Lonmin Share Discussion Threads

[elvisrocks] 18/11/2015 18:06

To give evidence to the impact of reduced PGM prices and how this will translate into Lonmin's financial numbers, here is why there is scaremongering. Page 3, SA only:

"The mine sales, rationalisations and reductions to capital spending discussed above have been driven largely by weak prices. Rand depreciation has protected producers from the full impact of this year’s collapse in dollar-denominated pgm prices, but platinum’s rand price has nevertheless dropped by about 8% from its January 2015 peak of nearly R15,000 per oz, to around R13,650 in late October (this compares to a fall of over 20% in dollar platinum prices over the same period)".

So, it's 8% we need to be concerned about, not the drop off a cliff 20% ($1000-800) that others on this BB continually try and draw attention to.

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"There is now clear evidence that the industry is making progress in containing mining cost inflation, but lower prices mean that margins remain insufficient to support the investment required to maintain future production"

I accept an equal point can be made on this BB that better margins are needed for future investment (but this is the same as the oil companies dilemna on today's oil price0.

Hence why Lonmin drew up the Business Plan that it did.

[brahmsnliszt] 18/11/2015 18:01

Thanks siwel. Yup had thought of that hence the initial very small position.

[elvisrocks] 18/11/2015 17:51

To illustrate that I do think, and indeed take note of other posts (not that it may be of interest to anyone), Brahms summary from Post #6003, comes from Page 27 of the JM Report, i.e. Total World demand for 2015 (after recycling) is greater than Total World supply, some of which will be met by reduction in stocks. The numbers cross tie exactly.

[elvisrocks] 18/11/2015 16:57

Smithim1311 re Post 6035.

I also agree, the Business Plan put forward is to survive, batten down the hatches, spend the minimum but of its own right is still enough to be scaring shareholders. It had to be pitched like that surely. In my view, it does include a buffer and the banks could have given more, how much without being in the true loop is anyone's guess. My reading is quite a healthy amount.

If you look at some of Kojak's postings, he may have a different view to you on Lonmin Capx situation past, now and future. The webcast slides indicate planned capital expenditure has been limited to levels required to satisfy regulatory and safety standards, essential sustaining capital expenditure in the continuing shafts and a limited number of development projects

[elvisrocks] 18/11/2015 16:47

LOL Graham, I'll try. No promises and if I don't I'll say so nicely!
Contrary to popular belief, I'm not some ogre who doesn't listen.
Just have strong views, as do others.

[graham2405] 18/11/2015 16:45

hxxp://www.cnbcafrica.com/news/southern-africa/2015/11/18/jobs-of-37-000-marikana-workers-hang-in-the-balance/

No comment, can't be arssed.......

[smithim1311] 18/11/2015 16:42

Elvis - thanks for that.

While I am with you IF Lonmin is cash flow neutral, the lack of capex spend does worry me. Lonmin's infrastructure is in large part already outdated, and there is very little room for contingency if for example furnaces need refit or replacement. I bow to your accounting knowledge, but I'd rather see a cash flow surplus and investment in reserve development and plant upgrades. Can't have everything I suppose. We gotta get through tomorrow first!

[siwel3] 18/11/2015 16:42

Odd how no one seems to think that Platinum could fall and hold at 600 Dollars yet previous boom busts shows that this is exactly what could happen. Spikes are always higher than you ever expect and busts are always worse. SA is exactly the climate where political interference could easily cause production levels to be maintained at artificially high levels, to the detriment of price.
Brahms, watch your liability to pay for the RI on your spreadbet if you keep holding.

[graham2405] 18/11/2015 16:42

"Graham ....tomorrow is a new dawn. No more mud slinging, we put our views across nicely!"

Ok, as long as you always agree with me........

[elvisrocks] 18/11/2015 16:42

Smithim1311. Can I ask you this before I get stuck in to the JM Report.

I realise a higher price is better for business and would translate into better cash and better profit. I of course get that.

But how does what JM articulate, or SFA Oxford for that matter who did the work for the Prospectus, influence the traded price on NYMEX and which eventually gets back to the sum of money Lonmin bank into their account in terms of the customer supply agreements (which are an industry standard format I understand).

And how do ETF's work to influence that trading price or share price sentiment? That's the bit I miss and how it can all turn on a "derivative" whim.

[elvisrocks] 18/11/2015 16:35

Graham ....tomorrow is a new dawn. No more mud slinging, we put our views across nicely!

[graham2405] 18/11/2015 16:33

"Where I come from as the accountant"

Yawn..............

[elvisrocks] 18/11/2015 16:28

Smithim1311 is on his IPad (his message not showing up here on my screen anyway, now does on Post 6028) so here is the link to the JM Report

hxxp://www.platinum.matthey.com/services/announcements/miscellaneous/johnson-mattheys-pgm-market-report-now-available

Where I come from as the accountant - and may I suggest where Ben Magara and his Business Plan come from - is that even if Lonmin is cashflow neutral after Capx over the next 5 years, it is in no worse a position except that it has used 5 years reserves and would then have to re-evaluate their Plan to look to the period 2020-2025. Cash and capital would still be in tact, probably more CapX then needed. All others things being equal.

What the investment banker, black entrepreneur may do in the meantime is find a way to "unlock value" for shareholders.

