Investors not keen on Lonmin’s $400m rights issue despite high discount

Troubled miner, Lonmin is not getting much respite from its financial predicament despite offering its shares at a discount of 94 percent to ensure its survival at a time of crashing commodity prices. The company said on Friday that it had received acceptances for 19.2 billion new shares as of December 10 out of 27 billion shares it is selling to shareholders at 1 pence per share. The stock’s previous session had closed at a price of 16.25 pence.

The London Stock Exchange-listed platinum producer which operates the Bushveld Complex of South Africa has struggled as platinum prices fall by about 22 percent in the last year. It had, therefore, urged its shareholders to approve the $400 million rights issue announced in November so that lenders would allow it to refinance its debts. The rights issue was the company’s third since 2009. In 2012, it had issued an $800m rights issue.

Lonmin shares have fallen 95 percent this year as high labour costs amid low platinum prices keep discouraging the market.

The platinum producer expects HSBC, JP Morgan Cazenove and Standard Bank, underwriters of the rights issue, to “use their respective reasonable endeavours” to place the remaining shares.

Lonmin’s cash call came at a time it reported an annual loss of $2.2 billion, majority of which came from a $1.5 billion impairment charge at its Marikana mine in South Africa. Police had killed over 30 miners during strikes and unrest.