Troubled platinum producer Lonmin (LMI) slumps 5.5% to 163p after 23.9% owner Glencore (GLEN) said it would get rid of its entire stake. The FTSE 100 commodities giant will give the Lonmin shares free to its shareholders. Given that Lonmin – once a FTSE 100 constituent itself – has struggled operationally and financially, the market clearly reckons Glencore shareholders will sell their Lonmin stock as soon as possible.
The divestment puts an end to speculation about the future of Lonmin within the Glencore camp. The investment dates back to the Xstrata days when it bought 24.9% of Lonmin as part of plans to expand into the platinum space. Xstrata had a proposal rejected in 2012 to merge its own platinum and alloy assets in South Africa with Lonmin, in return for the latter's shares. Such a move would have given Xstrata more than 70% ownership of its peer.
Glencore gobbled up Xstrata in May 2013 and quickly revealed plans to sell the Lonmin stake, although only when the time was right. Rumours resurfaced last September but no-one expected Glencore to simply give the shares away. Today's announcement would suggest the commodities giant couldn't find a buyer for the investment, not surprising given that Lonmin is a high-cost, loss-making producer. Glencore shareholders will be called to vote on the share distribution in May.
Lonmin's shares have fallen by 92% in value since 2010. 'Glencore's investment philosophy is to hold investments in production assets in the commodities in which we trade and so we have always regarded the stake in Lonmin as non-core,' says Glencore chief executive officer Ivan Glasenberg. 'As we do not trade platinum and have no special insight into the market, we believe that it is better to leave to our shareholders the decision as to how to manage the Lonmin shares.'