LONDON (Alliance News) - Lonmin PLC Monday launched a rights issue that will almost double its issued share capital and allow the company to amend its debt facilities as it tries to bolster its balance sheet and mitigate current low platinum prices.
The miner has been struggling to handle the fall in platinum prices, with the company reporting a huge USD2.26 billion loss in the last financial year.
In the latter half of October, Lonmin announced plans to launch a USD400.0 million rights issue, which if approved by shareholders, would also allow the company to increase and amend its debt facilities.
On Monday, Lonmin said the fully underwritten rights issue will now raise gross proceeds of USD407.0 million and net proceeds of USD369.0 million.
Those proceeds will be generated from a 46 for one rights issue of just under 27.0 million new shares in the company at 1.0 pence per new share. Those shares represent a staggering 98% of the company's enlarged issued share capital, with the price being a 94% discount to the closing price on Friday.
Lonmin shares were trading up 11% to 18.08 pence per share on Monday morning.
Shareholders have until December 10 to take up their rights.
The Public Investment Corp, which currently holds a 7% stake in Lonmin, has agreed to take up its full entitlement and has underwritten a "material portion" of the rights issue in excess of its entitlement.
"The net proceeds of the rights issue will be used to fund the implementation of the business plan, thereby improving the group's ability to withstand potential adverse movements in external factors, specifically a continuation of the weak platinum group metal pricing environment, and repositioning the group on the South African platinum group metal industry cost curve; and for general corporate purposes, including as additional working capital, strengthening the balance sheet and allowing the group to meet its obligations and commitments as they fall due and reducing the group's borrowings," it said in a statement.
Once the underwriting agreement for the rights issue has been declared wholly unconditional, Lonmin will be able to amend its debt facilities with its existing lenders.
Lonmin will extend its dollar facility to expire in May 2020 from the current expiration in May 2016 and reduce the facility to USD225.0 million from the current USD360.0 million.
It will also extend the maturity of its Rand facility to May 2020 from June 2016.
Later Monday, Lonmin reported a huge USD2.26 billion pretax loss in the year ended September 30, widening from the USD326.0 million loss a year earlier despite revenue rising to USD1.29 billion from USD965.0 million.
The main cause for the loss was depreciation, amortisation and impairments totalling USD1.96 billion, compared to only USD142.0 million a year earlier. Lonmin had previously said impairments would be in the range of USD1.85 to USD2.05 billion.
Its loss before interest, tax, depreciation and amortisation came in at USD52.0 million, narrowing from the USD113.0 million loss a year ago.
Its operating loss widened to USD2.01 billion from the USD255.0 million loss a year ago.
Lonmin has also been burning through cash, with its net debt rising to USD185.0 million at the end of the year from USD29.0 million at the end of September 2014, pushing its gearing up to 9.9% from only 0.6%.
The miner is also focused on reducing costs, lowering its cost of production beyond its guidance and slashing its capital expenditure to only USD136.0 million in the year, way under its original guidance of USD250.0 million.
Lonmin has also restricted capital expenditure going forward, with it expected to total USD132.0 million in the current financial year, USD110.0 million in the 2017 financial year and USD188.0 million in the 2018 financial year.
"Our priority is to run the business with a focus on cash generation and profitable ounces. We are repositioning Lonmin and aiming for the business to generate positive free cash flow after capital expenditure in this current low environment. In addition, we remain confident of the long-term market fundamentals for Platinum and its associated group of metals even though our Business Plan is designed to ensure Lonmin is resilient in this low price environment," said Chief Executive Ben Magara.
Lonmin reported its production figures last week when it said its total platinum sales in the year hit 751,560 ounces, the most it has sold since 2007 and ahead of its sales guidance of 730,000 ounces.
The pricing environment for the year remained weak, however, with the platinum price down 22% and sales revenue hit further by the weakness of the South African rand against the dollar.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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