Lonmin still on life support

South African platinum producer Lonmin has launched a third rights issue in seven years.

768-Lonmin-634

South African platinum producer Lonmin has launched a third rights issue in seven years. It is selling 27 billion shares at 1p per share, a 94% discount to last week's price. Investors can buy 46 new shares for each one they own. Lonmin's stock has slid 90% this year amid a 30% decline in the platinum price. The company also had to cope with strikes and rising costs.

What the commentators said

Lonmin's problems have been further "compounded by a costly and ineffective attempt to introduce more mechanised mining a decade ago" and the "complexities" of operating in highly unionised and strike-riven South Africa, which supplies most of the world's platinum. By following their rights, said Andy Critchlow on breakingviews.com, investors "are effectively betting" that platinum prices will recover by up to 50%. Lonmin "is still on life support". "I will be amazed", says Paul Gait of Bernstein Research, "if Lonmin is still trading in five years' time."

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.
Advertisement

Recommended

Visit/investments/stockmarkets/600688/bullish-investors-return-to-emerging-markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Visit/investments/commodities/600639/commodities-look-cheap
Commodities

Commodities look cheap

Gold may be on a bull run, but industrial commodities, including copper, zinc and aluminium, remain cheap.
17 Jan 2020
Visit/519872/beware-the-hidden-risks-when-investing-in-emerging-markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019
Visit/517395/emerging-markets-buy-when-the-news-is-bad
Emerging markets

Emerging markets: buy when the news is bad

Emerging markets are being squeezed by local turmoil and by more general factors. But bad news can spell opportunity for investors.
5 Nov 2019

Most Popular

Visit/investments/stocks-and-shares/600863/sirius-minerals-anglo-american-takeover
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020
Visit/investments/commodities/gold/600874/gold-is-at-its-highest-level-in-years-heres-how-to-invest
Gold

Gold is at its highest level in years – here’s how to invest

Gold's rise at a time when the dollar is unnervingly strong isn't unheard of – but it is curious. John Stepek explains what's going on, and what it me…
21 Feb 2020
Visit/investments/stocks-and-shares/share-tips/600843/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
21 Feb 2020
Visit/investments/commodities/600729/the-rare-earth-metal-that-wont-be-a-secret-for-long
Sponsored

The rare earth metal that won't be a secret for long

SPONSORED CONTENT – You can’t keep a good thing hidden forever; now is the time to consider Pensana Rare Earths and the rare earth metals NdPr.
31 Jan 2020