Lonmin shares have fallen after commodities trader Glencore said it would dispose of its stake in the troubled platinum miner.
The move is part of Glencore’s plan to cope with falling commodity prices, which also includes a cut in capital spending this year from $7.9bn to $6.5bn-$6.8bn.
Glencore plans to distribute its Lonmin stake to its shareholders, rather than selling it. The stake came as part of Glencore’s purchase of mining group Xstrata in 2013, and does not fit the company’s strategy since it does not trade platinum. Glencore said:
Glencore believes that a straighforward market disposal of the Lonmin stake at this time would not be in the best interests of its shareholders.
Glencore chief executive Ivan Glasenberg said:
We have always regarded the stake in Lonmin as non-core. As we do not trade platinum and have no special insight into the market, we believe that it is better to leave to our shareholders the decision as to how to manage the Lonmin shares. Our desire to distribute the Lonmin shares therefore reflects our philosophy not a view on Lonmin or platinum.
Lonmin shares have fallen 5% to 163.8p on fears of an overhang of shares on the market, despite Glencore’s management saying they did not currently plan to sell the shares they would receive.
Lonmin has suffered from falling platinum prices as well as industrial unrest at its South African mines, and made a loss last year of around $326m. Liberum said:
[The share distribution] will have no impact for Glencore, but for Lonmin it will be a material overhang on the stock at a time Lonmin’s fundamentals remain very weak. Expect significant underperformance today.
No mention of what will happen with Glencore’s remaining platinum assets which they are also looking to divest. Production results also out, and as expected Glencore cutting capex guidance from December by $1.1bn-$1.4bn given the weak commodity outlook, most likely to come out of coal and oil expansions. Marketing operations have performed inline with company’s expectations.
