Lonmin shares collapse as Glencore completes stake divestment

Lonmin shares collapse as Glencore completes stake divestment

Lonmin’s Marikana mine concentrator plant.

Shares in Lonmin (LON:LMI), the world’s third-largest platinum producer, dropped as much as 7.3% on Thursday as mining giant and commodity trader Glencore (LON:GLEN) completed the distribution of its 23.9% stake in the South African miner to shareholders.

The troubled platinum producer saw its stock hitting a low of 128.7 p in early trading, the biggest loss in three months, and was trading at $136.0, or 1,16% lower than the previous session at 2:15 pm London time.

Glencore came to own its stake in Lonmin through its $68bn acquisition of Xstrata in 2013, and chief executive Ivan Glasenberg had on several occasions described the venture as a “non-core” one.

In fact, the company is believed to have been opposed to Xstrata’s decision to buy the stake in two market transactions back in 2008.

Lonmin shares collapse as Glencore completes stake divestment

(Source: Google Finance)

Plans to spin off the stake came to light a year ago, when Glencore announced it would slash spending on its mines in 2015 to between $6.5bn and $6.8bn — down from a previously expected $7.9bn.

As a result of the move, the Swiss-based firm’s shareholders have received Lonmin stock in proportion to their stakes in Glencore, an option that Glasenberg considered better than a straight market disposal.

Three years of falling platinum prices and a five-months strike last year have left Lonmin near an all-time low and valued at just $1.2 billion. That’s down from a peak of more than $12 billion in 2007 for the miner of the metal used in cars and jewellery.

According to market analysts, such as Investec, the distribution of Glencore’s shares completed today may create a group of sellers that want to dispose of their holding. It also could create an opportunity for a buyer, it added.