After six weeks of disruption, the world’s third-largest platinum miner, Lonmin, commenced production at its Marikana mine this week after striking workers had agreed to an 11% to 22% pay increase. It is losing money and what it faces now is to sort out its balance sheet and for that it needs to go to shareholders and its money lenders to raise cash to keep it going.
Various reports in the local and international media about this year’s labour crisis and violence at South Africa’s platinum and gold mines say that investment in the sector has taken a knock, but analysts take a long term view which is positive now that the platinum price has climbed from around $1400/oz before the Marikana strike to around $1600/oz.
Key shareholders include Xstrata (25%), and black economic empowerment (BEE) company Incwala Resources (18%) whose biggest shareholders are Cyril Ramaphosa's Shanduka (50%) and the Industrial Development Corporation (IDC) and Lonmin (23% each).
It is not known whether they will exercise their rights in any capital raising exercise. To complicate things, Xastrata is the subject of a takeover bid by commodities trading giant Glencore which, according to reports, this week threatened to walk away from any deal if Xstrata’s shareholders, wanting a better offer, do not accept the deal on the table.
Lonmin has debt facilities totalling about $945-million. One analyst who declined to be named told Reuters he expected Lonmin’s lenders, which include Royal Bank of Scotland and Lloyds Banking Group, to be flexible in the short term.
The end of the strike will give the miner a stronger hand in its refinancing talks with lenders, say analysts.
Lonmin is expected to make a financial statement soon.
