London - Lonmin has avoided potential shutdown after the world’s third-biggest platinum producer found support for plans to raise about $407 million in a share sale as it seeks to raise finance after suffering losses from the collapse in metal prices. The stock rose the most in a week.
It will offer about 27 billion shares at 1 pence each, the Johannesburg-based company said in a statement on Monday. That’s a 94 percent discount to the producer’s closing price of 16.25 pence on Nov. 6 in London. Holders will get 46 new securities for every one held, and have until December 10 to decide on the offer, it said.
The Public Investment Corporation, which looks after South African state employees’ pensions and is the continent’s largest money manager, will follow its rights, while HSBC Holdings, JPMorgan Cazenove and Standard Bank Group will underwrite the offer, it said.
“The fact that the rights issue is underwritten means the company is certain to get the full proceeds, something which has been a concern for the market,” Goldman Sachs Inc. analysts wrote in an e-mailed note. A successful sale “should also allow the company to access debt.”
Lonmin is battling to stay afloat given its debt load and an environment in which the platinum price has lost 51 percent since a high in August 2011 and shows little sign of recovery. It has cut jobs, closed unprofitable operations and is still burning through cash.
The proceeds will go toward “improving the group’s ability to withstand potential adverse movements in external factors, specifically a continuation of the weak platinum-group metal pricing environment, and repositioning the group on the South African PGM industry cost curve,” the company said.
The shares climbed 7.7 percent to 17.50 pence at 8:06 a.m. in London.
Lonmin “will get it’s money, but shareholders who don’t follow their rights will be virtually wiped out,” Hurbey Geldenhuys, an analyst at Vunani Securities in Johannesburg, said by phone.
BLOOMBERG