Lonmin may shut down if shares sale flunks
South African platinum producer Lonmin (LON:LMI), the world’s third largest, warned it may shut down if its $400 million cash call through a rights issue doesn’t deliver enough funding.
"In those circumstances, the group may have to cease trading and shareholders could lose the entire value of their investment in the shares," the company said in a statement.
The drastic decision would make of Lonmin the biggest casualty of the ongoing commodity rout that is hurting miners worldwide.
Shares collapsed on the news. They were down over 8% to $23.3p at 3:51pm GMT, which means they have dropped more than 90% lower so far this year, placing Lonmin among the worst performing mining companies of 2015.
A plunge in platinum prices has hit profits and forced the company to restructure its business. About half of an expected 6,000 job losses have already been implemented, Lonmin said earlier this week.
The miner, which is planning for lower production at some of its South African mines, also noted it would cut platinum output from over 750,000 ounces to 700,000 ounces in 2016 and then down to 650,000 ounces for 2017 and 2018.
The share sale is the second since 2012, when Lonmin raised $817 million after deadly protests at its Marikana operation.