| * Lonmin seen bleeding more quickly than others * Shares hit lowest levels since 1979 By Silvia Antonioli and Ed Stoddard LONDON/JOHANNESBURG, July 30 (Reuters) - Platinum producer Lonmin is facing its deepest crisis to date, hurt by a downturn in the metal and haunted by a mixture of bad luck and debatable management choices that are putting its survival at risk. Times are tough for everyone in the platinum sector. Producers are squeezed between soaring costs and a rout in platinum prices to lows not seen since the 2008 financial crash. But Lonmin is bleeding more quickly than the others and its apparently inexorable decline has become evident this year. Its shares dropped this week to their lowest since Jan. 1979. Pre-tax losses last year were $326 million. Glencore's decision to sell its 23.9 percent stake earlier this year was the latest blow to Lonmin, whose name is tied to the tragic 2012 Marikana mining strike. "Glencore's exit was clearly a no confidence vote on the sector but foremost on a company that is disadvantaged versus the other big players," said Ingo Hofmaier, director at London-based merchant bank Hannam & Partners. "The situation is critical. Raising capital now will put pressure on the share price and as the highest-cost of the big producers, Lonmin is the first to feel the pain and the need to restructure." At current spot prices, Lonmin is burning cash at a rate of $240 million per year and might end this financial year with a debt of $380 million, according to Deutsche Bank analysts. Things will get worse if prices don't recover. Citi analysts forecast that Lonmin's net debt/Ebitda, a measure of its leverage, will baloon from 0.73 this financial year to 7.8 the next. In what is seen by many as a last attempt to buy time, chief executive Ben Magara outlined a plan last week to close cash-burning shafts and cut thousands of jobs in the face of plunging platinum prices, but failed to convince investors on the day. "Lonmin is defending value for all stakeholders in responding to the platinum pricing crisis by taking swift, decisive even though difficult measures," Magara said. Some argue that more drastic measures are needed to turn the company's fortunes around, and a rights issue might be necessary to shore up its balance sheet. Details of the restructuring expected later this year will be key for investors to decide whether to continue to support the company after the heavy losses. "The details and implementation of the operational plan are critical. Any equity investor needs the certainty that the operational side is solid," said fund manager Hanre Rossouw at Investec Asset Management, one of Lonmin's largest shareholders. "You can't just throw money at the problem." LAST AMONG THREE Lonmin was the last among the three largest producers to buy platinum concessions in South Africa and the geology of the mines it bought was less attractive than rivals Anglo American Platinum and Impala Platinum. But it managed to make the most out of it. "They were able to apply good metallurgical processes to what was difficult ore bodies and they were very successful," said a South-Africa based platinum mining veteran. "They developed a culture that was more innovative and nimble than the bigger producers. They were regarded as more clever." With demand for automobile exhaust catalysts booming, Lonmin thrived. Buoyant growth in platinum demand convinced chief executive Edward Haslam to embark a growth campaign in the early 2000s aiming to expand production by 20 percent to 1 million ounces. The was the first strategic error, according to industry observers. "They were carried away with expansion plans in the early 2000s," said the mining veteran. "The market did like Haslam's idea, even though it was impractical. The trouble with these deposits is that you have to accelerate spending to expand capacity as you go deeper underground." Lonmin raised capital and was at the peak of its expansion cycle when in the 2008 credit crunch hit its balance sheet hard. It has needed two rights issues since 2009 and many think it might need a third one soon as its $560 million bank loan maturing in 2016 could be difficult to refinance. Compounding its problems, prices of by-product rhodium collapsed in 2008. "Lonmin's ore mix means that its production of rhodium is, on a relative basis, higher than that of its peers'. So when rhodium prices crashed in 2008, Lonmin lost a greater component of its revenue than its rivals and this had an upward impact on its unit costs, moving it up the cost curve," said William Tankard, director of precious metals mining research at GFMS. BRAVE OR FOOLHARDY Haslam's successor Brad Mills, an American who had worked at BHP Billiton, focused on an attempt to mechanize labour-intensive mines. The company pushed for mechanisation from 2004 only to abandon its efforts - and its chief executive - four years later largely because of geological issues and high costs. "Mills' was a brave move but maybe foolhardy. And shareholders paid the price of it," said Stuart Murray, the former head of platinum producer Aquarius, who has also held roles at Impala Platinum and other mining firms. Adding to its woes, in August 2012 a strike hit Lonmin's Marikana mine, unleashing a wave of violence that killed 44 people, including 34 strikers shot dead by police. Another platinum mining strike in 2014, South Africa's longest and costliest, hit Lonmin more than its peers as unlike the others - with assets in Zimbabwe and other parts of South Africa - virtually all of Lonmin's operations are concentrated in the strike-affected area of Rustenburg. The company - also hit by technical issues halting its smelters - has struggled to recover since. "Whether they can survive is going to depend on platinum prices and on whether they can fix themselves for a new reality of lower margins," Murray said. "They have to hold discussions with the government and with the unions to try to save what was a national treasure which is now a shambles." ($1 = 0.6413 pounds) (Editing by Giles Elgood)
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