By Sarah Young
LONDON, Sept 19 (Reuters) – The end of a bloody strike by
South African workers at Lonmin will give the
miner a stronger hand in its refinancing talks with lenders, say
analysts, who believe the firm can withstand higher wages
despite its stretched balance sheet.
Lonmin expects to see production at its Marikana mine resume
on Thursday when striking workers return after it agreed an 11
to 22 percent pay increase, a deal which it hopes will put an
end to six weeks of disruption.
With mining operations due to restart, Lonmin will have a
stronger platform from which to try to sort out its pressured
balance sheet ahead of what most analysts say is likely to be a
breach of debt agreements.
“Having a mine that’s back up and running provides the base
for Lonmin to start having those discussions with lenders,”
Panmure analyst Alison Turner said.
Analysts said the higher wage for next year would add to
pressure on the company’s margins, but they called the estimated
sums involved “manageable” and thought it would not have a
material impact on the scale of a possible equity raising.
Lonmin has agreements with lenders that require it to keep
the ratio of net debt to core profit at no more than four times.
That ratio will be tested at the end of this month and is
already seen as strained.
Without active mining operations taking place, the company
would have found raising additional financing difficult, whether
that be through a debt deal or an equity raise, both of which it
has said it is considering in order to shore up its balance
sheet.
WAGE BILL
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