A week of violence at the miner's Marikana operations has seen 34 people die after about 3 000 workers protested for higher wages.
South Africa-focused Lonmin, the world's third-largest platinum miner, has given workers at its Marikana mine an ultimatum to return to work on Monday or face being fired, a twist that could heighten a tense situation on the ground and make it even harder for production to resume.
Already battered by rising costs and feeble prices squeezing the platinum industry, union clashes have now pushed Lonmin shares to the lowest levels since 2008.
At 7.40am GMT, its shares were down 4.7% in London at 610.3 pence, underperforming a 0.3% drop in the UK mining sector, while the Johannesburg shares were down 3.8%.
Lonmin has one of the most pressured balance sheets in the sector and analysts have warned for days that the latest stoppage, which means the miner will miss its 2012 output target, would force it to overhaul its debt and potentially raise cash on the equity market.
Expected rights issue
The Sunday Times said the miner's expected rights issue could be as large as $1-billion, roughly half its current market capitalisation. Sources familiar with the matter told Reuters it was too soon to put a figure on a cash call, as production had yet to resume at the mine.
Analysts at Liberum in London said a $1-billion cash call would be the "belt and braces" recapitalisation needed, given industry oversupply and market conditions that have made large chunks of production loss-making.
"A $1-billion rights issue, as compared to its current $2-billion market cap, will be a difficult proposition, but strategically, could provide them with a longer-term benefit," Nomura analysts said in a Monday note.
"However, with such an uncertain future we continue to see the share price as too high and re-iterate our 'reduce' recommendation."
Deutsche Bank cut its recommendation on the stock to "sell" from "hold".
Lonmin has also yet to receive a firm commitment of support in the event of a rights issue from its largest shareholder, miner Xstrata, the sources said. – Reuters