Lonmin rejects Xstrata proposals to take control
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Mining group Lonmin rejected proposals that would have handed control to its dissatisfied largest shareholder, Xstrata, but instead pushed ahead with a $817 million cash call to repair its battered balance sheet.
Xstrata - under pressure as it nears the final stages of its own takeover by Glencore - said it had aimed to protect the value of its investment, a 25 percent stake held as a result of a failed 2008 takeover attempt.
But it also fuelled tension that has marked the four year relationship between the two companies, questioning the ability of the current Lonmin management to keep the company alive.
Lonmin has suffered longstanding operational problems and we are concerned that the business does not have the management capabilities to ensure a sustainable future, even if short term funding issues are resolved, an Xstrata spokesman said.
We believe our concerns are shared by other major Lonmin shareholders, he said, adding the group was open to all constructive solutions to strengthen management and operations.
Lonmin, which already had one of the most stretched balance sheets in the sector, was hit in September by strikes at its flagship Marikana mine which saw some of the worst violence in South Africa since the end of apartheid and left 46 people dead.
The six weeks of strikes cost Lonmin $159 million and 110,000 lost ounces of platinum, forcing the group to tap shareholders for cash.
Lonmin had been expected only to detail the terms of its heavily discounted rights issue on Friday, along with a full year loss. It surprised the market by also giving details of a reverse takeover proposed by Xstrata.
Under the proposal made last month, Xstrata would have sold its South African platinum group metals (PGM), chrome and vanadium businesses to Lonmin for shares, conditional on a $1 billion rights issue alongside, which they would underwrite.