LONDON Aug 20 (Reuters) – Shares in miner Lonmin
slid for a sixth day on Monday, as investors
fretted over the prospect of a cash call to shore up its balance
sheet and the potential dismissal of 3,000 striking workers
after a week of violence in which 44 people were killed.
South African-focused Lonmin, the world’s third-largest
platinum miner, has given workers at its Marikana mine an
ultimatum to return to work on Monday or face being fired, a
twist that could heighten a tense situation on the ground and
make it even harder for production to resume.
Already battered by rising costs and feeble prices squeezing
the platinum industry, union clashes have now pushed Lonmin
shares to the lowest levels since 2008.
At 0740 GMT, its shares were down 4.7 percent in London at
610.3 pence, underperforming a 0.3 percent drop in the UK mining
sector, while the Johannesburg shares were down 3.8
percent.
Lonmin has one of the most pressured balance sheets in the
sector and analysts have warned for days that the latest
stoppage, which means the miner will miss its 2012 output
target, would force it to overhaul its debt and potentially
raise cash on the equity market.
The Sunday Times newspaper said the miner’s expected rights
issue could be as large as $1 billion, roughly half its current
market capitalisation. Sources familiar with the matter told
Reuters it was too soon to put a figure on a cash call, as
production had yet to resume at the mine.
Analysts at Liberum in London said a $1 billion cash call
would be the “belt and braces” recapitalisation needed, given
industry oversupply and market conditions that have made large
chunks of production loss-making.
“A $1 billion rights issue, as compared to its current $2
billion market cap, will be a difficult proposition, but
strategically, could provide them with a longer-term benefit,”
Nomura analysts said in a Monday note.
“However, with such an uncertain future we continue to see
the share price as too high and re-iterate our ‘reduce’
recommendation.”
Deutsche Bank cut its recommendation on the stock to “sell”
from “hold.”
Lonmin has also yet to receive a firm commitment of support
in the event of a rights issue from its largest shareholder,
miner Xstrata, the sources said.
(Reporting by Clara Ferreira-Marques; Editing by Erica
Billingham)
