Stories in the press this morning that, should the takeover of Xstrata proceed, that Ivan Glasenberg the “to be” new CEO would put the comapny’s stake in Lonmin up for sale shores up our comments 2 weeks ago that this was a likely outcome (link here –http://www.spreadbetmagazine.com/blog/2012/8/16/trading-buy-call-on-lonmin-trade-opened-658p-stock-primed-fo.html)
Aquarius which is the fourth-largest producer or either Anglo American Platinum Ltd and Impala Platinum Holdings Ltd – both of which operate in the same region of South Africa as Lonmin are likely potential acquirors. With Lonmin trading at a large discount to its DCF valuation of proven platinum reserves, this is a story worth watching.
To be sure, the company has its issues at present with the labour strikes at its Marikana mine, a CEO seriously ill and, a debt covenant issue, but we, in contrast to the rest of the market, believe the company’s assets to be worth much more than the current share price. It is inconceivable that the banks will not relax the debt covenants and a capital raising, if required, is almost certain to be supported by its shareholders, not least Xstrata as this gives the company a better platform for them to sell their stake. Of course, the alternate scenario now that the “for sale” sign has been put out there by Glasenberg is that they get approached for the stake before hand. Remember, Xstrata paid almost £20 a share and in fact believed the stock to be worth £33/share when they made their bid.
We cover Lonmin in our forthcoming magazine as part of a Mining sector special – be sure to subscribe and not miss this – released next week.
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