Lonmin, the London-listed platinum mining giant, just unveiled a devastating set of revelations about the company to investors.
It said in a regulatory statement that it has to take a number of drastic steps to “mitigate the effects” of the platinum-group metals (PGM) pricing environment.
This includes trying to raise $US400 million (£259 million) from investors, paying off its debt, controlling costs, and cutting thousands of jobs.
“The Board and executive management have reviewed the Group’s business and capital structure and developed the Business Plan in order to be able to deal effectively with the effects of a continuation of the current low PGM pricing environment,” said Lonmin in the regulatory statement.
“The Business Plan will accelerate the implementation of Lonmin’s published strategy to control costs, reduce capital expenditure and enable decisive measures to be taken.”
Platinum prices have fallen to a near six and a half year low due to a strong US dollar and the drop in consumption from a major consumer — China.
Lonmin intends to raise $US400 million (£259 million) through rights issue, which is when a company offers new stock to existing shareholders. A rights issue is intended to raise a large amount of cash quickly without relying on getting a new bank loan. It said it will unveil the details of the rights issue on November 9.
While Lonmin launches that, it intends to negotiate the terms of its $US370 million (£240 million) worth of bank debt, which matures in May 2020.
In the meantime Lonmin will be reducing production to cut costs as well as reducing capital expenditure. It even said that management level employees have waived their bonuses for the year ending September 30, and agreed to no salary increases until at least this time next year. Money spent on marketing, promotion, and training are all being reduced too.
However, perhaps the biggest issue for many people will be job losses.
Lonmin, which has 38,000 employees, said that as part of its plan to cut costs and raise cash, alongside reduced production, “approximately 6,000 employees and contractors are affected. The Group aims to complete the process by the end of September 2016.”