LONDON (Alliance News) - Lonmin PLC on Wednesday said it will raise USD400.0 million in a rights issue of shares and has secured an amended debt facility for another USD370.0 million, as the company launched a new business plan to try to mitigate lower platinum prices.
The platinum miner also warned further jobs could be cut, despite 6,000 employees already agreeing to leave the company earlier in 2015, and said production costs and capital expenditure have been severely cut.
"The board believes that the proposed rights issue and the amended debt facilities taken together will strengthen the business and provide the group with sufficient resources for working capital and capital expenditure to sustain the business in an ongoing low platinum group metal pricing environment," said the company.
The platinum miner said it will conduct the rights issue and secure the debt facility at the same time, before the end of the year, with the amended debt facility set to mature in May 2020.
That USD370.0 million debt facility will replace its existing facilities, which at the end of September stood at USD543.0 million and which are set to mature in May and June 2016.
At the end of the financial year ended September 30, net debt stood at USD185.0 million compared to USD282.0 million at the end of March.
The new debt facility is conditional on the company raising the USD400.0 million from the rights issue and on credit committee approval. Lonmin said it has agreed the terms of that new facility "in principle" with its banks.
The full terms of the rights issue will be released on November 9, but Lonmin said it expects it to be underwritten. In order to get the rights issue completed and amended debt facilities in place before the end of 2015, Lonmin will convene a general meeting on November 19 to seek shareholder approval.
The Public Investment Corp, which holds a 7.0% stake in Lonmin, has indicated it will take up its full entitlement in the rights issue and is expected to underwrite a material portion of the rights issue in excess of its entitlement.
The miner is suffering from a "reduced profile" due to lower platinum group metal prices, which Lonmin conceded may lead to further job losses. It also said it is "freezing" general recruitment going forward.
The threat of further job losses follows on from the 6,000 employees set to voluntarily leave the company before the end of September as part of Lonmin's redundancy programme earlier in 2015 when prices began to bite.
In total, restructuring costs related to its staff are set to cost Lonmin around USD800.0 million.
"In this regard, the Public Investment Corp and Lonmin will work together and collaborate with government and unions on alternatives to minimise the impact of job losses at Lonmin by finding alternative economic participation for some of the retrenched employees, for example through agricultural projects in labour sending areas," said the company.
Lonmin is also tackling its costs to mitigate lower metals prices, as with many of its peers. The company said its unit cost of production fell to around ZAR10,339 per platinum group metal ounce in the full year ended September 30, well below its original guidance of ZAR10,800 per ounce.
Capital expenditure also is set to be substantially down in 2015, totalling around USD136.0 million compared to Lonmin's original guidance of USD250.0 million.
The cost cutting and proposed fundraising is all part of a new business plan launched by the company to fight back against low metal prices.
"The business plan will accelerate the implementation of Lonmin's published strategy to control costs, reduce capital expenditure and enable decisive measures to be taken. The business plan aims to achieve positive cash flow after capital expenditure in the current low PGM pricing environment while preserving the ability of the group to increase its production as and when PGM prices improve," it said.
Overall, the new business plan is set to save Lonmin USD700.0 million in the 2016 financial year, less than the USD800.0 million it will have to pay out to its affected employees, before leading to USD1.60 billion worth of savings in the 2017 financial year. Lonmin said its unit costs will remain flat between now and the 2017 financial year.
In the year ended September 30, Lonmin's sales of platinum exceeded its guidance for the full year, totalling 751,560 ounces, compared to the guidance of 730,000 ounces. Production for the year came in at 704,000 ounces, which was less than expected because the miner lost around 48,000 ounces of production due to safety stoppages during the year.
Lonmin will release its results for the fourth quarter of the 2015 financial year on November 9, when it releases the details of the proposed rights issue.
Lonmin shares were up 3.7% to 30.07 pence per share on Wednesday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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