Lonmin shareholders approve crucial cut-price rights issue

Lonmin shareholders decisively approved the company's deeply discounted $400 million share issue on Thursday as the beleaguered platinum producer seeks cash to stay afloat.

Bruised by strikes, rising costs, a weak platinum price and slowing demand for the metal, South Africa-focused Lonmin said last month it also planned to raise another $370 million in loans to refinance debt currently due in May 2016.

Lonmin said about 88 percent of its shareholders approved the rights issue at a meeting in London after warning that if it couldn't raise the cash, shares could be suspended.

"We had no choice but to vote in favour because we will be wiped out if this doesn't go through. But does that mean we will be with the company in the next 10 or even two years? We don't know," said Anthony Guildford, a Lonmin investor since 1969.

The loss-making platinum producer had asked its shareholders to vote on five proposals, which also included consolidation of Lonmin shares. Shareholders also authorised its directors to allot new shares.

The scale of Lonmin's plight was illustrated on Nov. 9 when it priced its rights issue at just 1 pence a share - a 94 percent discount to the stock's previous session closing price of 16.25 pence on the London Stock Exchange.

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Some investors, including pensioners, raised concerns about the consolidation of shares.

"There had to be a better idea than consolidation. I will never see my money (14,500 pounds in shares) back at 6 pounds where I bought ... They were 1.70 last Christmas!," one investor said.

BUYING TIME

Lonmin still has to convince the wider market it can be a viable business.

"Lonmin has got its reprieve, and existing shareholders can hardly be blamed for sticking with it. But with labour costs still high and platinum still stuck, it is hard to work out where the positive investment story lies," IG analyst Christopher Beauchamp said.

"The company seems to be a black hole where cash is concerned; those looking for platinum exposure will find it unappealing, given the high-cost mines that the firm operates."

Lonmin shares, which have plunged more than 90 percent this year, were down 4.7 percent at 10.18 pence by 1356 GMT.

Platinum prices are near seven-year lows below $850 an ounce, hobbled by slowing demand in top consumer China and as the Volkswagen's emissions-cheating scandal weighs on market sentiment.

Lonmin, founded in 1909 as the London and Rhodesian Mining and Land Company, is also closing or mothballing several mine shafts and cutting 6,000 jobs, some 15 percent of its workforce.

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"We put these measures in place and we are very confident they are the right measures," Lonmin Chief Executive Ben Magara told Reuters after the meeting.

"Everything depends on market conditions. We have done what we believe would sustain the business in this low price environment."

The rights issue, Lonmin's third in six years, is being underwritten by HSBC, JPMorgan Cazenove and Standard Bank.

South Africa's Public Investment Corporation (PIC), which owns about 7 percent of the company, has committed to buying its full entitlement and has sub-underwritten a material portion of the issue, over and above its entitlement, Lonmin said.

"They must show us now that they can make a difference. If they have to come back to us in a year, that will mean that they were dishonest and their integrity will be brought into question," PIC Chief Executive Daniel Matjila was quoted as saying in South Africa's Sunday Times newspaper.

For a Reuters Breakingviews column on Lonmin click on

- Reuters