THE collapse in Lonmin’s share price was like watching a car wreck in slow motion. Having suggested in June 2014 he was looking to recapitalise the business, as some $370m in debt was to fall due, Magara and his company waited until October to articulate what everyone suspected would happen - a rights offer. During this time, Lonmin’s market value fell 80%. When the $400m fund-raiser was unveiled on October 24, the share was 92% lower. On November 10, the day after the share pricing was revealed at a 94% discount, a further 40% was lopped Lonmin. From a R10bn company, Lonmin was transformed into a penny stock despite promising to cut 6,000 jobs and reduce output 100,000 ounces/year. Magara paid the price for being indecisive which begs the question as to whether he can make Lonmin’s much criticised business plan work. Analysts doubt it, and say Lonmin will be seeking another bail-out in time. Magara is defiant. The debate as to whether Lonmin should have been allowed to fail will rage on, but with 32,000 jobs on the line the South African government couldn’t countenance it, and the argument is academic. First stop now is the interim results. If Lonmin is not generating cash flow, the doomsayers will be in full cry, and one must doubt Magara’s ability to cling to his job.
LIFE OF BEN
Magara, 44, studied mining engineering at the University of Zimbabwe with an Anglo American bursary and then spent 22 years with the Anglo group. He has also served as chairman of Richards Bay Coal Terminal and the Eskom 2008 Coal Working Group. He has been in South Africa since 1994.
- Web Address: www.lonmin.co.uk