Lonmin rejected a reverse takeover proposal from 25 percent shareholder Xstrata that would have seen Lonmin take on Xstrata’s platinum assets, the third-largest platinum producer said on Friday.
“The proposals weren’t in the interest of all shareholders,” Lonmin acting chief executive Simon Scott said.
Xstrata suggested last month that Lonmin buy its platinum and alloy assets in South Africa and hold a $1 billion (R8.7bn) share-sale fully underwritten by Xstrata, he said.
Lonmin, which on Friday reported a loss of $698 million for the 12 months to September, is offering $817m of stock to investors to meet pledges to creditors.
It is resuming operations at its Marikana mine after the deadliest post-apartheid strike that claimed the lives of more than 40 people. The company did not know whether Xstrata would take up its rights under the offer, Scott said.
The offer prices the shares at £1.40 (R19.40), a discount of 69 percent to Thursday’s closing price of £4.528, Lonmin said in a separate statement. The stock dropped 2.1 percent to £4.4330 as of 9.22am in London, valuing the company at about £901m.
Lonmin also rejected a proposal from Xstrata in which the Zug, Switzerland-based company offered to support a rights issue on condition that Lonmin’s executive directors were replaced, Lonmin said. Xstrata would have provided management services to Lonmin’s operations under the deal.
Even so, Lonmin is “open to approaches”, Scott said.
Xstrata said in a statement that Lonmin had “suffered longstanding operational problems and we are concerned that the business does not have the management capabilities to ensure a sustainable future.”
Lonmin management had rejected Xstrata’s proposals “without substantive engagement”, and the Johannesburg-based company had never proposed a constructive solution to its management problems, Xstrata said.
The Swiss mining company was “open to constructive solutions to strengthen Lomnin’s management and operational capabilities,” it said.
The walkout at the Marikana mine from August 10 to September 20 cut 110 000 ounces of output valued at about $170m. Workers returned after accepting pay increases of 11 percent to 22 percent.
Police shot dead 34 on the strike’s worst single day of violence on August 16, killings that are the subject of a judicial inquiry that started on October 1.
Lonmin is the worst performer on the FTSE 350 Mining index in the past six months, having lost half its value. It has declined 90 percent since its 2007 record and is trading at levels last seen in 1999.
“The sector as a whole is currently trading at price-to-book levels last seen in the early 1980s and late 1990s,” Paul Whitburn, an analyst at RE:CM, said in a note. It was “offering the type of buying opportunity that only comes along once every decade”.
Refined platinum production fell 6 percent to 687 372 platinum ounces from a year earlier, the company said on October 30.
Labour unrest spread to Anglo American Platinum, the largest producer of the metal, as well as to South African gold, coal and iron ore operations.
The stoppages shaved 50 basis points off the country’s economic growth, Treasury director-general Lungisa Fuzile said on October 26. Strikes that started more than eight weeks ago at Anglo’s platinum mines continue. – Carli Cooke from Bloomberg