For most of the mining industry, 2017 is turning out to be another good year. The big exception is Lonmin Plc.
Investors are losing confidence in the world’s third-largest platinum producer as it burns through cash to stay afloat, just 15 months after raising about $400 million from shareholders. Platinum prices aren’t far from a seven-year low and Lonmin has its own set of operational problems, including higher costs and lower output at its biggest mining shaft.
The stock is down more than 30 percent in 2017, the most in the FTSE All-Share Basic Materials Index of 28 commodity producers. The overall index has gained 11 percent this year.
“Lonmin can’t survive in its current form unless there’s a very significant recovery in platinum-group metal prices,” said Marc Elliott, a London-based analyst at Investec Plc with a sell rating on the stock. “I wouldn’t be surprised to see them come back to the market for more cash in the next two to three years.”
Other mining companies are looking to deploy new cash into dividends and acquisitions, buoyed by a recovery in commodity prices and deep cost cuts. Lonmin stands out for its years of problems. The company used up 70 percent of its net cash last quarter, leaving it with $49 million, although it can draw on $414 million, mainly through credit lines from banks.
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