JOHANNESBURG - Beleaguered Lonmin announced yesterday that it had suffered a $1.04billion (R12.7bn) impairment of non-financial assets driven by a change in its business plan during the year to September 2017 as it highlighted its heightened financial troubles.

Analysts said this impairment might put the recent take-over offer by Sibanye-Stillwater in jeopardy.

The impairment means that the group's tangible net worth was below the covenant level required by its banking facilities of $1.07bn.

As at September 30 last year, the tangible net worth had declined to $674million from $1605m in 2016.

“When you look at your business plan, you look at today's spot price combined with your view of long-term exchange rage. We have seen that the price of rhodium has trebled, palladium has doubled and the platinum price has remained flat. When you consider these some of our generation on shaft may need to close if the conditions persist. The future may change,” Lonmin chief executive, Ben Magara said yesterday.

Lonmin, the world's third largest platinum producer, said last week its lenders had agreed to waive their debt covenants due to the Sibanye-Stillwater take-over offer, which is expected to be finalised in February 2019.

Lonmin, which employs 33000 people, said that operating losses had widened to $1.1bn from $322m in the previous year. Net cash at the December 31 quarter was $63m, after working capital and capital expenditure. Net cash was $103m at September 2017 from $173m at September 30, 2016.

“We believe Lonmin has an enviable mine-to-market business with great mining assets, projects and process technology and a resilient workforce. Despite this, Lonmin continues to be hamstrung by its capital structure and liquidity constraints,” Magara said.

The bleak numbers overshadowed the operational report for the period in which the company recorded sales of 706030 platinum ounces. The 706030 platinum ounces beat sales guidance of between 650000 platinum ounces and 680000 platinum ounces.

Unit costs increased by 8.9percent to R11701, partly impacted by the 8percent increase in labour costs.

Magara also said it was becoming “tougher and tougher to reduce costs. We know what the labour costs are as we are in our three-year wage agreement. Unfortunately, we have to cut our cloth to size,” he said.

Adam Tyrrell, a senior analyst at Everbright Sun Hung Kai in the UK, said the numbers were concerning, citing that Lonmin had stated that net cash as of the end of December 2017 was $63m, down from $103m as of the end of September.

“This is worrying, since it means that net cash burn was $40m in the quarter to end December, despite a rebound in the platinum price and a strong palladium price.

“Sibanye are keen to get their own leverage down, following the purchase of Stillwater for cash early last year and they have stated that the Lonmin deal is intended to be net debt neutral at the time of completion,” he said.

“If Lonmin moves from a net cash position to a net debt position in the meantime, there is a risk that the deal gets voted down by Sibanye shareholders who need a simple majority to approve the share issuance.”

Lonmin shares closed 0.83percent lower at R14.38 on the JSE yesterday.