SHARES in Lonmin soared almost 50 per cent yesterday after British-Swiss mining firm Xstrata made a £5 billion offer for the world's third-largest platinum producer.
Xstrata bid £33 per Lonmin share, a 42 per cent premium over its 2,319p closing price on Tuesday.
Lonmin, most of whose operations are in the Bushveld complex in South Africa, immediately rejected the approach yesterday, describing it as "opportu
nistic and entirely unwelcome".
The offer caused Lonmin shares to jump 47 per cent or 1,107p to 3,426p – well above the offer price – while the rest of the mining sector was also higher. Xstrata shares closed 1 per cent down at 3,167p.
Xstrata tabled its offer at the same time as reporting a 13 per cent rise in half-year revenues, with adjusted pre-tax profit flat at $5.7bn (£2.9bn).
Chief executive Mick Davis said the offer proposal marked the next step in the company's strategy to develop a significant platinum business and add diversification to its portfolio.
The company said Lonmin's business had been hit by a number of operational difficulties over the past two years, including below-budget production at a time of strong platinum prices. It added: "Lonmin's operations have consistently underperformed its own forecasts on expected platinum sales and have been subject to a declining sales and production profile at a time of robust prices.
"Current guidance of 765,000 to 770,000 ounces of platinum for the year to 30 September 2008 is 15 per cent lower than the initial guidance provided for this period of 900,000 ounces and represents the fourth downward revision in this financial year."
But Lonmin urged its shareholders to take no action following Xstrata's "unsolicited" approach. It said: "This is an opportunistic and entirely unwelcome attempt to acquire Lonmin at a price which undervalues its unique assets."
Seymour Pierce stockbrokers said Xstrata already had a sizeable business in South Africa with considerable experience of mining on the Bushveld through its chrome operations.
It added in a note: "A strong technology division may be able to improve performance at Lonmin's mines, whilst the company also has platinum refining experience from its Nikkelverk refinery in Norway."
The price of platinum rose 4 per cent and palladium more than 7 per cent yesterday as strike action in South Africa fuelled supply fears.
The rise broke a sharp fall in platinum prices, which tumbled more than 10 per cent in the previous three days on fears over falling demand for the metal from car-makers.
The full article contains 434 words and appears in The Scotsman newspaper.
