Lonmin Plc dropped to the lowest level on record in London trading as platinum is set for the biggest weekly decline since October and UBS Group AG cut its recommendation on the world’s third-largest producer of the metal to sell.
Lonmin fell as much as 11 percent to 82.70 pence, the lowest intraday level since at least September 1988, and traded 8.5 percent down at 85.05 pence at 1:15 p.m. in London, giving the company a market value of 499 million pounds ($774 million).
While platinum gained 0.6 percent to $1,031.07 an ounce, it’s still set for a 4.8 percent loss this week, the biggest decline since October. The metal, used mainly in pollution-control devices for cars and for jewelry, sank to $1,010.26 on Wednesday, a six-year low. UBS reduced its recommendation from neutral.
Lonmin in May cut its capital expenditure forecast for this fiscal year to $160 million from $185 million and capped annual spending through September 2017 as it battles the price slump while salaries and costs climbed. It mines platinum in South Africa, which has the world’s largest known reserves of of the metal and where Anglo American Platinum Ltd. and Impala Platinum Ltd., the two largest producers, also operate.
“It’s really just down to the underlying commodity-price environment: it’s pretty brutal and Lonmin is a very marginal producer,” said Edward Sterck, a BMO Capital Markets analyst in London. “The South African PGM producers, they’re all in a very challenged position.”
About 4.4 million Lonmin shares changed hands in London, or more than twice the daily average over the past three months. The stock declined 8.8 percent to 16.36 rand in Johannesburg.