The platinum mining company Lonmin Plc reported that it is cutting spending as its net cash decreased by 77 per cent from last year, but is still going ahead with takeover of South African rival Sibanye-Stillwater.
The company's net cash decreased from $75m (£55m) last March to only $17m (£12.5) according to its interim report published on Monday.
While the total tonnes of platinum mined was only marginally down from last year with 1.1 per cent decrease, the company was particularly affected due to the platinum prices which are low at the moment.
As a result of the loss, which is mainly due to the weak platinum prices, Lonmin has said it will cut their annual spending target which will include letting go of 1,504 company employees.
The company's share price increased by almost 6 per cent to 51.3p.
Why it's interesting
Lonmin has said because of the difficult operating environment caused by the low platinum prices, it may have to continue to cut spending which they said could potentially affect 12,600 jobs over the next three years on top of the redundancies they have already had to make.
The company it is seeking to take over, Sibanye-Stillwater, has said that they will walk away from the deal if it turns out that Lonmin does not have the net cash required when the deal is set to close later this year. Nevertheless, Lonmin has said that the deal is still on.
What Lonmin said
Chief executive of Lonmin Ben Magara said:
“The Lonmin team remains focused on operational excellence, and dealing successfully with tougher conditions that currently face our entire industry.”
“As is typical of transactions of this nature [Sibanye-Stillwater deal], our focus remains on minimising disruption to the business as we move towards completion. We have to remain cash vigilant in order to maintain a resilient business, ready for the next era.”
Lonmin will continue to cut spending which may affect more jobs as it closes in on the takeover of Sibanye-Stillwater.