Lonmin Loses 90% of London Market Value This Year on Funding

  • Worst performer on exchange's broadest measure adds to losses
  • Third-largest platinum miner needs refinancing as burns cash

Lonmin Plc’s shares fell in London, bringing the decline in its market value this year to 90 percent on concerns the world’s third-largest platinum miner will struggle to refinance its debt.

The company has to renegotiate $544 million of debt facilities by the middle of next year as weak platinum prices, down by half since a peak in 2011, mean its operations are burning through cash. It already drew down a $400 million facility amid talks with bankers to restructure debt, two people familiar with the matter said this month. Lonmin may cut as many as 6,000 jobs and annual output by 100,000 ounces, the company said in July.

“The priority for banks and equity holders to bail out a platinum company must be pretty low at this point,” Ben Davis, a mining analyst at Liberum Capital Ltd., said by phone from London on Wednesday. “It’s going to be pretty tough for them unless the platinum price increases miraculously.”

Lonmin fell as much as 5.3 percent and was down 1.3 percent at 18.75 pence by 1:58 p.m. in London. It is the year’s worst performer on the FTSE All-Share Index of equities. In Johannesburg, where the company has a secondary listing, the stock has declined by 88 percent in 2015.

“One cannot see how banks or shareholders will support them if they cannot stop the cash burn,” Hurbey Geldenhuys, a mining analyst at Vunani Securities Pty Ltd. in Johannesburg, said by phone.

Lonmin remains confident in the long-term fundamentals of platinum-group metals, its operational performance and the underlying value of the business, James Clark, a spokesman for the company at Cardew Group in London, said by e-mail in response to questions.

“As announced previously, the company will address this issue through
strategic, operational and financial plans through which we will protect
shareholder and stakeholder value and stabilize the environment ahead of the pick-up in prices,” Clark said.

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