* To raise $800 million in underwritten rights issue
* Would equate to roughly half current market capitalisation
* Sees price benefit from reduced supply
* Shares trade higher in London, Johannesburg
* Shareholder Xstrata says considering its position
By Clara Ferreira-Marques and Tiisetso Motsoeneng
LONDON/JOHANNESBURG, Oct 30 South African miner
Lonmin, the world's third-largest platinum producer, is
to raise $800 million from shareholders to cut debt and finance
a recovery after weeks of strikes in which dozens were killed.
It will use the underwritten rights issue to restructure the
balance sheet as soon as possible, the company said on Tuesday.
In August, Lonmin's Marikana mine was the scene of South
Africa's most violent episode since the end of apartheid, when
police shot dead 34 people involved in wildcat stoppages
battering the country's already beleaguered platinum industry.
Most of Lonmin's miners have since returned to work, but the
producer - which even before the walkouts and illegal strikes
had one of the most stretched balance sheets in the platinum
sector - said it had lost 110,000 ounces of production and
scaled back long-term plans to boost output and sales.
Lonmin said efforts to ramp up activity after weeks of
strikes were progressing better than expected, but the return to
business as usual would take months and, along with the
rebuilding of stocks, would swell its debt in the short term.
That meant it would have breached current loan covenants at
the end of March - even if higher-than-expected sales of
stockpiled platinum help it meet a test this November; so the
miner has turned to investors for a cash boost.
"We believe $800 million is the right quantum to support the
plan we have in place," acting chief executive Simon Scott told
reporters. "It will put the company in a position where it can
reduce its current debt levels and manage the business on a
Analysts had speculated that Lonmin could raise as much as
$1.5 billion - virtually its current market value - after it
warned in August that it could turn to investors for cash.
On Tuesday, Lonmin said it would rein in expansion plans and
raise less than half that in gross terms - meaning the number
includes fees paid to underwriting banks which are expected to
include its advisers JP Morgan and Citigroup. It did not provide
full details on the timing or the extent of any discount.
It said in a statement that it planned to restructure its
balance sheet at "the earliest possible opportunity".
It did not comment on any commitment from its largest single
shareholder, fellow miner Xstrata, which owns a 25
percent stake after a failed takeover attempt.
Xstrata, which is currently in the throes of a takeover by
its own largest shareholder, Glencore, said it would
consider its position after assessing Lonmin's revised strategy,
business plan and "management capability". Xstrata is not
expected to remain a shareholder in the long term, but analysts
say it could pay up to avoid further writedowns of its stake.
"I want to see what Xstrata does. It would be very
interesting to see if it follows its rights - they are more
important in this whole process than anybody else," said Sasha
Naryshkine, fund manager at Johannesburg-based Vestact.
"Lonmin has to be a meaner, leaner machine after."
Shares in the group were trading up 5.7 percent at 507.50
pence at 1335 GMT in London on the news, while its Johannesburg
listed shares were up 5.0 percent.
Lonmin said new debt conditions agreed with its lenders
depended on the company raising at least $700 million in new
equity capital by the end of the year, and using that to reduce
its debt to $400 million from $700 million.
The current conditions, linked to a debt-to-profit ratio,
will be replaced by conditions tied to the tangible value of its
assets and limits on capital expenditure.
The changes will, though, slow Lonmin's previous plan to
increase production to more than 900,000 ounces in 2015 to raise
margins and its bottom line, efforts which had been based on
development of growth shafts at Marikana - Hossy, Saffy and K4.
It now aims to sell 660,000 ounces in the financial year to
the end of September 2013, Lonmin said, targeting sales of over
750,000 ounces in both 2014 and 2015. That would include output
from a planned restart in 2014 of the mothballed K4 shaft.
"This is perhaps a less aggressive ramp-up - compared with
the $450 million programme before this summer to get K4 up and
running sooner rather than later," analyst Tyler Broda at Nomura
said, welcoming the capital raising. "This rejigged plan has
taken into account the relative balance-sheet strength, and is
also an indication of how poor the current end-market is."
The company, which had already warned the strike would cause
it to miss targets, said production of platinum in concentrate
almost halved in the three months to Sept. 30. Sales for the
quarter, though, were down less than 4 percent, thanks to
stocks. Over the year, Lonmin sold more than 700,000 ounces.
While the rights issue from Lonmin, will help it address the
cost of months of unrest that have threatened growth in Africa's
biggest economy, the sector remains beset by difficulties.
Amplats, the world's top platinum producer, is still
struggling to get workers at its Rustenburg mines to return to
work. Hundreds of miners barricaded a road to one of its mines
on Tuesday with burning tyres, while police fired rubber