LONMIN on Tuesday successfully completed its $817m rights issue to raise the capital it needs to stave off a breach of covenants and it now has to deal with key shareholders pushing for wide-sweeping changes to the platinum company’s management.
Xstrata, which owns 24.6% of Lonmin, has pushed hard for a change in management now that the company has returned to the market for a third time to raise cash to pay down debt and recapitalise its operations.
Xstrata CEO, Mick Davis, has said investors must be given a clearer view of the world’s third-biggest platinum miner’s strategy and business plans and it views changes to key board positions as critical to turning around the fortunes of the company.
Lonmin had to raise at least $700m before the end of the year for its lenders to change the terms of debt covenants that would be measured in March next year and which the company had warned it was at risk of breaching after a violent wildcat strike at its Marikana mine and safety stoppages curtailed production.
Forty four people were killed in violence at Marikana, 34 of who were shot dead by police in August.
The strike cost Lonmin 110,000oz of platinum production. It managed to meet its September covenant measurements of profitability to net debt and net interest to capital expenditure by digging deep into its pipeline of metal production to boost sales in the year to generate revenue.
Shareholders subscribed for nearly 97% of the nine shares for every five held at R19.50 each.
The underwriters secured buyers for the remaining shares at a premium to the £1.40 price, selling them for £2.72 equivalent to about R38 each.
"The proceeds of the rights issue, allied to the amended banking facilities, provide financial security for Lonmin. Management now has a secure platform from which to deliver the Lonmin renewal plan," said Lonmin chairman, Roger Phillimore.
In a statement in mid-November giving Xstrtata’s backing to the rights issue and which publicly aired the diversified miner’s unhappiness with Lonmin, Mr Davis said: "As a significant Lonmin shareholder, we are concerned about the destruction of value of our shareholding."
He said Xstrata would follow its right, but the "recapitalisation must be backed by a suitable management team and business plan".
Acknowledging the pressure from shareholders like Xstrata, which has since been taken over by commodity trader Glencore, Mr Phillimore has said permanent appointments would be made in consultation with shareholders once the rights issue was completed.
Lonmin’s nine directors increased their shareholding in the company to 367,581 from 153,827, with the single largest owner of the stock on the board being Ian Farmer, the CEO, who fell seriously ill in August.
Simon Scott, the financial director, is acting CEO. Key management also followed their rights, Lonmin said.
© BDlive 2012