Lonmin has rejected a reverse takeover proposal from its largest shareholder, Xstrata, which questioned the ability of the strike-hit platinum producer’s current bosses to keep their loss-making group alive.
At the centre of a wave of strikes at South African mines that have left dozens dead, Lonmin highlights the difficulties facing a platinum industry under pressure from low prices, rising costs and a restive labour force.
Lonmin yesterday detailed a discounted $817m rights issue to repair its balance sheet – its second cash call in three years – and said it had slid to a $698m full-year loss.
But it was the news of investor and one-time suitor Xstrata’s efforts to remove current management and, under at least one plan, take control of Lonmin, that came as a surprise.
“The proposals from Xstrata were conditional proposals, with terms that did not favour all of our shareholders,” Lonmin’s acting chief executive, Simon Scott, said.
Xstrata, which holds a 25 per cent stake as a result of a failed 2008 takeover attempt, said the aim was not to take control, only to protect the value of its investment. It took a $514m writedown on its Lonmin stake in August.
But it also did little to ease the tension that has marked the four-year relationship between the two companies.
“Lonmin has suffered longstanding operational problems and we are concerned that the business does not have the management capabilities to ensure a sustainable future, even if short-term funding issues are resolved,” an Xstrata spokesman said.