LMI – Lonmin – nursing a heavy loss

I selected LMI for the Motley Fool 2014 share competition, and regretted it. Fortunately, I personally bailed out way before the end of the year, saving myself from its inexerable decline.

Seeing it selected for 2015, I hemmed and harred, decided it was too cheap, and bought some shares in January at around 172p. The shares are at 108p, so obviously I’m sitting on a hefty loss at the moment. Mineweb reports that it has plunged to its lowest level in 17 years.

GLEN (Glencore) has a 23.9% stake in LMI, which is a legacy holding it wants to get shot of. It believes that a straightforward market disposal would not be in the best interests of GLEN shareholders, and therefore intends to distribute the shares to the shareholders. A resolution for this will be put at the AGM on 7 May.

Some have proposed a theory going around that GLEN is offering blocks of shares in the market, that the disposal is up to the discretion of management, or they’re attempting to flush out a bid.

I discount all of these theories. GLEN have put out an RNS stating exactly what they intend to do, so I’ve no reason to believe they’ll do otherwise.

It seems likely that GLEN have been trying to find a buyer for some time, but without success. The market must have cottoned onto this, which has led to the unremitting deterioration in the share price. And when I say “the market”, I mean “everyone except me”.

The stake is a major overhang, and I think there’s a substantial special situation. We don’t know dates yet, but let’s assume the AGM is approved, and the shares are distributed to holders. Expect major dumping at that time, causing even lower prices. THEN will be the time to buy. I plan to up my holding at the time, although there’s no guarantees that I won’t bottle it. Shares are on a PBV of 0.32, which is already absurdly low.

I’ll try to remember to keep you informed if I buy any more. I think it will be a great opp for those that don’t currently hold any.

About mcturra2000

Computer programmer living in Scotland.
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