Johannesburg - South Africa’s Public Investment Corporation said it will take up as much as 25 percent of Lonmin if some of the platinum producer’s investors don’t follow their rights in a proposed $407 million share sale.
The pledge from the state-owned PIC, which already owns about 7 percent of the world’s third-largest platinum producer, comes as shareholders are due to vote this week on whether to proceed with a deeply discounted share issue that will also unlock new debt from banks.
Lonmin is reeling from from a plunge in metal prices that cut its profit and erased 95 percent of its market value this year.
“The rights issue is the best possible approach to re-capitalising the company in the current circumstances,” the PIC’s CEO Daniel Matjila said by e-mail on Monday.
“Not supporting Lonmin would put the company at risk and it could potentially be harmful to the industry and the communities where Lonmin operates.”
The investment manager views the estimated $38 million cost of the share sale as high, Matjila said. The costs include rolling debt with banks, advice on the rights issue and underwriting fees, he said.
Three banks, including HSBC Holdings, will guarantee the share issue, Lonmin said in a November 9 statement.
BLOOMBERG