Johannesburg - Lonmin [JSE:LON]
has rejected a proposal from its largest shareholder Xstrata to take control of the miner by folding its PGM and alloys division into the platinum miner, Lonmin said on Friday.
Under the proposal, Xstrata, which owns about a quarter of Lonmin, would have ended up with at least 70% of the company and would have changed its top managers including the chairperson, chief executive and chief financial officer.
In a statement, Lonmin said the asset merger would have been followed by a $1bn rights issue. It said the terms were not attractive for non-Xstrata shareholders.
"The Board of Lonmin had made it clear that it would be prepared to consider any revised proposal that Xstrata wished to make on its merits; however, no revised proposal was made by Xstrata," Lonmin said. The proposal was made in September.
Lonmin said that this Thursday, Xstrata made a fresh proposal to support a separate rights issue as long as it could replace Lonmin's executives, which Lonmin also rejected.
Lonmin, the world's third-largest platinum miner, said it had not yet been told if Xstrata would support the rights issue without the management changes.
Lonmin priced its $817m rights issue at a discount of 44.4% to its theoretical ex-rights price (TERP) of an existing share. In South African rand, the discount is 45%.
Lonmin is raising cash to slash debt and fund a recovery, after it was battered by six weeks of strikes in South Africa. At the most violent strike at its Marikana mine, 34 people were shot dead by police.
It said it would issue 9 new shares for every 5 existing, a total of up to 365 million shares at 140 pence or R19.50.
Lonmin booked $755m of special costs, including $159m for the costs of the strike. That dragged it to a full-year loss before tax of $698m.
Lonmin shares on the JSE dropped 4% to record lows after the company rejected the Xtrata proposal.