(Reuters) - Platinum miner Lonmin does not have sufficient liquidity to fund the new projects needed to avoid shaft closures and job losses, it said on Monday as it urged shareholders to back its proposed takeover by Sibanye-Stillwater.
The London-listed company, crippled by soaring costs and subdued platinum prices, has been cutting spending to conserve cash and retain a positive balance sheet required by conditions of South Africa-based Sibanye’s offer.
However, progress on all fronts has been slow against the backdrop of strikes by South Africa’s Association of Mineworkers and Construction Union (AMCU) in a long-running pay dispute.
AMCU, which has been on strike at Sibanye-Stillwater’s gold operations since mid-November, wanted to extend the strike to at least 11 other companies including Anglo American’s gold and platinum operations, Harmony Gold and Lonmin. However, South Africa’s labor court rejected AMCU’s request this month.
“The challenges facing Lonmin and the industry persist,” Lonmin said in a statement ahead of what is likely to be a fiery AGM in London on Monday.
“This is why your board, recommends the all-share offer from Sibanye-Stillwater.”
Despite “new and prudent measures” to refinance the business with a previously announced $200 million facility, Lonmin said it remains “financially constrained and unable to fund the significant investment required to sustain our business and associated employment in the future”.
Lonmin added that poor production and correspondingly high unit costs have continued in its second quarter this year, largely offsetting the benefits of improved prices of platinum group metals.
Lonmin shares were up 8.4 percent at 76.9 pence at 1242 GMT.
Reporting by Justin George Varghese in Bengaluru and Zandi Shabalala in London; Editing by David Goodman