Lonmin Said to Favor Share Sale on Revival of Platinum Deals

  • Shares have plunged 80 percent in London trading this year
  • Company needs to refinance $548 million in debt by mid-2016

A flurry of deals in the platinum industry is giving Lonmin Plc confidence that it can complete a share sale to help the world’s No. 3 producer of the metal raise cash, according to two people close to the process.

Lonmin has seen its stock slide 80 percent this year and has been considering various funding options. The company is encouraged by investor optimism after larger rival Impala Platinum Holdings Ltd. completed a $297 million share sale and Sibanye Gold Ltd. bought two mines over the last month, said the people, who asked not to be identified because the plans are private. 

The producer is burning through cash to sustain operations and needs to refinance about $548 million of debt by the middle of next year. The company operates at a loss as prices of platinum, used to clean vehicle emissions and for jewelry, trade near a six-year low.

The shares dropped as much as 13 percent Thursday and traded 0.7 percent lower at 34.50 pence by 9:37 a.m. in London, paring the previous day’s gain of 34 percent. While the stock doubled in the past week as confidence returned to the mining industry, prices are only the highest in a month.

Market Speculation

“We are unable to comment on market speculation, but as we have said previously the company is working very hard on strategic, operational and financial plans which will protect shareholder and stakeholder value and stabilize the environment going forward,” James Clark, a spokesman for the company at Cardew Group in London, said by e-mail in response to questions. “Lonmin will have more to say about this at the appropriate time.”

Lonmin is in talks with key advisers to evaluate its funding options, the two people said. The company is due to announce how it will restructure its balance sheet in November, when it releases annual earnings, according to a statement from July.

The platinum producer has already drawn down a $400 million facility amid talks with bankers to restructure debt, two people familiar with the matter said last month. Lonmin may cut as many as 6,000 jobs and annual output by 100,000 ounces, the company said in July.

Before it's here, it's on the Bloomberg Terminal.