Bloomberg News

Lonmin to Sell 1.1 Billion Rand Stake in Limpopo to Shanduka

October 03, 2011

(Updates with closing share price in last paragraph.)

Oct. 3 (Bloomberg) -- Lonmin Plc, the third-largest platinum producer, plans to sell a controlling stake in its Limpopo division to Shanduka Group Ltd. for 1.1 billion rand ($135 million) if a feasibility review is successful.

Shanduka, a black-investors holding company, will be entitled to subscribe for 50 percent plus one share in the issued capital of Messina Platinum Mines Ltd., which is wholly owned by a subsidiary of Lonmin’s Western Platinum Ltd., the Johannesburg-based company said in a statement.

The deal will enable Lonmin to develop its Limpopo Baobab mine in South Africa, where operations were halted in 2009 after the global financial crisis sent platinum prices plummeting, and help meet the government’s the black-shareholding target of 26 percent by 2014.

“The provision of capital by Shanduka will enable Lonmin to retain its balance sheet capacity and management focus on growth from its Marikana operations,” Lonmin said.

The platinum miner will continue to hold an 82 percent interest in Western Platinum, which will have the option to fund any expansion if the Limpopo division boosts production to more than 250,000 ounces a year in exchange for shares in Messina Platinum Mines, according to the statement.

‘Canny Deal’

It is “a small but canny deal by Lonmin, which extracts value from a small and non-core asset,” Liberum Capital Ltd. said in a note. It would give Lonmin a cash injection “at an opportune time since at current PGM prices we believe its balance sheet out to 2015 is set to come under scrutiny,” it added. PGMs are platinum group metals.

Shareholder approval may be required as Shanduka is a related party, Lonmin said. Shanduka controls Lonmin’s empowerment partner Incwala Resources Ltd. and Cyril Ramaphosa, founder and chairman of Shanduka, is a director of Lonmin. The deal is expected to take 12 to 15 months to close, Lonmin said.

Lonmin fell 22 pence, or 2.1 percent, to 1,029 pence at the 4:30 p.m. close in London. The six-member FTSE/JSE Africa Platinum Mining Index gained 0.8 percent.

--Editors: Stephen Cunningham, John Viljoen

To contact the reporters on this story: Jana Marais in Johannesburg at jmarais@bloomberg.net; Carli Lourens in Johannesburg at clourens@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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