[miningmx.com] – LONMIN’s defence against tax evasion allegations levelled by the Alternative Information Development Centre (AIDC) has thrown into relief the cost to shareholders of keeping the UK-listed firm afloat.
Lonmin said in a statement today that it could not have concealed profits in an offshore company because it was forced to raise R17bn ($1.54bn) from shareholders in two separate rights issues in the last six years.
The last was in 2013 when it raised $823m (R9bn) from its shareholders “… in order to keep the mine operational”, it said.
The AIDC has argued that the UK-listed platinum producer sold refined metal from its operations in South Africa to international clients through a Bermuda-registered marketing firm which housed profits from the sales. These profits could have been used to pay worker salary increases in 2012, it added.
Said Lonmin: “The idea that Lonmin hid profits from shareholders while asking them for a total of R17bn is not credible”.
What’s incredible is the extent to which the South African platinum industry has had to draw on shareholder funds from about 2010.
Anglo American Platinum (Amplats) raised $1.6bn (R12.5bn) in 2010 – largely supported by 80% shareholder, Anglo American – in order to cut debt two-thirds to about R6.8bn.
In 2013, Impala Platinum (Implats) issued a $500m convertible bond which translated into a then rand value of R4.1bn while several months later Northam Platinum tapped shareholders for R600m.
Earlier this year, Aquarius Platinum raised $225m or R2.31bn in order to repay bondholders which takes total financings by bonds or share issues in the industry to R28.5bn, excluding the R8bn Lonmin raised in the four years to 2012.
Including that amount, the industry raised R36.5bn equal to 19.5% of the total market capitalisations of those four companies.
The capital calls on shareholders also dwarf returns. According to the Chamber of Mines of South Africa, the average dividend paid to shareholders between 2008 and 2012 was R5.37bn. No dividends have been paid since 2011 and a cash loss of R4.3bn was registered by the industry in 2013.
In its response to the AIDC’s criticisms, Lonmin said wage settlements with lower category workers had increased 74% on a compound basis in the five years to end-2013.
It added that the AIDC was undermining the work of the Farlam Commission which is investigating the conditions behind the death of 45 workers at Lonmin’s Marikana mine in August, 2012.
“The report is misleading and false and Lonmin reserves all its rights with regard to legal recourse,” the platinum producer said.
