Lonmin offers 94 percent discount on crucial rights issue

By Olivia Kumwenda-Mtambo

JOHANNESBURG (Reuters) - Platinum producer Lonmin priced its $407 million (270 million pounds) rights issue at a 94 percent discount as the firm fights for survival in the face of depressed commodity prices after writing down $1.8 billion in assets.

Battered by strikes, rising costs and weak platinum prices, Lonmin said last month it planned to raise the money and another $370 million in bank loans to refinance debt due in May 2016.

Lonmin has urged shareholders to approve the cash call at a meeting on Nov. 19, saying the injection was crucial to its survival.

Lonmin plans to sell 27 billion shares at 1.00 pence each to its shareholders in a 46 for 1 rights issue, compared with the stock's last trading price of 16.25 pence on the London Stock Exchange on Friday.

The company had signalled that the equity cash call would be issued at a "significant discount".

Its shares have tumbled 90 percent this year and were up 9 percent to 17.75 pence as of 0920 GMT on Monday.

"The rights issue has been fully underwritten and we hope shareholders vote positively. We firmly believe that the rights issue is in the best interest of our shareholders," Chief Executive Ben Magara said in a statement.

The company has said that if shareholders did not approve the rights issue, lenders would not provide the loans to push back the maturity of the 2016 debt to 2020.

Lonmin said that South Africa's Public Investment Corporation (PIC), which owns about 7 percent stake of the company, had committed to take up its full entitlement and has "sub-underwritten a material portion of the proposed rights issue in excess of its entitlement."

Investec analysts said investors had little choice but to sign up to the rights issue.

"Management is effectively forcing shareholders to follow their rights or be diluted into obscurity," the analysts said in a note.

Lonmin had to rely on an $800 million rights issue to shore up its battered balance sheet in November 2012.

ASSETS WRITE DOWN

Lonmin was hit harder than other producers by a platinum mining strike in 2014, South Africa's longest and costliest, as unlike its peers, virtually all its operations are concentrated in the strike-affected Rustenburg area.

The miner announced a plan in July to close or mothball several mine shafts, putting 6,000 jobs at risk. It said on Monday around 3,100 people have since left the company.

The company said it had widened its full-year loss and booked an impairment charge of $1.8 billion on its assets as metal prices fall and it restructures its business.

Lonmin posted a full-year pre-tax loss of $2.26 billion from a loss of $326 million a year ago.

Spot platinum has recovered from seven-year lows of less than $900 hit last month but it was still at levels last seen in 2009 due to oversupply concerns and slowing demand in top consumer China.

Greenhill advised Lonmin on the rights issue, which was underwritten by HSBC, J.P. Morgan Cazenove and Standard Bank.

(Reporting by Olivia Kumwenda-Mtambo; Editing by Mark Potter and Keith Weir)