Lonmin tumbles as investors run for the exit ahead of rights issue

Shares in beleaguered platinum miner Lonmin tumbled for the second day in a row as investors rushed for the exits ahead of a highly-discounted rights issue.

Lonmin said on Monday it would launch a $407m (£270m) rights issue, which represents a 94% discount to the company’s share price last week, as it struggles to keep its head above water amid falling platinum prices and rising costs.

Bank of America Merrill Lynch pointed out that securing this funding was key to the group’s near-term outlook as it will not be able to refinance its debt with lender unless the rights issue is approved by shareholders.

Merrill said its ‘neutral’ view on the stock is due to the overhang of potential equity funding in the near term, given the tough operating environment.

“Despite this overhang, we think the operating trends are encouraging. In addition, the business is highly geared to a recovery in metal prices (in line with our base case).”

At 1450 GMT, Lonmin shares were down 25.3% to 9.90p, having earlier fallen to a record low of 8.3p.