Lonmin Share Discussion Threads

[cudmore] 09/5/2016 19:27

Considering the FT comments yesterday I think only 12% drop is pretty good. There's still lots of buyers tucking these away for positive news around the corner IMHO.

[elvisrocks] 09/5/2016 19:10

Granite, no nothing has changed, still believe in Lonmin, but putting my word across as there are a lot of people doing a jig (and reminding us three times per day about the Pt Price) and to me there are parallels of what may happen to the current share price as I believe it has overshot itself. It reminds me of the so called dead-cat bounce in October 2015 when it went up by 90% in about 10 days to 45p, then fell back to 10p then 1p before rising from the ashes again. The share price has shot up too fast in the last few weeks in my view.
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Anyway, seen as though there are some who like to question maths v arithmetic how about this one. In 2015 for the full 12 months, Lonmin had EBITDA of $21m and non-special items Depreciation / Amortisation of $155m so Operating Loss of $134m which led to Underlying EPS Loss of 16.2cents. The average Pt price for that 12 month period was $1095 and the average XR was 12.01. Compare that with today. Please do.
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Now lets say only $100m is the new annual, recurring depreciation charge and $55m of the $155m drops away, and there is zip-all else in the P&L account, then Lonmin will have to make 5 times last year's EBITDA ($100m/$21m) just to break-even. I do not think so.
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Maybe that is why the share fell today and analysts are not yet predicting profits at such "brilliant" Pt prices!

[careful] 09/5/2016 13:31

i remember a few months ago Cramer on CNBC, an ex Goldman man, saying that Goldman were 'going after' Glencore.
Investec, who seem to have turned into the craziest bunch of the lot,were saying that Glen shares were worthless.

Glen had more than $50bn of desirable assets at the time and making $2.5bn from trading alone.
Gen shares fell to 69p i bought some and sold out at 170P

These idiots can make us money, but it takes nerve and can be high risk.

[lazyhisnibs] 09/5/2016 12:58

I notice load shedding got a mention above. In the media with google.co.za being a good starting point last week there was high level talk of there being no more of it. The last minute nature of the cuts for big industry must have been highly disruptive at times. When something big and expensive breaks again (i.e. in Eskom's mostly aging power infrastructure) I guess there could be some limited and perhaps localised power cuts if it happens during the southern hemisphere winter.

Above also was a curious comment about some basic number crunching being arithmetic rather than maths. I said that on a BB once and someone claiming to be a maths teacher was scathing as s/he failed to see the difference. Given that most people are comfortable with simple arithmetic but baulk at the idea of doing maths the distinction seems valid to me - in the real world of ordinary people that is.

Thanks for the Times articles from both sides of the equator. I would not have seen either of them and thought the journos covered the major themes well enough for the non-Lonmin/PGMs experts amongst us. Detail Monsters failing to spell out where they were wrong smacks of short term self interest.

[granite717] 08/5/2016 20:19

Elvis, you have hit a complete 360. Did you sell at s loss? Now a little bitter ?
Just curious because you were the.most optimistic re the share price ???

[cudmore] 08/5/2016 17:44

Many a time I've seen a Sunday Share tip to buy or sell and on Monday morning the shares have gone the opposite way. Still think there will be positive news here and today's comments in the ST will be swept under the carpet!

[elvisrocks] 08/5/2016 17:26

A horrible set of broker targets from the last few months, why are they all so bearish then? Notwithstanding that banks are supposed to have Chinese Walls between their investing and research arms, why is HSBC so low at 76p? HSBC, along with Standard Bank SA and JP Morgan, were one of the three underwriters to the Lonmin RI and also splashed about $300m of cash to allow Sibanye to buy Aquarius Platinum!

hxxp://www.hl.co.uk/shares/shares-search-results/l/lonmin-plc-ordinary-usd/broker-forecasts

[harry_david] 08/5/2016 15:53

Elvis, your comments are important, particularly the long term impact of rising costs and I don't think anybody expects a profit for the latest period. My experience of other mining operations makes me confident that they should be capable of a surprising improvement in average costs with a rigorous high grading strategy.I am expecting a report showing light at the end of the tunnel indicating profitability at current pgm prices. That would be more than enough to justify my purchases.

[elvisrocks] 08/5/2016 15:17

harry_david. Have you heard about inflation in SA, not just wages, but the price of electricity and load shedding down there? Lonmin consumes huge mega amounts of elecy. So whilst per the bullion rates, Pt may be 31% higher than 2011, I bet inflation over the last four years in SA is much higher. The XR was probably somewhere in the 13-14s as well in 2011.

