Lonmin mine disruption continues

Lonmin mineThe disruption at Lonmin's main South African mine has continued after three-quarters of staff failed to turn up to work in the wake of last week's violence which claimed the lives of 34 people.

The group had ordered 3,000 illegally striking rock drill operators to return to work or risk losing their jobs, and appealed to a further 25,000 staff and 10,000 contractors to report for duty after police said it was safe.
%VIRTUAL-SkimlinksPromo%
But it said just 27% of the staff who were supposed to go on shift at the Marikana mine were at work on Monday morning, which was not enough to resume production and means the shutdown has dragged into a second week.
Shares fell a further 4% on top of the 15% falls last week after 34 people were gunned down by police in one of the worst displays of state violence since apartheid ended in 1994.

Lonmin said it was unable to provide a breakdown of how many of the strikers had returned to work and it is yet to decide whether to dismiss them amid reports that many want to work but are scared of further violence.

To add to Lonmin's woes, Deutsche Bank downgraded the stock from "hold" to "sell" following reports it is considering a billion dollar (£640 million) emergency fundraising move. It estimates that Lonmin will lose at least 50,000 ounces of production as a result of the crisis and now says it will make a loss this year, having previously expected a small profit.

Lonmin dismissed reports that it will need to raise funds as "speculation" yet fears remain that it may be forced to make some form of cash-call to shareholders as the closure of its biggest mine in South Africa puts a significant strain on its income. The closure of the Marikana mine is understood to be a significant hit to Lonmin as it accounts for around 90% of the group's output.

Lonmin is also believed to be asking for leniency from its banks as it struggles with debts. The mining giant was already under pressure before the closure after platinum prices slumped in the past year as demand for the metal has dropped from car-makers in the crisis-hit eurozone.

Its plight has also been compounded in the past week by news that chief executive Ian Farmer has been admitted to hospital with a "serious illness" and will be temporarily replaced by chairman Roger Phillimore. Shares have now nearly halved in the past year.

Lonmin is also approaching its end of financial year, which will trigger compliance tests with its banks. The group said last week that it "continues to monitor the position closely regarding the additional pressure which the current disruption to production may put on its bank debt covenants when they are next tested on 30 September".
Read Full Story

FROM OUR PARTNERS