Lonmin Share Discussion Threads

[leoneobull] 14/9/2012 19:02

So DB thinks they need to raise $700 million, the house broker Cazenove has banded a figure of $1.25bn around (c.f. FT blog link to Cazenove note)...so that's an RI of between 1/3rd & half of the mkt cap...

from Times August 21 2012

Lonmin admitted last night that its South African mining crisis could force it to turn to shareholders for a multimillion-dollar cash call - only days after insisting that its finances were robust.
The platinum producer said that it looked set to breach its banking covenants when they are next tested at the end of next month. It was forced to stop production at the Marikana mine last week after a series of violent clashes in which 44 people died.
Lonmin said that it had started talks with its bankers, which include Lloyds Banking Group, and was considering "all options" to improve its financial position, including raising equity.
The apparent U-turn came five days after it said that it was "well within its banking limits" and privately briefed investors that it had no plans to tap the equity capital markets.
Leading shareholders responded with resignation. One top-ten investor told The Times that there was "no point" levelling accusations at the company, which he said was the victim of circumstances beyond its control. A top-20 investor said it had known that a refinancing was on the cards, despite assurances by the company.
Lonmin has been in crisis since late last week when strikes at the Marikana pits erupted in violence. Police used machineguns against protestors, who had walked out on August 10.
The company issued an ultimatum to workers on Monday to resume duties or face the sack. After President Zuma declared a week of national mourning, Lonmin dropped its demand.
It said yesterday that none of the 3,000 striking workers were at risk of being dismissed this week, but it reserved the right to do so in future, claiming that their action was illegal under South Africa's Labour Relations Act.
Mark Munroe, Lonmin's executive vice-president for mining, told a local radio station: "It won't help anyone if Lonmin dismisses a whole lot of people for not coming to work today. It will set us back significantly in terms of violence, in terms of building trust."
Sources close to the company said last night that Lonmin had no date for the resumption of production at the mine, which is responsible for more than 90 per cent of its platinum output.
Shareholders said that Lonmin's bankers, which also include HSBC, RBS and Standard Chartered, would be under pressure to find a financial compromise given the desperate plight of the mine. "Lonmin's bankers are going to find it difficult to squeeze it on the covenant arrangements; otherwise they would be seen to be profiting from the tragedy," one said.
Lonmin has net debts of $356 million and, before the disruption, was facing pressure from a worldwide downturn in platinum prices. Its banking covenants dictate that its net debt must be less than 3.75 times its pre-tax earnings before interest and other charges.
Analysts estimate that it is currently at 3.4 times, but it is losing 15,000 ounces of platinum production a week. Based on yesterday's platinum price of $1,480.91 an ounce, it could lose more than $70 million assuming the mine is out of action for at least the next week.
Shareholders said that they expected Lonmin to raise at least "several hundred millions" to shore up its finances, while analysts at Deutsche Bank speculated that it would need $700 million, about a third of its market value.

[leoneobull] 14/9/2012 17:00

The shares on loan to shorters are at a similar level to YELL...& boy did i lose there!

Just over 19pc of the mid-cap group's shares are on loan, the highest proportion of any FTSE 250 company, according to data from Markit, the financial information services company.
The amount of shares borrowed is used as a proxy for the level of short-selling interest and the average for a company in the mid-flight index is 1.8pc, according to trades settled on August 28.
The proportion of Lonmin shares out on loan has climbed 13.6pc in the past month, spurred by a dramatic share price drop amid the violence at its Marikana mine in South Africa, which brought platinum production to a standstill. Investors are wagering the shares have further to fall.
"Short interest stands at a record high of 19pc of the total shares, although it has been building since early summer," said Alex Brog at Markit. "Demand to borrow the shares is very high with almost three-quarters of the shares that can be borrowed being out on loan. This means it would be hard and expensive to short more of the company."
Lonmin's shares have fallen by 24pc since trouble at the mine began last month. The group is attempting to resolve it but talks between the company, the government and unions are on a knife-edge.

[leoneobull] 14/9/2012 10:07

....but workers have rejected the deal...so dispute will drag on!

[mj19] 13/9/2012 14:10

For a dire situation stock holding up ever so nicely....

[leoneobull] 13/9/2012 07:44

from LSE board - Stock being dumped like a hot potato now. Full scale strikes happening all over the the Rustenburg area and Lonmin will be forced to close shafts by the end of the week according to news

[leoneobull] 13/9/2012 07:42

yep the price has spiked but there has been no production for 5 weeks....& this single mine i ustand accounts for 96% of LMI's revenue....with covenants going to be breached 30.09

[lucky_punter] 13/9/2012 07:36

Platinum prices seen spiking higher due to "dire" supply constraints

With the strike of the world's third largest Platinum mine stretching into a fifth week, the metal's price remains supported due to supply-side concerns, making analysts bullish on its future.

[sanks] 12/9/2012 17:50

Workers want nearly 3 times their current pay!

