Johannesburg - The UK Panel on Takeovers and Mergers has told the Xstrata CEO Mick Davis to "put up or shut up" on the firm's pre-conditional offer for platinum group metals producer Lonmin by October 2.
This follows representations to the panel by Lonmin advisers seeking a ruling, after Xstrata pitched its hostile offer at £33 a share on August 6. Lonmin has rejected the offer out of hand.
According to a Lonmin statement, the panel has ruled that, by 17:00 on October 2, Xstrata must either announce a firm intention to make an offer for Lonmin or announce that it does not intend to make an offer.
If Xstrata does not commit to making an offer by then, it will effectively be precluded from doing so for the next six months.
The panel ruling is a plus for Lonmin. Platinum market sources have suggested that Davis intended waiting for Lonmin to release its production results for the year to September before launching the full bid.
The reason is the expectation that those results - which Lonmin put out on October 25 last year in respect of financial 2007 - will be disappointing, showing further production drops.
That psychological blow could have convinced some Lonmin shareholders, who were uncertain about accepting the offer, to throw in the towel and take Xstrata's money.
Meanwhile, Leon Esterhuizen, an analyst from RBC Capital Markets, has publicly criticised Lonmin's management as being the root cause of the group's problems.
In a research report, Esterhuizen said: "In our opinion, Lonmin shareholders would be ill-advised to sell the assets when the problem lies not in the assets but in how they have been managed.
"We acknowledge the obvious opportunistic nature of Xstrata's bid, but it is no secret that that this opportunity was, in fact, created by significant under-delivery by Lonmin against management guidance over most of the past two years."
That point of view is rejected by Lonmin chairperson Sir John Craven, who told Miningmx on Tuesday that "I can assure you - and I speak on behalf of the entire Lonmin board - that we fully support (CEO) Brad Mills and his management team."
Esterhuizen reckons that Xstrata would increase its bid for Lonmin, but he's looking for a target price of £38 a share after allowing for a takeout premium.
On his numbers Lonmin?s net asset value varies between £32/share at current depressed spot platinum group metals prices - compared with £45/share just a month ago - to £35/share at RBC Capital Markets' long-term platinum group metals price forecasts.
That implies a mere 10% to 15% upside in Xstrata's bid.
Those numbers jibe with Lonmin's own estimates, contained in its latest defence document released on Tuesday.
According to Lonmin, every US$100/ounce rise in the platinum price will add around £2.90 to the share price and every 50 000oz increase in platinum sales will add around £3.90 to the price.
Totting that up, Lonmin chief strategic officer Ian Farmer reckons "you easily come up with a chunky number beginning with a four. We think £33 a share is a steal."
- Miningmx.com
For more mining sector coverage, visit miningmx.com.