Lonmin, one of the world's major platinum producers, has warned its debt-covenant levels, which have been temporarily suspended, will be breached because of an impairment of its assets, the size of which will be released in long-awaited results on January 22.
Photo: BusinessLIVE
Sibanye-Stillwater has launched a takeover bid for the whole of Lonmin and the platinum miner's financiers have conditionally agreed to a waiver of compliance with the covenant, which stipulates the tangible net worth of the company may not fall below $1.1bn.
However, in drawing up its full-year accounts, which had been due to be released in November but were delayed, Lonmin said the non-cash impairment of its assets would reduce its tangible net worth "significantly below" the $1.1bn level.
"The " waiver will ensure this shortfall is not regarded as an event of default during the waiver period," the company said.
Lonmin's lenders gave in-principle agreement to the company for the waiver "subject to credit approval and execution of the necessary legal agreements" until the Sibanye offer closed or lapsed.
Lonmin has run into difficulties a number of times, and while some in the market had speculated it could conduct a fourth rights issue to prop up its balance sheet, others said there was no ways shareholders would support such an action.
In 2015, Lonmin raised $400m in a poorly supported and massively discounted rights issue, crippling its share price. Its CEO Ben Magara and the board had unveiled a strategy of selling spare capacity in its concentrators, smelters and refinery, selling non-core assets and bringing partners into a number of key projects that Lonmin simply could not afford but had to develop.
The strategy forced the hand of Sibanye, which would have preferred to wait a year or two longer before launching its all-share bid for Lonmin. Sibanye has grown into one of the world's largest platinum producers since listing in 2013.
The Lonmin assets give Sibanye the processing facilities it wanted so that it could take control of its destiny and sell refined platinum group metals from SA, instead of processing metal through offtake and toll treatment agreements with Anglo American Platinum.
Lonmin's shares were trading 3% higher at R15.18 each by mid-afternoon on Thursday.
