Lonmin prices rights issue at 1 pence a share

The rights issue, which is subject to shareholder approval, will result in the issue of 26,997,717,400 new shares (representing 97.87% of the enlarged issued share capital of Lonmin).

Lonmin’s shares were up 9.2% at 17.75 pence a share at 0815 GMT.

“The group may have to cease trading at a few point between December 2015 and May 2016 and shareholders could lose the entire value of their investment”, the company said last week.

On an underlying basis, Lonmin recorded a $143m pre-tax loss for the year to September 30.

The measure will go to a vote at a meeting on November 19, but the rights issue has already won the backing of The Public Investment Corporation, the investment manager owned by the South African government that holds 7pc of Lonmin’s stock.

“Management is effectively forcing shareholders to follow their rights or be diluted into obscurity”, the analysts said in a note.

The firm will also unveil the prospectus for its $400m rights issue, which it is carrying out in order to refinance $370m of debt.

Shareholders will vote on November 19 whether to proceed with the rights issue that will be used to amend debt facilities falling due in the middle of next year and strengthen the company’s balance sheet. “We firmly believe that the rights issue is in the best interest of our shareholders”, Chief Executive Ben Magara said in a statement.

Spot platinum has recovered from seven-year lows of less than $900 hit last month but it was still at levels last seen in 2009 due to oversupply concerns and slowing demand in top consumer China. It said on Monday around 3,100 people have since left the company.

Lonmin had to rely on an $800 million rights issue to shore up its battered balance sheet in November 2012.

To try to turn around its fortunes, the producer announced in July a plan to close or mothball several mine shafts, putting 6 000 jobs at risk.

The majority of its losses came from a $1.5bn impairment charge at its Marikana mine in South Africa, where 34 miners were killed by police during strikes and unrest in 2010. It indicated its support for the rights issue, but said it did not have enough money to do so.