Lonmin Share Discussion Threads

[dealy] 13/7/2015 11:00

volume coming in on the buy side.

still outrageous that no rns from company

[mj19] 13/7/2015 10:57

I am crying

[dealy] 13/7/2015 10:49

volume still very low. Less than 2% of shares traded have taken 20% off the market cap in 3 days. Never seen anything like it in 20 years of trading (remember - this has occured on NO NEWS from the company)

[karmastuartra] 13/7/2015 10:49

Time to suspend until rns issued.

[karmastuartra] 13/7/2015 10:46

Come on lomin,defend your corner!

[karmastuartra] 13/7/2015 10:45

That's the UBS target met,waiting for lomins comment via rns?

[dealy] 13/7/2015 10:43

and the company is OBLIGED to comment on such a move.

[dealy] 13/7/2015 10:42

huge drop based solely on the opinion of one broker. Ignoring option value for a) recovery in prices b) better management c) M&A

This move has massively rocked my faith in the ability of the equity markets to price risk/reward.

[mj19] 13/7/2015 10:35

UBS advice drags Lonmin down
July 13 2015 at 07:45am
By Dineo Faku
Comment on this story
IOL pic july13 BR Lonmin 438 INDEPENDENT MEDIA Workers leave the Lonmin K3 shaft in Marikana, Rustenburg, after their shift. UBS downgraded its recommendation of Lonmin's stock to a "sell" on Friday. File photo: Simphiwe Mbokazi

Johannesburg - Lonmin shares on the JSE on Friday fell by as much as 11 percent on news that investment bank UBS had downgraded its recommendation on the stock to a sell and Citigroup had slashed its target price for the company.

The firm, which is the world’s third biggest platinum producer, saw its shares close 11.32 percent down at R15.90 on Friday.

“It’s really just down to the underlying commodity-price environment. It’s pretty brutal and Lonmin is a very marginal producer,” said Edward Sterck, a BMO Capital Markets analyst in London.

“The South African platinum group metal (PGM) producers are all in a very challenging position,” he added.

Lonmin is in dire straits and in May announced that it was talking with labour unions on its plan to cut 3 500 employees or 10 percent of its labour as part of a plan to make R2 billion savings amid the depressed commodity price environment.

UBS on Friday raised concerns that the cashflow generated by the company once the depressed precious metal prices recover would be used as capital expenditure to restore its asset base, after several years of underspending, and leave little money for investors.

“Lonmin does not have the same asset flexibility as peers, and it remains unclear how it could transform itself into a producer with the ability to generate cash through the cycle,” UBS said.

UBS also cut its long-term platinum price forecast by 16 percent to $1 600 (R19 880) an ounce from $1 900 an ounce.

“Once platinum prices recover above $1 500 an ounce in 2018, we believe Lonmin will increase capex spend from 2019 onwards. However, as a result of historical underspend, we believe capex will likely increase to $250 million (R3.1 billion) for some years before returning to a more normalised level.”

Labour unrest

Lonmin has grappled with labour unrest, including the massacre of 34 mineworkers at its Marikana mine in mid-August 2012, which has been described as the most lethal use of force by South African security forces against civilians since the 1960s.

Last year, the company was crippled by a five-month wage strike. Lonmin cut capex as part of a strategy to conserve cash following a rights issue in 2013.

Management also forecast that it would cut capex to $160m from $250m in the first half of the year in response to the low price environment.

UBS had previously expected higher PGM prices to boost Lonmin, improve earnings and help it to re-start its capex projects, but the protracted subdued metal price environment has been problematic. “On our updated PGM forecasts, valuation is stretched and we downgrade Lonmin to a sell.”

Lonmin was loss making at the current prices and UBS believed that shares would remain depressed until prices recovered.

UBS expected positive momentum in PGM prices, which would be positive for Lonmin given high operational gearing.

“However, we believe shares are already discounting a platinum price of $1 625 an ounce,” the company said.

Lonmin management had guided that its sales would be 750 000 ounces in 2016/17 financial year, and would spend only $150m a year, UBS said.

“We believe that this level of sales is not suitable at such a low level of capex.

“As a result, we expect production to decline to 700 000 ounces between 2018 and 2020 before increased capex starts to bear fruit,” UBS said.

It said a potential positive was the perceived value of the infrastructure – replacement value of Lonmin’s mines, concentrators and smelters was likely to be $2bn, higher than current market cap.

“However, we believe replacement value is more likely to underpin valuation in a tight physical market,” UBS said.

[dealy] 13/7/2015 10:32

never seen such a severe drop in such a short period for a company that

a) didn't make an announcement
b) has no debt

Looks totally overdone - probably related to the glencore disposal overhang. Else there is an insider dealing lawsuit coming.

[ukgeorge] 13/7/2015 10:32

what a warning that, they may make a profit



quite a good article

[mj19] 13/7/2015 10:27

Is there some sort of profit warning coming

[dealy] 13/7/2015 10:17

how can the company not comment on this fall. unbelievable

[karmastuartra] 13/7/2015 10:07

Yeeeeeeeeeeeehaaaaaaaaaaa!

[karmastuartra] 13/7/2015 10:07

Gonna ride this puppy all the way back up!

[bernieboy] 13/7/2015 10:06

Took some more at just over 76.....

[bulltradept] 13/7/2015 10:03

Karma is emotionally invested..

[ukgeorge] 13/7/2015 10:02

good luck karmastuartra

[karmastuartra] 13/7/2015 09:50

Watch the bounce back,should be just as dramatic !

[bernieboy] 13/7/2015 09:46

So are we expecting a fund raise or discounted rights issue here or something!? Fall here is incredible.

[karmastuartra] 13/7/2015 09:07

Come on down,the price is right!!!

[karmastuartra] 13/7/2015 09:05

Bargain city,roll up,roll up,get your cheap shares here!

[karmastuartra] 13/7/2015 08:53

Just added some more,bargain,thanks.

[karmastuartra] 13/7/2015 08:49

I'm tucking mine away till next year,picture will be completely different,I'm sure of that!

[bernieboy] 13/7/2015 08:38

Soon into the 70's. Amazing!