Lonmin shares rally over 13% on the platinum producer's plans to raise $400 million through a rights issue

by , 21 October 2015

Earlier today, Lonmin Plc announced its plan to raise $400 million through a rights issue.

The world's third largest platinum miner is taking steps to deal with the current commodity price slump, which has put pressure on its business.

Let's take a closer look at what's going on…


Lonmin is making changes to cope with the current climate


Lonmin [JSE:LON] wants to “raise $400 million selling new shares to existing holders,” reports Fin24. The company is in a bid to “stave off concerns” about its high levels of debt.

And this isn’t the only step the platinum producer is taking.

It plans to go ahead with restructuring, which will “cut 6,000 jobs,” says IOL. And Lonmin has cut “its capital expenditure for the year to the end of September 30 to $136 million,” nearly half its “original target of $250 million”.

Lonmin has also “put in place an amended debt facility for $370 million before the end of the year,” notes BDLive. With its current debt facilities amounting to $543 million maturing in the middle of next year, the amended debt facility “will mature in May 2020 [and] will be conditional” on the rights issue.


Lonmin shares jumped higher on release of the news


The market greeted the announcement well, with shares on the JSE up 5% in morning trade, says Mining Weekly.

And shares have continued to rise. At time of writing, shares were over 13% higher at R6.59.

The Public Investment Corporation, the third largest holder of Lonmin shares with a 7% stake, has told the company’s board of “its intention to take up its entitlement in full in the proposed rights issue,” notes MoneyWeb.

Shareholders will have to wait until 9 November to find out the details of the rights issue.

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