2nd Sep 2008 07:00
Lonmin provides further information on the value of the Company
2 September 2008
The Board of Lonmin Plc ("Lonmin" or the "Company"), advised by Citi and Greenhill, is today publishing a document for its shareholders which provides further information highlighting the value of the Company.
The Board continues to believe that the unsolicited, pre-conditional proposed offer for Lonmin announced by Xstrata plc ("Xstrata") on 6 August 2008 fundamentally undervalues the Company's unique assets, resources and reserves. It is not in the interests of Lonmin's shareholders, and the Board will continue to oppose it vigorously.
If and when Xstrata comes forward with a formal offer, the Board will provide shareholders with further comprehensive information, including long-term production information, to enable them to properly assess the fundamental value of Lonmin.
The Board of Lonmin continues strongly to advise shareholders to take no action and to reject Xstrata's approach.
Lonmin Chairman, Sir John Craven, said:
"Xstrata has for its own reasons decided that a hostile approach is the best way of persuading Lonmin shareholders to part with their assets. The document we are issuing today provides further information highlighting the value of the Company. As set out in this document, based on reasonable assumptions for rating, production and Platinum pricing, it is not difficult to see a share price for Lonmin well above Xstrata's £33 a share proposal, even before a control premium.
"Therefore, the Board has no hesitation in rejecting Xstrata's entirely unsatisfactory approach which fails to reflect a proper value for the assets and prospects of Lonmin and the synergies from which Xstrata's rather than Lonmin's shareholders would benefit. We continue to explore all options to maximise value for our shareholders."
Just valuing Lonmin on its average historical trading multiple of 10.5x, implies a standalone value for Lonmin of £32 per share, before any premium for control(1).
- Production: Lonmin achieved Platinum sales of over 900,000 ounces in each of the four financial years 2003 to 2006 following which in FY2007, Lonmin started to experience operational challenges. During FY2008, as previously reported, underground production was principally impacted by safety related stoppages, the Eskom four day power outage in January, high levels of absenteeism, particularly in the first half of the financial year, and the slower than anticipated ramp up of the Company's mechanised shafts. Production was also affected by an increased focus on accelerating ore reserve development to address shortfalls in prior periods. FY2008 represents a low point in production for Lonmin and has also been challenging for other PGM producers.
Summary
Lonmin's long-life, high quality, low-cost assets are extremely valuable. Investment opportunities in the consolidated PGM sector are rare. Xstrata's unsolicited, pre-conditional proposed offer fails to recognise Lonmin's potential given both Lonmin's attractive growth profile and the prospects for PGMs in the future.
A share price for Lonmin significantly above Xstrata's approach price can be calculated by applying reasonable rating, production and Platinum pricing assumptions, even before the addition of a control premium.
The Board of Lonmin will demonstrate through its defence that Xstrata's unsolicited, pre-conditional proposed offer does not reflect the fundamental value of Lonmin's assets.
The Board of Lonmin continues strongly to advise shareholders to take no action and to reject Xstrata's approach.
Note: The above illustrative sensitivities show the impact of a change in product sales volumes and Platinum price to the value of a Lonmin share assuming that all other factors remain constant and applying an enterprise value to EBITDA multiple of 10.5x. In particular, in calculating these sensitivities it is assumed that other PGM prices and currency exchange rates remain constant. It is also assumed that 70% of costs remain fixed and are assumed not to vary in line with sales volume, and that 30% of costs vary in line with sales volume assuming a constant EBITDA margin. The above illustrative sensitivities do not constitute a profit forecast. Shareholders should consider these factors in conjunction with the explanatory notes set out at the end of this announcement and on pages 26-29 of the document published today.
Enquiries
Lonmin: +44 (0) 207 201 6060
Alex Shorland-Ball
Citi: +44 (0) 207 986 4000
David Wormsley
Jan Skarbek
Tom Reid (Corporate Broking)
Andrew Forrester (Corporate Broking)
Greenhill: +44 (0) 207 198 7400
James Lupton
David Wyles
JPMorgan Cazenove: +44 (0) 207 588 2828
Michael Wentworth Stanley
Jonathan Wilcox
Matthew Lawrence
Cardew Group: +44 (0) 207 930 0777
Anthony Cardew +44 (0) 7770 720 389
Rupert Pittman +44 (0) 7976 249 289
Financial Dynamics (South Africa): +27 (0) 21 487 9000
Nic Bennett +27 (0) 766 877 429
A copy of Lonmin's document published today, dated 2 September 2008, is available on Lonmin's website at www.lonmin.com.
Citigroup Global Markets Limited ("Citi"), Greenhill & Co. International LLP ("Greenhill") and JPMorgan Cazenove Limited ("JPMorgan Cazenove") are acting for Lonmin and no-one else in connection with the matters described in this announcement, and will not be responsible to anyone other than Lonmin for providing the protections afforded to their respective clients, or for providing advice in relation to the matters described in this announcement.
The Lonmin directors accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the Lonmin directors (having taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.
Under the provisions of Rule 8.3 of the Takeover Code (the "Code"), if any person is, or becomes, "interested" (directly or indirectly) in 1% or more of any class of "relevant securities" of Lonmin, all "dealings" in any "relevant securities" of that company (including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by no later than 3.30pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the "offer period" otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an "interest" in "relevant securities" of Lonmin, they will be deemed to be a single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevant securities" of Lonmin by Xstrata or Lonmin or by any of their respective "associates", must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.takeoverpanel.org.uk.
"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the Takeover Panel's website. If you are in any doubt as to whether or not you are required to disclose a "dealing" under Rule 8, you should consult the Takeover Panel.
This release contains statements that are forward-looking. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements may be identified by the use of forward-looking words such as “plans”, “expects” or “does not expect”, “is expected”, “is subject to”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes” or variations of such words and phrases or statements that contain certain actions, events or results ”may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Lonmin, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Lonmin's present and future business strategies and the environment in which Lonmin will operate in the future. Among the important factors that could cause Lonmin's actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of demand and market prices, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, interest rates, operational problems, industry trends, labour relations, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors and activities by governmental authorities such as changes in taxation or regulation. Other than in accordance with its legal or regulatory obligations (including under the UK Listing, Prospectus, Disclosure and Transparency Rules of the Financial Services Authority), Lonmin is not under any obligation and Lonmin expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Explanatory Notes:
3. Movement in Platinum price
Related Shares:
Lonmin