Lonmin paints bleak picture as it calls on shareholders to back takeover

Updating on trading ahead of the annual general meeting, the platinum specialist said it had returned to profitability in 2018. It also hailed a successful refinancing during the period.

But the group, which is dual-listed in London and Johannesburg, warned that the first half of the current year had been weaker, with “poor production and correspondingly high unit costs” offsetting the benefits of improved prices for platinum group metals. The price of platinum has dropped around 45% over the last five years.

It said: “We continue to be financially constrained and unable to fund the significant investment required to sustain our business and associated employment in the future.

“The challenges facing Lonmin and the industry persist. The company is a single asset producer in a single asset geography and remains exposed to inflationary cost pressures as well as volatility in pricing and exchange rates.

“This, together with our current year performance, continues to underscore the vulnerability of our business the importance of a sustainable long-term solution for the company. This is why your board recommends the all-share offer from Sibanye-Stillwater.”

South Africa’s Sibanye-Stillwater made the £285m all-stock offer for Lonmin in December. Lonmin said the combination of the two businesses would create a “larger, more diversified and resilient company better able to withstand market volatility and business disruptions”.

However, the deal has been held up because of legal proceedings over industrial action at platinum mines operated by Sibanye-Stillwater.

Shares in Lonmin perked up on the update, and were ahead 11% at 1400 GMT at 78.95p.