[smithim1311] 18/11/2015 16:20

I would if I could! Posting links on BBs from an iPad is beyond my technical ability! The market report was published today, so just type Johnson Matthey 18 November into Google and you'll find it. Maybe you could post it for me!!

[graham2405] 18/11/2015 16:19

Well, tomorrows the vote.......

I'll be back

[elvisrocks] 18/11/2015 16:14

Hi smithim1311.

My apologies for you having to endure all this mud slinging. I put my hand up for my share of the mud and hopefully with your intervention this will now stop.

I guess the tendency for all of us is to use our occupations to inform our thinking. I realise your background is PGM science in SA, and indeed some dealings with Lonmin, and you are very welcome to this BB.

My comments around (very) important but not critical is from the "accountant side" and how all this Business Plan, Prospectus and multi-variables within it will have come together. That is my experience. Plat. price is like one variable on a rubiks cube. Lonmin will turn and twist those 9 dots to manage the business. Ultimately it becomes critical because like the oil price, oil companies can't survive below a set price.

I am however interested in the JM Report, could you post a link to it?

Thanks

[careful] 18/11/2015 15:59

the number of nil paid rights traded will tell all on Friday,
billions of them.
A cheap way to get hold of a big chunk of an important company.

[smithim1311] 18/11/2015 15:50

All. I'm slightly disappointed that there has been no comment on Brahms posting re production deficit. Instead a continual stream of my-slinging has continued. I would advocate everyone reading the recently published Johnson Matthey report (or at least the headlines as its 41 pages long!), as it hints at supply / demand and dynamics of Pt price movements.

Elvis-while I am with you in being bullish, I cannot agree that Pt price is not critical. It may not be critical for short term survival, but ?I for one am not interested in short term survival. If the share price is to recover and provide decent returns, then the business needs to have cash to spend on capex. To return to this position it needs the margins, and whether cash flow neutral at $1070 or lower, a sustained sub-$900 Pt valuation would be catastrophic.

I may have jumped the gun when I suggested the bottom had been achieved at ca $900 / ozT but I am still confident of a rise from current levels to ca $1100-1200 within 6 months. With this in mind, I have bought Pt and Pd today. Time will tell whether this is the bottom.

One very interesting aspect of the JM report was the significantly reduced ETF demand from non-SA sources. If there is any trend reversal, then maybe there will be a significant increase in ETFs & we will see a rapid rise in PGM valuations.

Then again, what the hell do I know?

[elvisrocks] 18/11/2015 15:33

Does Fish and Chips too.

You know doing postings with you Graham is like going fishing, you know you'll take the bait. Prices can go up as well as down. You ain't Mr Don that it's down, stay down.

I'll have some salt and vinegar on me fish and chips too

[brahmsnliszt] 18/11/2015 15:32

got to admit im with graham on the argument for lower, but just a faint hunch the worst is over. as the old adage goes - the market can remain illogical longer than you or i can remain solvent and although Graham has no position here i just have a feeling this might turn when we least expect it. if im wrong i dont stand to lose much and if it rallies ill buy more and move stop accordingly.

should be an interesting ride in the next week or two.

[graham2405] 18/11/2015 15:31

"Platinum group metals prices are set to increase over the next five years"

They ain't got 5 years........

[elvisrocks] 18/11/2015 15:29

Graham, I'm down at the UK Takeover Panel, bar next door.
Does great food and drink. You should pop by.

[elvisrocks] 18/11/2015 15:27

How about this Graham:

Experts says Volkswagen’s emissions cheating scandal may cause customers to steer clear of diesel cars.

Vunani Securities says that in fact, the opposite may be true. “Noncompliance is likely to result in an increase in demand for fuel-efficient vehicles such as diesel, hybrids and electrical vehicles,” it says.

Many of the experts say the prospects for the metal are finally starting to turn.

Research by Johnson Matthey says that above-ground stocks of platinum peaked in 2011 and have started to decrease since.

“Platinum group metals prices are set to increase over the next five years ... platinum prices will rise to $1800 in the med-ium term, while palladium prices could increase rapidly to at least the same levels by 2017,” Vunani says.

Other analysts agree.

Bank of America Merrill Lynch says: “We think the operating trends are encouraging ... and (Lonmin) is highly geared to a recovery in metal prices.”

Deutsche Bank is also calling Lonmin as a “buy”, assuming the rights offer goes ahead, because of its large ore reserves and the fact that it’s so much cheaper than its rivals.

But Deutsche says this comes with a “healthy warning that the business is marginal under spot rand prices and is a call on higher rand PGM prices”.

Once platinum prices turn, says Deutsche, a recapitalised Lonmin is leveraged to benefit from higher platinum prices.

[graham2405] 18/11/2015 15:25

"It's irrelevant what the terms were to Kagiso, it's still the same amount of total pence."

Hogwash, the way it was done wipes out current equity in favor of new equity.

Which = GUN TO THE HEAD for existing shareholders.

Regardless, have they stated their support for the issue?

So, that's a big fat NO then.

Elvis, whatever your drinking, I'd like some. ;-)

[graham2405] 18/11/2015 15:22

I have no holding whatsoever.

I'm just here watching the wheels go by.........