Lonmin aims for $400 million rights issue, proceeds with job cuts

By Ed Stoddard

JOHANNESBURG (Reuters) - Platinum producer Lonmin (LMI.L)(LONJ.J) plans a $400 million (259 million pounds) rights issue of new shares and will proceed with a planned restructuring to cut 6,000 jobs in the face of depressed prices, it said on Wednesday.

The moves, along with a debt restructuring, are last-ditch efforts to turn round a company that has seen its share price fall to record lows this year. The $400 million rights issue exceeds its current market capitalisation of 170 million pounds.

Lonmin also announced that it had cut its capital expenditure for the year to Sept. 30 to $136 million from an original target of $250 million.

The company, which had already flagged the possibility of 6,000 job losses with the aid of voluntary severance and early retirement programmes, said the restructuring is now expected to be completed by the end of September 2016.

It said that South Africa's Public Investment Corporation (PIC), which owns about 7 percent stake of the company, had indicated to Lonmin's board that it would take up its full entitlement and might "underwrite a material portion of the proposed rights issue in excess of that.

Lonmin shares in Johannesburg were up more than 7 percent in early trade.

The embattled platinum producer, whose Marikana mine was the scene of the police killing of 34 wildcat strikers three years ago, also said it planned to amend its debt facilities "for a total of $370 million, maturing in May 2020".

It said this would be conditional on the raising of $400 million in new equity funding through the rights issue.

"The amended debt facilities will replace the existing debt facilities commitments, which as at 30 September 2015 were approximately $543 million and mature in May and June 2016,” it said.

FRAUGHT WITH DIFFICULTIES

Lonmin's plans are likely to be fraught with difficulties despite the apparent vote of support from the PIC, which manages pensions on behalf of South African government employees.

"The first hurdle is to get this substantial rights issue away and shareholders will be arguing for a very attractive price given the size in relation to the market capitalisation," Citi said.

Lonmin had to rely on an $800 million rights issue to shore up its battered balance sheet in November 2012 and has been beset by a string of problems since.

The company and its peers are still recovering from a five-month strike last year and have been dealt a further blow by the emissions-scandal at Volkswagen (VOWG_p.DE), which has further depressed platinum prices.

Platinum (XPT=) fell to seven-year lows this month at less than $900 an ounce after the United States accused the German carmaker of using software for diesel cars that deceived regulators measuring emissions.

Lonmin also has social and housing obligations to meet under South African law and achieving these would be difficult under current operating and market conditions.

Job losses are another sensitive issue in Africa's most advanced economy, where the unemployment rate is about 25 percent, the mining workforce is restive and income disparities are glaring.

(Editing by David Holmes and David Goodman)