[elvisrocks] 08/5/2016 15:12

Per the 2015 annual report, two things and three 'why do I say this'?
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"The majority of the Company’s sales of PGMs are made under multi-year contracts at prices related to certain average market reference prices for the month in which the sale occurs, such that the Company is a price-taker rather than a price-maker. The remainder of the Company’s sales of PGMs are made in the spot market at prevailing market prices. So why do I say this?"
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In 2015, Lonmin made a full year EBITDA of $21m but still had $134m of non-special items and reported a Underlying LPS before Special Items of 16.2 cents (not pence) Loss. EBITDA will now be higher but the $134m of non-special items have not gone away. Even allowing for the big impairment write off on the fixed assets last year, a lot of this charge will still be there. It is depreciation in the main. So why do I say this?
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The analysts have already improved their EPS estimates, to just under loss making levels I believe. Careful should dream on if he thinks he needs a 5p EPS, pence not cents, to support a RandGold equivalent PE of 40 (LMI share price of £2). Not going to happen any time soon. So why do I say this?
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Standard Life must be in this long term, until 2020-25 at least, to get their money back. Big Ben says when Lonmin finally starts making money (think $1,800 Pt Price) only then will it return dosh to long suffering shareholders. We are a long way from that just as we are a long way from thinking we are going to get stellar (improved) results that the market hasn't already anticipated next week.

[redbaron10] 08/5/2016 14:28

Spot on neg.Lonmin investors don't need to brace themselves.If you're invested in Lonmin you should be familiar with all the history and the reheated info being spouted in the article anyway.If you don't know all this you shouldn't be invested here in the first place.

[harry_david] 08/5/2016 13:51

Elvis, there are lots of reasons why things may have gone wrong for the company, but the reasoning in the Sunday Times is unresearched and inaccurate and the article when I checked is really proof that the business has potential to be a winner.Firstly, the average price in Rand in 2011 according to bullion-rates was 12,200 rand with a high of 13,300 rand. As it happens Friday's close was 31% higher than the average for 2011.Secondly, the period Feb to April was remarkably steady in Rand with highs of about 15,300 and lows averaging about 14,000.The close on Friday looks particularly encouraging at 16,036 being 10% higher than the average for Jan to April.I also feel encouraged by the Barclay note, I think I recall they were anti Anglo when the shares were £2.20

[elvisrocks] 08/5/2016 13:33

Herewith today's article from the SA Sunday Times. I agree with quite a few points in this article, particularly the one that if Lonmin over-reports its profits next week, or cash position, it plays straight into the hands of the Unions who started at the wage bargaining talks this month. Better to hold the answer back for another six months when the negotiations are out of the way.
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The platinum price, which climbed above $1000 an ounce in the past three weeks, will bring relief to mining companies, but it may be too little too late. In 2011 during the commodities boom, platinum peaked at $1,903 but by January this year it had fallen to $818. The industry is battling to recover in the wake of expensive and unsuccessful projects, two strikes in two years and mismanagement of capital. Added to this is that demand from China is still weak and there is a continued oversupply of platinum in the market.

But there has been some relief in terms of the metal's price.

Hurbey Geldenhuys, platinum analyst at Vunani Securities, said this week that the primary and short-term reason for the higher prices was the weaker US dollar and the stronger gold price because there was a correlation between gold and platinum prices. He said that long-term platinum prices were going to increase, depending on the demand-supply effect. With the platinum mining index on the JSE up about 101%, the sector is still down around 59% since 2011

"They [platinum miners] will breathe a sigh of relief at these levels. The average basket price that the miners will receive is probably now at the highest it's been in the past 12 months," he said.

But Ryan Seaborne, an analyst at 36One Asset Management, said: "The demand for underlying metals, whether it's precious metals or base metals, is mostly driven by speculation by the Chinese traders and it's very short-lived."

He said he did not believe the supply-demand issues for PGMs (platinum group metals) had changed. The market was still oversupplied and would remain so for the next few years. The platinum price dropped to about $830 in the second half of last year because of slower demand from China. The price weakened from June last year to January this year, before picking up and rising 16%.

Sibanye to be 'new mining champion'. Whether the latest price persuades companies to revise their production guidance upwards for the year is unlikely; price alone is not enough. "It's a short-lived phenomenon; these companies are in a lot of trouble," said Seaborne. "They might be given short-term relief, but it's not a fundamental change of business."

Geldenhuys agreed that the better platinum price would not result in changes to the companies' production guidance forecasts for the year. He said most of the mining companies had delayed capital expenditure and maintenance and would focus on that first before increasing production.

The higher platinum price might be a double-edged sword for mining companies because unions were likely to use the gains in the price to negotiate for higher wages, especially if companies reported higher profits. Seaborne and Geldenhuys said that if rising prices persisted, unions would definitely use this to argue for higher pay when entering the wage negotiations.

But even though there have been gains for the sector since January, with the platinum mining index on the JSE up about 101%, the sector is still down around 59% since 2011.

[bouleversee] 08/5/2016 11:39

This is Fortston's article:

"Investors in Lonmin, brace yourselves.

Toward the end of this month the world’s third-largest platinum producer will open a fresh round of wage talks with unions. The conditions under which its 30,000 employees toil are medieval. Lonmin, however, can ill afford a jump in costs.

The company raised $373m (£258m) in an emergency rights issue only six months ago. Caught between rising costs and the plunging commodity price, its prospects were deemed so poor it had to offer an extraordinary 27bn shares at just 1p each to get the deal across the line.

