HomeNewsLonmin urges shareholders to vote in favour of rights issue

Lonmin urges shareholders to vote in favour of rights issue

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JOHANNESBURG – London and Johannesburg-listed platinum miner Lonmin has urged its shareholders to vote in favour of an $817-million rights issue at its general meeting on Monday.

Report by miningweekly.com

The company, which owns the Marikana Mine where the ongoing South African mining sector labour conflict first erupted, told shareholders that achieving financial certainty was conditional on a majority vote in favour of the cash call.

“The board firmly believes that if the rights issue is not approved, it will jeopardise the substantial inherent value in Lonmin’s well-vested assets to the detriment of all stakeholders,” it said in a statement.

Last week, Lonmin acting chief executive officer Simon Scott announced details of the discounted rights issue, aimed at reducing the company’s debt, and said it had rejected a reverse takeover offer from its 25% shareholder Xstrata.

The platinum company also rejected a proposal from Xstrata, which stated it was prepared to support the rights issue but on condition that the Lonmin board publicly commit to ceding management control.

Lonmin reminded shareholders that it had negotiated amended facilities agreements with its lending banks following the Marikana tragedy, which, together with the fully underwritten rights issue, would restructure the balance sheet to place the group on a sound financial footing.

The amended facilities agreements were conditional on completion of the rights issue and receipt of at least
$700 million of net proceeds by December 31.

The directors warned that without the amended facilities agreements, Lonmin might breach its banking covenants, which could result in events of default, causing the group’s borrowings to become repayable on demand.

At October 31, the group’s net debt was about $550 million and was forecast to rise further in the coming months as the ramp-up to normalised production levels continued.

Meanwhile, the board commended the current management team for doing a “remarkable job” in responding to circumstances, which have affected Lonmin since August.

It said that the management team had successfully managed a return to production following the events at Marikana, while, at the same time, it had executed a comprehensive debt and equity balance sheet restructuring to secure Lonmin’s longer-term financial future.

“The current management arrangements were put in place in response to Ian Farmer sadly having to step away from the business owing to serious illness at a time when the company was facing a momentous period in its history.

“The board believes that the current arrangements are appropriate for the time being and are working well to stabilise the company and bring production back to normal,” Lonmin stated.

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