Lonmin Plunges on Funding Concern; Plans to Cut 6,000 Jobs

The world’s No. 3 producer will announce before November whether it will review its capital structure and how it will refinance debt facilities, Chief Executive Officer Ben Magara said on a conference call Friday. It may cut about 16 percent of its staff and contractor base, while closing shafts, he said. The shares dropped as much as 17 percent.

Companies including Anglo American Platinum Ltd. and Impala Platinum Ltd., the two biggest operators, are reducing costs as profit margins shrink with tumbling metal prices. Platinum has been in a bear market for two years, and South African producers are losing money on about three of every four ounces they mine.

“At these prices, it will be difficult for Lonmin to meet some of its covenants,” Sibonginkosi Nyanga, an analyst at Imara S.P. Reid (Pty) Ltd. in Johannesburg, said by phone. “If they decide to sell shares, the market will punish them.”

Lonmin intends to close its Hossy and Newman shafts and idle three others, reducing annual output by 100,000 ounces, the Johannesburg-based company said in a statement. The planned job cuts include staff who took voluntary redundancy packages offered in May, Lonmin said.

“Losing jobs is not pleasant, but everyone is having to take significant short-term pain,” Magara said on the call.