London, England — MININGREVIEW.COM — 06 August 2010 – Shares in Lonmin “’ the world’s third-biggest platinum producer “’ fell as much as 5% in London today as analysts said a South African government ban on its sales could be a serious threat to its business. The company’s Johannesburg-listed shares were down 3%.
The company revealed last night that it had received a letter from the South African Department of Mineral Resources (DMR) ordering it to stop selling nickel, copper and other offshoots of its platinum production due to a dispute over prospecting rights.
“Dialogue with the DMR continues and meetings are scheduled for next week, but in the interim period we are continuing down the only route which is available to us at the moment “’ to take legal action,” a Lonmin spokesman told Reuters here. He said a legal process had been started in South Africa, but declined to comment on whether the company was optimistic that the issue would be resolved.
Panmure Gordon analyst Alison Turner said that in the long term she expected the issue to be settled with limited impact on the company, but meanwhile the DMR’s order was very bad news.
“Until there is a resolution, the order must be taken at face value, and represents a very serious threat to Lonmin’s business,” she said.
In 2009, associated minerals sales contributed US$80 million (R600 million), or around 8% of Lonmin’s revenue.
The dispute has arisen because the company did not explicitly apply to have its licences for associated minerals transferred to a new mining rights set-up in 2006.
It finally applied in 2009, by which time an ex-board member had already applied for those rights on a small part of the company property. He was awarded the rights in May 2010, a decision Lonmin has appealed.
“We expect the situation to be resolved, but it must further undermine confidence in management,” said Evolution Securities analyst Charles Kernot, referring to Lonmin’s problems with a key smelter over a number of years.