LONMIN HAS warned it might need to raise fresh capital after the shutdown of its South African mine, amid clashes, set it on course to breach its debt covenants.
The London-listed miner is forecast to lose production equivalent to about 7 per cent of last year’s output. This compounds a 20 per cent fall in the platinum price over the past year caused by slumping demand from car makers.
“The balance of probabilities is that the impact on production of the current events will result in covenants being breached at the next test date on September 30th,” Lonmin said yesterday.
The company backed down from a threat to fire striking miners who did not return to work. Clashes at the Marikana mine have left 44 people dead. Only one-third of the mine’s 28,000 staff – and a fifth of the 3,000 rock drillers whose skills are critical to operations – reported for duty yesterday.
Lonmin, which has net debt of $356 million (€285.6 million), said it had held “constructive discussions” with bankers. Analysts believe it might secure leeway on its covenants, which will be breached if net debt exceeds 3.5-4 times earnings before interest, tax, depreciation and amortisation.
Shares have shed 19 per cent since initial clashes, caused by a pay dispute and union rivalries.
– Copyright The Financial Times Limited 2012
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