I remain a shagger with a £1.17 level 4 target

[leoneobull] 12/9/2012 17:47

100 years of plat in the ground -----the prob is...is it a profitable business once wages are hiked & the platinum price falls ....see FT article

[leoneobull] 12/9/2012 17:47

Glencore would dispose of Xstrata's stake in platinum miner Lonmin if it can win over Qatari investors to its £23bn takeover. It came as Qatar, which fears an exodus of Xstrata's top talent, said its support for the deal was by no means guaranteed. A senior figure familiar with Glencore's plans said Xstrata, or its eventual owner, has a 'big decision' to make on Lonmin and should 'assess carefully' whether it was worth having a stake. 'Nothing has come out of that mine for four or five weeks,' the source added. Xstrata owns 25% of Lonmin (down 8p to 611p), which has been rocked by strike action and violence that has left 44 people dead. The value of the stake has fallen by £65m amid the unrest, while Lonmin has warned it may tap shareholders in a £650m rights issue that would further devalue Xstrata's holding, The Daily Mail says.


It could get worse still.

[leoneobull] 12/9/2012 17:30

I have to agree with FT bloggers - the share price has yet to catch up with the reality of how dire this situation is. even if the dispute solved 2moro knock-ons on results will be massive (wage rises, costs of lost production)....is a large RI on cards...tick tock til 30/09

[sanks] 12/9/2012 16:27

Its technically and fundamentally ready to break the previous lows of £4,50
After that i guess, Bob's your uncle and Sheila's your auntie!

Hope it helps

[sanks] 12/9/2012 16:26

Lets put this into perspective.....the company is knackered...its balls are in the hands of the financial institutions who will ultimately decide whether it remains a shaggers business or a shagging business....

Its in trouble, which is why the stock, imo, is not worth the number its got on it!..hence i have today initiated coverage with a SELL note to clients advising of a few drip ..drip... BANG's on the card, with a level 4 target of £1.17

Let me know if this helps
Sanks

[leoneobull] 11/9/2012 19:08

Oh God, should i sell?

[leoneobull] 11/9/2012 06:45

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [e-mail] to buy additional rights.

By Peter Major of Cadiz Corporate Solutions
While platinum is a very valuable metal, platinum mining is a difficult business with a mediocre profit record.
That's the commercial reality behind the recent tragic events at Lonmin's Marikana mine in South Africa – and the underlying dispute between the managers and the workers.
South Africa generates around $10bn a year from the mining of platinum group metals (PGMs – platinum, palladium, rhodium, ruthenium, iridium and osmium) for their value as an investment and as industrial materials.
But there isn't the money to meet everyone's needs, let alone their desires. Platinum mines employ around 150,000 of South Africa's 500,000 mine industry workers, who on average have the second-highest wages in the country, after government employees.
South Africa has nearly 80 per cent of the world's known PGM reserves (over 2bn ounces) and produces over 4.5m oz of platinum a year (75 per cent of world mine supply) and about 4m oz a year of the other PGMs.
Yet PGMs are not in such dire shortage in the world that prices are set for an inexorable rise. At $1,590 oz today, platinum is nearly double its 100-year 'average real price' of $830 oz. Can it really go or stay much higher?
Between 2001 and Aug 2012, the dollar platinum price barely rose 8 per cent a year. In rand-per-ounce terms the rise was under 9 per cent a year. But platinum mines earn revenue from 'all' the PGMs and base metals they extract (platinum averaged 60 per cent of revenue). This PGM and base metal 'basket' of revenue increased less than 4 per cent a year in rand during the past 12 years.
Meanwhile, South Africa's inflation rate averaged 6 per cent a year, wages increased over 11 per cent a year and other costs by more. South Africa's platinum industry total rand/oz costs increased 19 per cent a year since 2001. Since 2008, the platinum price in rand has not risen at all.
As a result, when platinum is $1,400 oz and the rand $/R8.20, if you combine 'all' of SA's platinum mines, $1,550 oz is needed just to maintain production and net profitability. This allows for no capex (another $200 oz would be needed for that). So, roughly half of SA's 4.5m oz pa platinum production generates no returns below $1,500 to $1,550 an oz.
One has to wonder that if mines can't hire who they want, at terms both sides agree on, at today's PGM prices, what will happen if prices fall back towards their long-term means?

[leoneobull] 11/9/2012 06:18

Meanwhile, the strike at Lonmin clocked one month on Monday as 10 000 stick-wielding platinum miners marched and chanted songs against President Jacob Zuma.


Just over six percent of the workers turned up for work on Monday as strikers muscled into mine shafts to force them to shut. Michael Kahabo, a striker, said they want all work at the mine to shut down. "It's a small percentage but they must stop working, to join the strike."

"As for me, I can't go back to work without 12 500 rand," said 52-year-old load operator Sello Ntsibane.

Wage talks due to start on Monday had to be adjourned as mediators waited for non-unionised workers' representatives to show up, said Lonmin spokesperson Sue Vey.

One leader reached by phone said they would not attend the talks until there was a guarantee that demands for a threefold increase in pay would be discussed

[leoneobull] 10/9/2012 17:46

makes u wonder with a 1.3bn mk cap if they need to raise 1.25bn in a RI (suggested by house broker according to the FT...what is the co. worth?!?!

[leoneobull] 10/9/2012 16:59

the rise today could be linked to militant union joining talks ---in my view..if the dispute continues much longer we could be faced with a RI...end sept cov test. Own broker said that one may be needed if this goes on beyond 1st week in Sept!

[imastu pidgitaswell] 10/9/2012 16:28

Mangez Fromage?

[typo56] 10/9/2012 16:26

perhaps 'Surrender'?

[imastu pidgitaswell] 10/9/2012 16:20

'Analysts at Societe Generale upgraded shares of Lonmin to a "sell" rating'

Do the French have a rating worse than 'sell'?

Maybe 'dump', or 'burn' or 'use as toilet paper'?