Lonmin shares take a heavy tumble after Glencore announces it's divesting

by , 11 February 2015

Shares in platinum producer Lonmin have been under heavy selling pressure today following an announcement by major shareholder Glencore to divest out of the business.

Glencore says this is due to platinum not being part of its core business.

Shares plunged in earlier trade, but have recouped some losses, but they remain down over 5%.

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


Glencore plans to divest its 23.9% holding in Lonmin


This morning, mining and commodities trading giant, Glencore [JSE:GLN], said “it’s planning to distribute its 23.9% holding in platinum producer Lonmin [JSE:LON] to its own shareholders,” says IOL.

Glencore’s CEO, Ivan Glasenberg, says as the company doesn’t “trade platinum and have no special insight into the market,” they’ve decided to let its shareholders decide what to do with its shares in Lonmin, adds IOL.

Glencore will distribute the company’s shares in Lonmin to its shareholders before the middle of the year, reports BDLive. This is “subject to shareholder approval at the company’s AGM” in three months’ time.

At the moment, Glencore says its shares in Lonmin are worth around 3 US cents a share, says IOL. Glencore notes that the sale won’t affect its “approach to its annual cash distribution consideration”.

On release of the news, Lonmin says the move by Glencore is “a constructive way forward,” adds BDLive.


Shares in Lonmin dropped on the news


The news sent shares in Lonmin down 8.3% to R28.56 this morning, says MineWeb. This is the “biggest one-day drop since December 1”. By that stage, Glencore had gained 2.3%.

Today’s fall in Lonmin shares adds to the “46% fall” in its share price over the past year, says Fin24.

Lonmin was one of the top three platinum producers that endured a five-month long strike in the first-half of last year.

At time of writing, shares in Lonmin were trading 5.59% down at R29.38. Shares in Glencore were trading 2.19% higher at R49.05.

Time will tell if Glencore’s shareholders approve the move at the company’s AGM.

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