Shareholders in the company, which has been under pressure because of high costs, weak prices and strikes, this week approved a $817-million rights issue.
Eastern Platinum Limited and Western Platinum Limited, Lonmin's two operating subsidiaries, mine on land owned by the Bapo ba Mogale community. Lonmin has had a lease agreement with the community since 1969 and pays them mining royalties, which has amounted to about R370-million.
The conflict centres on Lonmin's black economic empowerment (BEE) structure, Incwala Resources, of which Cyril Ramaphosa's Shanduka Group owns the controlling share of 50.3%. Incwala holds 18% of Eastern and Western Platinum Limited.
Incwala was established in 2004 shortly after the Mineral and Petroleum Resources Development Act came into effect. It requires mining companies to establish BEE structures to have their mining rights converted to new-order mining rights, or they will be cancelled.
The community was disappointed when it was awarded a 2.85% shareholding in Incwala in 2004.
When the platinum price fell in 2008, the three primary BEE partners in Incwala – Andisa Capital, Dema Capital and Vantage Capital – were forced to sell their shares of 16.22% each.
In 2009, the then department of minerals and energy affairs threatened to cancel Lonmin's new-order mining rights if Incwala was not salvaged. To solve the problem, Lonmin lent R2.5-billion to Shanduka, which contributed R300-million, to allow it to acquire a 50.3% share in Incwala in 2010. As a 2.85% shareholder, the Bapo had pre-emptive rights to purchase the Incwala shares, but they did not exercise them.
Hugh Eiser, the community's legal representative, believes this happened because the community lacked political connections, but Lonmin denies this. It said the community could not raise the money for the shares. It also said that community leadership disputes left the company with no legitimate authority with which to do business.
But Eiser said that Lonmin did not offer the community a R2.5-billion loan, as it did to Shanduka, and that the community's legal advisers and Lonmin could have set up a structure to overcome the problems of community leadership.
Eiser said, according to the Act, Lonmin should never have been granted new-order mining rights and, according to its conditions for broad-based black economic empowerment (BBBEE), the Bapo should have been empowered through Incwala.
He said because the Bapo were excluded from Incwala – they had no control over their 2.85% shares in the company – they had not been empowered. The 2.85% shares are held by Mirrorball Investments 0019, a company set up by Lonmin.
Its profits are managed by the Bapo Lonplats Trust, also set up by Lonmin and controlled by four trustees – all attorneys from Cliffe Dekker Hofmeyer, which is contracted to Lonmin.
Eiser has accused both Lonmin and Shanduka of misleading the department of mineral resources about Lonmin's true BBBEE status. He said the community planned to take Lonmin to court to have the mining rights of Eastern Platinum Limited, as well as Western Platinum Limited's mining rights on Wonderkop farm, cancelled.
But Sue Vey, Lonmin's spokesperson, said the company never misled the department: "Lonmin has on numerous occasions presented its BEE structures to the department, who granted conversion of our mining rights on the strength of these structures."
She said Lonmin implemented measures to include the Bapo in the original Incwala transaction despite the community's inability to provide an appropriate resolution authorising the signature of a trust deed that would have enabled them to be direct shareholders in Incwala. She said Lonmin set up Mizrrorball to hold the community's 2.85% to avoid the Bapo's exclusion from the transaction, and although Lonmin could not stop Eiser approaching the high court, it did not believe that there was any merit to the case.
Shanduka referred all queries to Lonmin.
The department said it did not have any information regarding the shareholdings in Incwala Platinum Limited, of which Incwala Resources is a subsidiary.
Heidi Swart is the Eugene Saldanha fellow in social justice reporting