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Xstrata has scrapped its bid for Lonmin due to financing costs The Anglo-Swiss mining company said tight credit markets meant it would be unable to refinance a large part of the acquisition debt at favourable terms.
The withdrawal, which comes a day before Xstrata had been ordered to “put up or shut up” by City regulators, saw Lonmin shares slide 630p – or 28pc – £16.38 in early trading. Xstrata shares rose 177p – or 10pc – to £18.95.
Xstrata chief executive Mick Davis said: “The current lack of clarity and certainty regarding the future availability of credit introduces significant risks into the financing package available to Xstrata.”
Banking sources said last month that Xstrata had approached 22 banks to make commitments for a $15bn loan to fund the Lonmin takeover and refinance existing debt.
Lonmin had suggested that it was not opposed to a deal with Xstrata on principle but said that it could not accept the initial £33-a-share offer.
The company parted with chief executive, Brad Mills, earlier this week, as it prepared itself for a hostile bid from Xstrata.
Over the past few years, accidents, labour shortages, power outages and plant shutdowns have meant that Lonmin underperformed and has seen annual platinum production fall from 900,000 ounces to 725,000 this year.
The company has been working on a mining plan to reverse its fortunes. The plan, to be unveiled within the next two months, was largely drawn up by chief strategic officer Ian Farmer, who will replace Mr Mills as chief executive. – Daily Telegraph – London