Fin24

Lonmin eyes $800m in rights issue

2012-10-30 09:41

London - Strike-hit South African miner Lonmin [JSE:LON] said it planned to raise $800m in a rights issue and had signed amendments to its debt facilities to help it avoid a possible covenant breach next year.

Lonmin, the world’s third-largest platinum miner, which has one of the most pressured balance sheets in the sector, had warned that it may need to issue new shares to help shore up its finances after a deadly strike hit output.

The company said that the proposed rights issue was underpinned by a standby underwriting agreement and that it had also amended a deal with its lenders to remove earnings-related covenants.

Analysts had raised concerns that the company could breach such covenants at the latest test but Lonmin said on Tuesday that it did not expect to do so, although it warned had it not taken action there was a danger over the March test.

“With the standby underwriting and amended debt facilities signed we have taken two decisive steps on our way to delivering that and we are confident about our financial security,” chaiperson Roger Phillimore said in a statement.

Lonmin’s Johannesburg-listed shares were down 1.8% at 07:39 GMT, paring earlier gains of as much as 4%.

The company said that production slumped 45.7% in the three months to September 30. It had already warned that it would miss its 2012 output target after a strike left 44 dead in August.

South African mines have been hit by months of labour unrest which have threatened growth in Africa’s biggest economy and drawn criticism of President Jacob Zuma for his handling of the most damaging strikes since the end of apartheid in 1994.

Lonmin’s miners have since returned to work and the company said that the ramp up in production was going better than expected.

Lonmin shares fell more than 5% in early trade following news of the rights issue.

At 07:08 GMT, Lonmin shares were down 4.76% to R64, after earlier hitting a record low of R63.


Comments
  • rontheogre - 2012-10-30 10:32

    This is the first of the effects caused by the mining strike. Who in their right minds would throw good money after bad by investing in a company that was already under financial strain in a country with such a turbulent labour market?

  • wynandjsmit - 2012-10-30 11:08

    Close the mine.

      Klaus - 2012-10-30 16:46

      "Sell" to chinese ?

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