Lomin rejects Xstrata bid but leaves door ajar

Platinum miner, Lonmin, has rejected Xstrata’s £5 billion takeover bid but says it would be willing to enter discussions, if the offer price is raised.

Lonmin’s chairman, Sir John Craven, has urged shareholders to hold out for more than the £33 per share proposed by Xstrata but at the same time has indicated that the company could cease to be independent during the coming year.

Xstrata’s offer can be seen as taking advantage of the company’s recent difficulties and some analysts suggest that Lonmin is looking for close to £40 a share.

However, production and workforce difficulties in Lonmin’s South African mines mean annual output is expected to fall to around 725,000 in 2008, from an average of 900,000 ounces a year.

In addition, the price of platinum has been falling. The metal is used in catalytic converters and funds have been selling off some long futures positions in response to declining North American automotive production figures.