Lonmin stock discount signals trouble in South African platinum industry – by Geoffrey York (Globe and Mail – November 10, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

JOHANNESBURG — For the world’s third-biggest platinum producer, it was a stunning admission of its precarious condition. Desperately needing money to stave off collapse, Lonmin PLC announced on Monday that it will issue its latest stock offering at a 94-per-cent discount.

The huge discount, allowing Lonmin to raise the $407-million (U.S.) that it needs to survive, is the latest sign of a major shakeout in South Africa’s troubled platinum sector. But two Canadian platinum companies are still pushing ahead with their South African investments, convinced they can find profits with lower-cost projects.

The platinum industry has been stumbling from crisis to crisis for the past several years. Global platinum prices have dropped by more than 50 per cent since 2011. The industry has been plagued by rising costs and labour unrest in its South African heartland, including a heavily damaging five-month strike in 2014 and the notorious police shooting of 34 protesters at Lonmin’s Marikana mine in 2012.

Platinum producers have responded by shutting mines, selling assets and cutting thousands of jobs. Two of the biggest producers, Anglo American Platinum Ltd. and Impala Platinum Holdings Ltd., have been closing or selling mines, postponing projects, cutting costs and eliminating hundreds of jobs.

One smaller producer, Aquarius Platinum PLC, which has lost about 90 per cent of its market value in the past several years, was recently swallowed up by a larger South African company, Sibanye Gold Ltd., as part of the shakeout in the industry.

But all of this is dwarfed by the near collapse of Lonmin, which has already been bailed out twice by shareholders over the past seven years.

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