Johannesburg - Platinum miner Lonmin [JSE:LON]
will price its $800m rights issue at around a 45% discount on Friday, according to three people familiar with the matter, representing the top of its expected range.
Its biggest shareholder, Xstrata, has not yet decided whether it will take up rights in the issue, said the people, all of whom declined to be identified because the information is not yet public.
Lonmin is also due to report its full-year results on Friday. It needs to raise funds to cut debt and finance a recovery after six weeks of deadly strikes at its South African platinum mines.
"Currently (Xtrata) are not participating in the rights issue, but I think there is a likelihood that they will," one of the people said.
Xstrata, which is still in the midst of being taken over by its own largest shareholder Glencore, has a 25% holding in Lonmin after a failed takeover attempt four years ago.
Glencore is said to have little appetite for platinum, other sources have said.
Lonmin will offer the shares at around a 45% discount to the theoretical ex-rights price, or TERP, two of the people said. TERP is the market price the shares would theoretically have after the rights issue. It is based on the number of new shares to be issued and the price of existing shares.
Reuters earlier reported that the range was likely to be between 35% and 45%. Shares of the company are down more than 53% so far this year in London.
There is "strong demand" for the rights issue at the current, discounted, levels, said one of the sources.
"I think people see value in Lonmin at where its priced," the source said, adding that the offer is expected to run from November 20 to December 11.
The rights issue will not dilute Lonmin's black empowerment rating, because its black investors hold direct stakes in its mines, not its shares.
South African companies are required to meet government targets on black ownership in a drive to right imbalances from apartheid.
Lonmin said last month it needed the rights issue to restructure a balance sheet that is one of the most stretched in the sector, thanks to cost inflation, cooling demand for platinum and the crippling strikes that cost it 110 000 ounces in lost platinum output.
In August Lonmin's Marikana mine was the scene of South Africa's most violent episode since the end of apartheid, when police shot dead 34 people involved in wildcat stoppages battering the country's already beleaguered platinum industry.
Without the rights issue Lonmin would have seen a revised debt agreement scrapped and would likely breach key covenants as the new debt agreement is conditional on Lonmin raising at least $700m by the end of the year.
"Lonmin needs this money to 'stay in the game'. Current and prospective shareholders will have to chip in at least half the value of their existing holdings to allow their investment to remain viable," CIBC analysts said in a note.
"To get payback on this will require a metal price basket increase of at least 25% by our estimates."
Lonmin is expected by analysts to report a loss before tax of $18.5m for the year ended September 30, according to Thomson Reuters I/B/E/S Estimates, which compares with a $315m profit in the previous year.