Proactive Investors - Run By Investors For Investors

Lonmin remaining "cash vigilant" as it posts a half-year loss

Having funds in the bank looks to be key to its putative takeover by Sibanye-Stillwater
The platinum price affected results

Lonmin PLC (LON:LMI) chief executive Ben Magara said the company continued to remain "cash vigilant" as it unveiled interim results hit by currency movements and a weak price for the precious metal.

Reiterating its production guidance of 650,000 and 680,000 tonnes of platinum, the company said revenues in the half to March 31 had grown to US$561mln from US$486mln, resulting in a pre-tax deficit of US$51mln.

Lonmin had net cash of just US$17mln at March 31. It is also sitting on US$47mln of metal locked up by a smelter outage that will be sold in the second half and which will swell its coffers accordingly.

Analysts are eyeing the company's funds as Lonmin needs to be a in a cash positive position after paying off certain loans for its US$386mln (£285mln) takeover by Sibanye-Stillwater to go ahead.

Not a slam dunk

In a note to clients last week, City broker Liberum said the deal wasn't certain to go ahead. "Assuming current spot prices remain for the remainder of the year, Lonmin will be in a net debt by September using the low of end of guidance," it added.  

"There hasn't been a substantial economic downturn or any operational factors that we know of, just simply the strength of the Rand and the weakness of the platinum price has failed to be offset by better price performance of rhodium and palladium. 

"For Lonmin to be cash flow neutral, the basket price would have to rise by 10-15% to new highs, which feels unlikely given the price stagnation over the past four years and that platinum, the key revenue generator, has little fundamental support."

Resilient performance

Magara hailed the company's resilient financial and operational performance. "All this has been achieved in spite of the period required to close our transaction with Sibanye-Stillwater and the disruption experienced by our employees," he explained.

"As is typical of transactions of this nature, our focus remains on minimising disruption to the business as we move towards completion. We have to remain cash vigilant in order to maintain a resilient business, ready for the next era."



View full LMI profile View Profile

Lonmin Timeline

Related Articles

November 30 2018
Jubilee Metals will be adding significant extra production capacity in the short to medium term
October 04 2018
Last month, Jaxon said it had identified Backbone as a gold-bearing tourmaline breccia zone with a 1,000-metre long strike
August 08 2018
Eurasia Mining has an enviable position in Russia platinum and platinum group metals

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use