[miningmx.com] – SHARES in Lonmin were a quarter higher on the Johannesburg Stock Exchange taking total gains in the beleaguered platinum producer to 73.5% in the last seven days.
But as a sign of the volatility in the stock, the company’s value is still 78% weaker this year amid fears the company will struggle to finance its borrowings which stood at $342m with net debt of $282m as of its year-end on March 31.
“The market certainly seems to think that there might be someone ready to pounce, or inject equity or something,” said Hanre Rossouw, portfolio manager for Investec Asset Management.
Neal Froneman, CEO of Sibanye Gold, made the case for steering clear of Lonmin. Speaking following the group’s R4bn bid for Aquarius Platinum yesterday, he said the company was trading low “for a reason”.
“Something like Lonmin is cheap at the moment, but it’s like considering a bid for Harmony.
“These companies are losing a lot of money and buying them doesn’t work without synergies. They need a lot of capital, they have got heavy debt and then you’d probably have to pay a premium for control of the companies,” he added.
A UK analyst said the improvement in Lonmin shares was from “an exceptionally low base. I think people are interested in the potential option value, and Sibanye’s buying activities have likely stimulated further interest,” he said.
Shares in Anglo American and Glencore were also 11% and 6% higher continuing the trend for extreme volatility in mining stocks, a reflection of investor uncertainty over the risks associated with high indebtedness and the rate of economic growth in China.