Chief executive Ben Magara has closed shafts and binned more than 5,000 jobs. Yet it is unclear even now whether the company is salvageable.

Indeed, rivals were hoping last year that it would go bust because its collapse would alleviate a supply glut that has crushed the commodity price. South Africa’s pensions giant, the Public Investment Corporation, would not let that happen. It underwrote the offering and ended up as Lonmin’s biggest investor, giving a big employer in a battered economy a new lease of life. But for how long?

Platinum is used in jewellery and in catalytic converters to clean the exhausts of diesel engines. The Volkswagen scandal and China’s slowdown mean little prospect of a surge in demand from either of its key industries. The price has surged by 30% from its January trough to $1,067 an ounce — still roughly half 2011’s highs. If analysts are right, Lonmin is loss-making despite its latest cuts.

Joseph Mathunjwa, head of the biggest union, the AMCU, is spoiling for a fight. He said: “Conditions will be improved when people get a living wage. These workers do not get a living wage.”

Magara will no doubt play up the company’s plight at Lonmin’s interim results in eight days.

With crunch talks looming, it is a sound negotiating tactic. The harsh reality it will also lay bare is that six months on from its latest brush with death, it has already burnt through a decent chunk of its nest egg. Sell.

[e-mail]
Sh

Rather depressing.

[neg] 08/5/2016 09:47

Sunday Times article: Like many of Danny Fortson's stories, it is poorly written and contains no new news. It is a rehash of what we already know: wages talks, platinum being used in diesel engines and loss making.
Wage talks were always going to start in May, but on the basis of the Sibanye deal in April when the AMCU threatened strike action, I don't think they will be too bad.
Price rise of platinum has more than compensated for the exchange rates, but this is likely to feed through more in the next results. This company is all about managing cash flow short term and the future prospects. The article is all about old information.

[elvisrocks] 08/5/2016 09:30

Maybe Barclays know something we don't with a 25p target? I haven't checked for a while but currently most analysts targets are 150p or below arn't they, with most well below?

[elvisrocks] 08/5/2016 09:28

A sensible question. If the big IIs who stayed in Lonmin during the RI and paid 46p for their shares to avoid being diluted, and let's say have held their stake for the last 3-5 years (Standard Life may be a good example with a 6% holding), what does anyone think their break even price now is? £6, £8, £10 or more / less than that?

[careful] 08/5/2016 09:28

Yes I read that, a shorters dream.
Take a position on friday, slag off on Sunday, close out next week.
the same old trick.

This year has been a perfect storm, low PMG prices, a rights issue, job losses the whole damn works.
but his assumption that the VW emissions scandal will reduce demand is debatable as is the China slowing theory.
China is slowing in % terms but growing much faster than in the past in nominal terms because of its higher GDP.
Also growth is stated in US$ terms is another variable that is misleading.

[elvisrocks] 08/5/2016 09:24

Redbaron, can u post the link to that S Times article or copy paste the article in. Was it in the SA or UK S Times?

[russell250] 08/5/2016 09:20

Red - Banking is my play around brexit vote - common agreement forex will move up to 6% on day either way with £ - but result may not be known until after markets open - and could be too close to call - I think the uk will vote out as much as 60% - 40%

Any views on oil price tonight following Saudi reshuffle

plus China imports / export miss overnight with growth of reserves 2 months running with dollar continue to weaken

[redbaron10] 08/5/2016 08:58

Another negative article on Lonmin sunday Times.Analysts and financial journalists really got it in for this company! Why don't they all hold fire til 16th when everyone will have a clearer picture.

[redbaron10] 07/5/2016 19:39

What investment plays,if any, have you got in mind around 23/6 ,24/6 russell? Great opportunity to make a lot of money if you get it right! banking sector appears the most obvious to me.So long since i looked at banks.It will be in and straight out.Had Woolwich shares-once.Should have sold right after Barclays got hold of it.

[redbaron10] 07/5/2016 19:21

Your fortunes hinge on improving Chinese manufacturing/pmi data russell.You were snookered this week by the surprise RBAustralia cut in their rate at the beginning of the week.This was interpreted by the markets as a weak commodity demand signal from China.It's all a bit of a mess with commodities like iron ore,copper.Noone really knows what is going on with the Chinese data.There is an element of questioning the voracity of the official figures.They are so desperate about not losing face globally that there is always a suspicion.Anecdotal evidence is often more reliable.They are paranoid in their competition with their historical enemy Japan,and very keen to get one over their neighbour.I think long term Glencore is a good call.Short-term,not a clue.With your Barclays,i sense along with RBS,Lloyds,HSBC,they could all suffer in the run-up to the referendum vote 23/6.They are desperately hoarding cash in the event there may be a' leave' vote and some panic withdrawals on 24/6 apparently.There's massive uncertainty.Domestically focused shares are the most at risk,but how many people know that even if we do leave, nothing will change with our relationship with the EU for two years.Small comfort if we do leave,but it gives the politicians two years to work out a workable relationship.