Fitting that Lonmin taken out by empire-building Sibanye-Stillwater boss, Neal Froneman

Neal Froneman, CEO, Sibanye-Stillwater

ALTHOUGH Lonmin takes its leave after 20 years of trade, its origins are, in fact, much older, and full of colour.

Founded in 1909 as the London and Rhodesia Mining and Land Company, or Lonrho, the company was rarely out of the news, especially in the Seventies when as a sanctions-buster throughout the period of Rhodesian prime minister Ian Smith’s unilateral declaration of independence, which ran for 14 years from 1965, it drew the criticism of then UK prime minister, Edward Heath. He labelled Lonrho “… the ugly face of capitalism”.

Empire-builders, such as Tiny Rowland, who led the company for just over 20 years from 1962, did nothing to dispel the notion.

Lonrho was a high-flying corporate in search of conglomerate status. It, for example, fought for control of Harrods, the UK’s Knightsbridge department store; it also bought Ashanti Goldfields in Ghana. And when not capturing the headlines on the business pages, it was owning them following its takeover of the Observer, the UK newspaper.

It’s fitting, therefore, that what’s left of the company should be gobbled up by Sibanye-Stillwater’s Neal Froneman whose deal-hunger and craving for multi-jurisdictional, blue-chip status is not unlike the ambition of the late Rowland. At the current juncture, however, Lonmin is perhaps the last deal Froneman’s shareholders can tolerate; at least, for a while. As for Lonmin, analysts think the merger represents a lifeline for its shareholders.

“We believe Lonmin is not viable on a standalone basis unless it is replicated and that any attempt to recapitalise it should have been properly planned and embarked on months ago, and not as a knee-jerk reaction to higher PGM prices,” said Nedbank analysts, Leon Esterhuizen and Arnold van Graan in a report dated June 4.

“We therefore see the deal as a good lifeline for Lonmin shareholders.”

For Sibanye-Stillwater, Lonmin brings with it some $71m in cash which will help deleverage the balance sheet following three years of intense deal activity.

Whilst production from Lonmin is unlikely to increase, especially as Sibanye-Stillwater focuses on capital conservatism, Lonmin will provide the cash flow and security enabling Froneman to tackle the recovery of the firm’s gold division, recently emerging from a five-month strike, as well as June’s announcement it was cutting 3,500 staff.

“Deleveraging the balance sheet seems to be a top priority for Sibanye’s management at this stage; we believe this comes on the back of pressure from concerned bankers and shareholders,” said the Nedbank analysts.

“The marginal nature of Lonmin’s assets also adds further PGM price leverage that will likely be well received by those bullish on the PGM market,” they said. “These assets should, therefore, become a significant boon if PGM prices rise further.”

3 COMMENTS

  1. Was the Lonmin deal not mostly about SGL being able to smelt for itself and get out of the dirty paws of Anglo? Fortunately Anglo has other dirty paws around itself to be worried about so “the wheel turns”!

    • Absolutely correct. SGL now has access to the Lonmin smelting facilities. It may be a game changer.
      However, one will have to see whether SGL will be able to use the Lonmin facilities for the Aquarius and old Anglo Operations properties. They may be contractually bound by off-take agreements, etc to supply Anglo.
      Anglo is not know for being nice. They probably are heavily dependent on the Aquarius and the old Anglo Operations ore to keep their smelters in Rustenburg going.

      However, saying all this. I am no expert and thus only speculating.

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