Lonmin sees salvation, launches $407m rights issue at only 1 pence per share

Lonmin’s Marikana mine concentrator plant.

South African platinum producer Lonmin (LON:LMI), the world’s third largest, avoided Monday becoming the biggest casualty of the commodity crisis by winning shareholder support for a $407 million equity sale.

The company said it would sell 27 billion shares at one pence each to its shareholders — a 94% discount from the stock’s last trading price of 16.25 pence on the London Stock Exchange on Friday.

Analysts at Investec said shareholders had little choice but to accept the rights issue. “Management is effectively forcing shareholders to follow their rights or be diluted into obscurity,” they said in a note Monday.

A plunge in platinum prices has hit profits and forced the company to restructure its business. About half of an expected 6,000 job losses have already been implemented, Lonmin said last week.

The miner, which is planning for lower production at some of its South African mines, also noted it would cut platinum output from over 750,000 ounces to 700,000 ounces in 2016 and then down to 650,000 ounces for 2017 and 2018.

The share sale is the second since 2012, when Lonmin raised $817 million after deadly protests at its Marikana operation, where 34 miners were killed by police during strikes and unrest in 2010.

The move came as Lonmin reported an annual loss of $2.2bn, compared with a loss of $326m a year earlier. The majority of its losses came from a $1.5bn impairment charge at Marikana.

The miner’s net debt climbed to $185m at the end of September compared with $29m a year ago.

Lonmin shares climbed in early trading as much as 14%, bringing the company’s market value to about $160 million. But the stock collapsed in the afternoon, falling more than 10% to $14.50p at 3:08 pm GMT.