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South Africa tells Lonmin to drop threat to sack striking miners Lonmin set to breach loan agreements over South African mine strike
(about 4 hours later)
Lonmin has been ordered to drop its threat to sack striking miners who failed to return to work after South African police shot dead 34 of their colleagues. Lonmin has been forced to go cap in hand to its banks after admitting it will breach its loan agreements as a result of a strike that led to the shooting of 34 miners last week.
The London-listed miner had told 3,000 miners striking over low pay that they would lose their jobs if they failed to turn up for work on Tuesday morning. But the world's third-largest platinum miner was on Monday night ordered by the South African government to lift its ultimatum. The London-listed platinum miner was forced to warn investors that the shutdown of its Marikana mine 60miles from Johannesburg will result in debt covenants being breached.
Lonmin said it was in "constructive discussions" with its banking syndicate about resolving the problem.
However, the company admitted it has been forced into "reviewing all the options available to strengthen its financial structure, including possible access to the equity capital markets".
The formal announcement that the FTSE 100 miner is considering an emergency rights issue comes just three days after it strongly refuted reports it was planning such a move to raise up to $1bn.
In addition, last Thursday the company released a formal statement saying: "Net debt remains well within the limits and terms of its existing bank debt facilities."
Analysts say the company will have little choice but to tap shareholders for an extra $700m-$1bn. Experts at Deutsche Bank have said the strike will cost Lonmin at least $74m in lost production.
UBS analysts warned the unrest is "unlikely to be resolved swiftly and will probably continue for the next six to eight weeks". They added that there is an "increasing likelihood of contagion, with market focus now shifting to Amplats [Anglo American Platinum, the world's top platinum producer]."
Lonmin's shares, which have lost 44% of their value over the past year, closed up 2.4% to 624.5p on Tuesday. It is the first time the shares have ended up in nine days of trading.
The company, which was once part of Tiny Rowland's Lonrho conglomerate, has relented on its ultimatum to sack striking staff if they continued to fail to turn up for work.
The London-listed miner had told 3,000 miners striking over low pay that they would lose their jobs if they failed to turn up for work on Tuesday morning. But the world's third-largest platinum miner was ordered by the South African government to lift the ultimatum.
"The president [Jacob Zuma] has declared this week as a mourning week. We want all, including mine bosses, to respect this," police minister Nathi Mthethwahe told reporters in Rustenburg late on Monday, according to the South African Mail & Guardian."The president [Jacob Zuma] has declared this week as a mourning week. We want all, including mine bosses, to respect this," police minister Nathi Mthethwahe told reporters in Rustenburg late on Monday, according to the South African Mail & Guardian.
On Tuesday, Mark Munroe, Lonmin's executive vice-president, said sacking thousands of workers would not improve the tense situation at the Marikana mine near Johannesburg. On Tuesday, Mark Munroe, Lonmin's executive vice-president, said sacking thousands of workers would not improve the tense situation at the mine.
"It won't help if Lonmin goes out and dismisses a whole lot of people for not coming to work today," he told South Africa's TalkRadio 702 FM. "It will set us back significantly in terms of violence, in terms of building trust.""It won't help if Lonmin goes out and dismisses a whole lot of people for not coming to work today," he told South Africa's TalkRadio 702 FM. "It will set us back significantly in terms of violence, in terms of building trust."
Some families are still do not know whether their loved ones are dead or among about 250 arrested protesters and 78 people being treated in hospital.Some families are still do not know whether their loved ones are dead or among about 250 arrested protesters and 78 people being treated in hospital.
The South African parliament will debate the killings on Tuesday. The deaths have sparked a national outcry and are the worst single example of police violence since the end of apartheid. Lonmin said a third of its 28,000 workforce were back at work on Tuesday, including a fifth of the 3,000 striking rock drillers.
Some miners had said they would rather die than return to work. Kaizer Madiba told the South African Times newspaper: "People have died already so we have nothing more to lose … We are going to continue fighting for what we believe is a legitimate fight for living wages. We would rather die like our comrades than back down." The South African parliament debated the deaths, which have sparked a national outcry and are the worst single example of police violence since the end of apartheid. United Democratic Movement leader Bantu Holomisa described the shooting as a "massacre".
The 3,000 striking rock drillers are demanding their wages be trebled from 4,000 rand (£306) a month to 12,500 rand a month. In comparison, Lonmin's chief executive, Ian Farmer, who is currently seriously ill in hospital, collected pay and bonuses of £1.2m last year.
Lonmin's shares, which have fallen sharply in response to the crisis, were up 2.5% to 625p on Tuesday morning.
The Mail & Guardian is live-blogging the fallout from the shooting here.