that got to do with it..........

If it's the price the figures are based on.

Simply put, what price are the figures based on?

Whats the use of figures 'over the life of the mine' if you are going to run out of cash within 2 years due to current prices.

[elvisrocks] 17/11/2015 19:51

Der... Graham, try again.

I know you got that figure from Table 5-1 but that is over the life of the mine and in real terms. Now go to Note 31 in the financial statements and translate that for me. PDF Page 395 area.

EDIT

Keep up the good work Graham. I know you won't get there. Last week it was with Goldilocks and Barclays, so it's fun watching someone with constipation.

Remember plat price is only one variable just like the oil price is with oil companies.

[graham2405] 17/11/2015 19:46

So, they need a 25% INCREASE in Platinum, to match the CONSENSUS LOW!

..........priceless

[graham2405] 17/11/2015 19:43

What about consensus 'low = $1070 an ounce'?

It's trading @ 853 per ounce.

If prices don't rise they are going to be eating cash faster than Enron.

[elvisrocks] 17/11/2015 19:41

Der .... Graham, no didn't forget this at all, July 2015 when market was starting to factor in an RI.

So what would have been their other choices? I know what you are going to say .... the banks put in more, but you have a fetish about that too thinking they have reduced their exposure by reducing the gross value of the facility. True but not true.

An army of professional advisors and 10 banks particularly finally drew the line in the sand 50:50 on new Lonmin, watershed moment. Banks $370m:RI net $367m.

But that's not fair? Oh Yes it is either we go under and business rescue where the vultures pick it off or we do the RI.

But the RI is about jobs say Graham. No it's not says PIC and Magara, we all have to take a little bit of pain. It's called the Business Plan.

But your not being cynical enough Elvis? Oh Yes I am, that's where the potential takeover offer round the corner is when black entrepreneur and new BEE deal structure something to their benefit (if not already) then shareholder gets his capital growth back.

All to do with the RI and why they (and hedge funds) want this to go through.

[lazyhisnibs] 17/11/2015 19:37

Elvis,

Regarding the PIC it probably would make sense to go for 29%. I'll not bang on about it beyond that save to acknowledge it is a positive and probably necessary move from the point of view of other holders and management.

An OFF TOPIC follows.

That analyst did look dishevelled but then again three out of four of them (who were on camera) came up to your suited and booted standards. I was more interested in what came out their mouths and I wondered what I always do and that is whilst not being able to deny their instincts with Lonmin have been sound this past year or three I do contemplate how much depth there is to their opinions. Unlike Glen though Lonmin has been on the JSE for a long time so they should know it reasonably well.

I won't get in to a long discussion about suitable business attire on this already busy BB but I've always questioned the sense of societies in hot countries both adopting and then conforming to an essentially European dress code that can be traced back to King Charles II.

I suspect that successful young people will increasingly dress well but somewhat casually as our generation fades. In the mean time, if in doubt then for those not super rich or retired then I guess most will conform. At least the suit was a step up from robes!

[graham2405] 17/11/2015 19:36

Well I've found Lonmins consensus...........and you won't like it.

Low = $1072 per oz.

Median = $1450 per oz.

High = $1500 per oz.

So, their idea of 'low' consensus is $1072 per oz.

........and that's from the prospectus.


....and where is it today?

$853 per oz.

[graham2405] 17/11/2015 19:28

"PIC now put cards on the table, they want 7% plus 25% more either for themselves or black entrepreneur, which in my view, if they get it, due to their clear public statement would be seen as on the record and seen as one unit by the UK Takeover Authorities."

I don't think PIC 'want' it at all, they have supported the RI by agreeing to underwrite a significant portion of it. If they hadn't perhaps the banks would not have?

Need to assume less and challenge more!

PIC had earlier stated that they did not want a rights issue and asked Lonmin to try raising the cash another way. Or have you forgotten this?

hxxp://www.moneyweb.co.za/news/companies-and-deals/pic-averse-to-lonmin-share-sale/

A reminder, so they were not too keen, which must mean they were not too keen on underwriting it either. So, why are they doing it?

Alternative assumption, perhaps they had no choice?

Lets not forget, this is about the jobs, its not about the shareholders. PIC are most likely politically motivated in their 'investment'.

It's all about the jobs.........

[elvisrocks] 17/11/2015 19:14

Graham re Post 5865, will get back to you later. I don't know what current consensus is, but if anyone does, please contribute. Read also my Post 5862.

[elvisrocks] 17/11/2015 19:09

I certainly do Lazy, looked a complete kid in my view, couldn't even be bothered to turn up for the TV well dressed etc. Not exactly boardroom material, blow him away with a puff puff.

What's your view?

PS: PIC now put cards on the table, they want 7% plus 25% more either for themselves or black entrepreneur, which in my view, if they get it, due to their clear public statement would be seen as on the record and seen as one unit by the UK Takeover Authorities.

If they keep it just below at 29%, easily could do a deal with hedge funds who will have been picking a few % up. Probably have already I would have thought.