Shares digital

While both Brad Mills, the chief executive of platinum specialist Lonmin (LMI), and Ian Framer, the corporate development director, both sold shares in the company, both have actually upped their respective stakes in the firm. Both Mills and Framer sold shares which they acquired under the group’s bonus scheme. They were merely selling enough of that stock to satisfy the tax liabilities associated with the award.

Lonmin, which is the rump of the once mighty Lonrho empire, suffered a series of problems last year – with production shortfalls, a poor performance from one of its main centres, a shortage of skilled workers and a ten day strike in South Africa. It is also along with other miners facing pressure from the South African government to improve safety at its mines.

However, it was bailed out last year by a higher platinum price, which rose by 22% to $1,390 an ounce. It has risen further to $1,550 and analysts are now forecasting that it could go still higher to over $2,000 under the aegis of increased demand for catalytic converters and also from China.

The group has forecast that it should enjoy volume growth of 13% this year. However, unit costs are forecast to rise by some 15% as it increases the pay and safety of its employees.

There is currently a wide divergence between brokers. Deutsche Bank is forecasting earnings of 206p, while HSBC is forecasting earnings of 163p. On consensus forecasts of 178p the shares are selling on a PE of less than 18, at £31.94. Some market insiders also believe Lonmin, as the third largest producer of platinum, could be a target in sector consolidation.

Shares says: Recent performance has been unexciting but Lonmin should benefit from ongoing commodities boom. SPECULATIVE BUY