Lonmin write down leaves it in the red

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Lonmin write down leaves it in the red

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Published Date: 2018-01-23 | Source: Stephen Gunnion | Author: Stephen Gunnion

Lonmin write down leaves it in the red

The group's loss comes as it recommends an all-share offer from Sibanye-Stillwater to buy the platinum miner

A large impairment has left Lonmin in the red for its 2017 financial year as it prepares for a possible takeover by Sibanye-Stillwater.

Reporting delayed results, the platinum miner impaired its assets by $1.05 billion for the year to September due to a change in its business plan and its assumptions as it adjusts to a "lower for longer" platinum price. However, operationally the group said its performance was on par.

Related article: Banks waive Lonmin's covenants pending takeover

It produced 10.1 million tonnes from mining, slightly below 2016, while production from its three core Generation 2 shafts increased by 7.1% to 6.9 million tonnes. Sales of 706 030 platinum ounces beat its guidance of 650 000 to 680 000 ounces.

Revenue for the year rose $48 million on the prior year off the back of higher platinum group metals prices. But it reported a pre-tax loss of $1.17 billion due to the impairment.

Lonmin expects the Sibanye-Stillwater transaction to close in the second half of the year subject to the approval of both companies' shareholders and a number of regulators. Under the proposed deal, Lonmin shareholders will receive 0.967 Sibanye-Stillwater shares for each Lonmin share. Sibanye believes the deal will give it a downstream processing business worth a lot more than it's paying. It expects the transaction to be net asset value accretive on closing, and earnings and cash flow accretive in respect of Sibanye-Stillwater shares from 2021, once all synergies are realised and related one-off costs incurred.

Last week Lonmin said its lenders had agreed in principle to waive covenants linked to its tangible net worth pending the outcome of the Sibanye-Stillwater's offer. It said its tangible net worth had fallen significantly below the threshold required by the banks. The waiver remains in place until 28 February 2019, the long stop date of Sibanye-Stillwater's acquisition of Lonmin.

Despite solid operational results for the year and what it describes as "enviable mine-to-market assets", CEO Ben Magara say: "Lonmin continues to be hamstrung by its capital structure and liquidity constraints. The announced combination with Sibanye-Stillwater will provide a stronger platform for Lonmin's shareholders and allow them and our other stakeholders to benefit from the long-term upside potential of an enlarged and geographically diversified precious metals group."

Its shares ended 0.8% lower at R14.38.



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