Lonmin is looking to raise approximately US$400 million in gross proceeds through a rights issue as part of its broad business plan to achieve positive cash flow after capital expenditure in the low PGM pricing environment.
The company will simultaneously enter into amended debt facilities with its lending banks for a total of US$370 million, maturing in May 2020, conditional on credit committee approvals, on full documentation being agreed, on the Group raising a further $400 million in new equity funding and other customary provisions.
The amended debt facilities will replace the existing debt facilities commitments which as at 30 September 2015 were approximately U543 million and which are maturing in May and June 2016.
The board believes that the proposed rights issue and the amended debt facilities taken together will strengthen the business and provide the Group with sufficient resources for working capital and capital expenditure to sustain the business in an on-going low PGM pricing environment.
Lonmin will announce on 9 November 2015 the full terms of the proposed rights issue to provide the new equity funding required of $400 million and to publish a prospectus and the audited results for the Group for the year ended 30 September 2015.
The Public Investment Corporation, which holds approximately 7% of the issued share capital of Lonmin, has indicated its intention to take up its entitlement in full in the proposed rights issue and, subject to satisfactory investment committee approvals and documentation, to sub underwrite a material portion of the of its entitlement.
Trading update for the year ended 30 September 2015
On an unaudited basis, Lonmin’s sales of platinum exceeded its guidance for the year ended 30 September 2015, achieving sales of 751 560 platinum ounces compared to forecast guidance of 730 000 platinum ounces.
The Group achieved mined production of approximately 704 000 platinum ounces, after taking into account approximately 48 000 platinum ounces of production lost as a result of section 54 safety stoppages.
Total platinum metal in concentrate for the year ended 30 September 2015 was 740 315 saleable platinum ounces.
Lonmin took early decisive action to reduce costs and capital expenditure to preserve cash. As a result, on an unaudited basis, the unit cost of production of approximately R10.339 per PGM ounce is expected to be achieved for the year ended 30 September 2015, well within the original guidance of R10.800 per PGM ounce despite the section 54 safety stoppages.
On an unaudited basis, capital expenditure for the year ended 30 September 2015 was $136 million, compared to original guidance of $250 million. The US$/ZAR exchange rate further benefited the capital expenditure reduction.
The restructuring programme, part of its business plan to become more financially secure, started with the freezing of general recruitment and natural attrition to reduce workforce levels. In addition, over 1 550 employees had left the Group through voluntary separations and early retirement by 16 October 2015.
In total, approximately 6 000 employees, including contractors, are affected by the right-sizing of the Group and the restructuring programme is expected to be completed by the end of September 2016.
Full provision as a special cost is expected to be made in the 2015 accounts for the estimated one-off retrenchment and associated restructuring costs of approximately R0.8 billion, on an unaudited basis, in respect of the affected employees.
Good progress is being made with the section 189 consultation process. In the interest of ensuring timely consultations, Lonmin is running two concurrent consultation processes; one with the Association of Mineworkers and Construction Union (AMCU), the majority union, and a second process with the other unions and non-unionised employees.
Both processes are being facilitated by the Commission for Conciliation, Mediation and Arbitration (CCMA). The consultation period has been extended by mutual agreement of all relevant stakeholders to enable full exploration of all alternatives to forced retrenchments.