London - Shares in miner Lonmin [JSE:LON] slid for a sixth
day on Monday, as investors fretted over the prospect of a cash call to shore
up its balance sheet and the potential dismissal of 3 000 striking workers
after a week of violence in which 44 people were killed.
South African-focused Lonmin, the world’s third-largest
platinum miner, has given workers at its Marikana mine an ultimatum to return
to work on Monday or face being fired, a twist that could heighten a tense
situation on the ground and make it even harder for production to resume.
Already battered by rising costs and feeble prices squeezing
the platinum industry, union clashes have now pushed Lonmin shares to the
lowest levels since 2008.
At 07:40 GMT, its shares were down 4.7% in London at 610.3
pence, underperforming a 0.3% drop in the UK mining sector, while the
Johannesburg shares were down 3.8%.
Lonmin has one of the most pressured balance sheets in the
sector and analysts have warned for days that the latest stoppage, which means
the miner will miss its 2012 output target, would force it to overhaul its debt
and potentially raise cash on the equity market.
The Sunday Times newspaper said the miner’s expected rights
issue could be as large as $1bn, roughly half its current market
capitalisation. Sources familiar with the matter told Reuters it was too soon
to put a figure on a cash call, as production had yet to resume at the mine.
Analysts at Liberum in London said a $1bn cash call would be
the “belt and braces” recapitalisation needed, given industry oversupply and
market conditions that have made large chunks of production loss-making.
“A $1bn rights issue, as compared to its current $2bn market
cap, will be a difficult proposition, but strategically, could provide them
with a longer-term benefit,” Nomura analysts said in a Monday note.
“However, with such an uncertain future we continue to see
the share price as too high and re-iterate our ’reduce’ recommendation.”
Deutsche Bank cut its recommendation on the stock to “sell”
Lonmin has also yet to receive a firm commitment of support
in the event of a rights issue from its largest shareholder, miner Xstrata, the
Lonmin has issued an ultimatum to the illegally striking
workers to return to work on Monday or face possible dismissal.
The ultimatum applied only to illegally striking rock drill
operators and assistant rock drill operators who began an unprotected action on
August 10, the company said in a statement on Sunday.
“We still are very optimistic that workers will show up,” said Barnard Mokwena, executive vice-president of human capital and external affairs.
“Only then can we sit down and review the situation and determine the next action,” he told SAfm.
Lonmin CFO Simon Scott said, “The safety and security of our
employees is paramount and nobody will be asked to report for duty if the
police consider them in danger of reprisals.”
Lonmin accounts for 12% of global platinum output. It is
already struggling with low prices and weak demand. The company has slashed
spending plans and may miss its annual production target of 750,000 ounces.
The possibility of tightening supply has lifted the price of
platinum, giving a much-needed boost to Lonmin rivals Impala Platinum Holdings
[JSE:IMP], up 1%, and Anglo Platinum [JSE:AMS], up 0.9%.
A total of 259 Marikana protesters were expected to appear
in the Garankuwa Magistrate’s Court on Monday.
“They will all appear in the Garankuwa Magistrate’s Court on
various charges which include murder, attempted murder, armed robbery, public
violence and more,” Captain Dennis Adrio said.
The protesters were arrested on Thursday following the
violent confrontation between police and striking workers of Lonmin’s platinum
mine in Marikana, North West.
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