As I mentioned in my previous post '407m reasons to sell Lonmin plc', I predicted the shares would collapse to the 1p/share region because of the huge dilution of 27bn new shares coming to the market. 

Secondly I mentioned in another post back in September the probability of Lonmin going into bankruptcy was pretty high at 85% (which is absolutely wrong!!). Instead, the 15% probability of being rescued by shareholders and banks is the winner. 

However, if commodities prices don't recover in a year or two, Lonmin's shareholders may be asked to front another Rights issue! 

In my opinion, this rescue deal means current Lonmin's shareholders stand to lose even more money. Already 10% of the Rights issue are going to the bankers, and some is used to pay down debt. 

Researching this business, I can honestly conclude that being a Lonmin's shareholder is like being in a 'BAD' marriage! Let's look at these facts: 

1. Lonmin's 2012 Rights issue of 365m shares at £1.40/share didn't do so well, since the share price collapse by 90%! 

The funny thing is the minority shareholders didn't participate and still get awarded a dividend, the shareholders having fronted the money got its dividend cut to zero.  

2. The minority shareholder own Lonmin's subsidiaries, therefore shareholders cash go to pay Lonmin itself! 

3. Lonmin loaned a subsidiary money to the tune of $310m (under HSDA receivables) and this loan is due in March 2015. 

The radio silent from Lonmin has been lifted in its latest results and the platinum miner wrote off a 'huge' chunk of the loan! Why is that the case? 

Again the subsidiary called Lexshell 806 Investments Limited has a close relationship with Lonmin. 

Who is Lexshell 806 Investments Limited?

Well, it is a subsidiary of ‘Shanduka Resources’ to facilitate the acquisition of 50% of shares in Incwala Resources (remember them, the minority shareholder with a juicy equity yield) from HDSA shareholders.

Terms of finance- IMPORTANT (always read the small print!)

Lonmin’s financing to Shanduka Resources includes the accrual of interest on HDSA receivable @ fixed rates based on the principal value of £200mREPAYABLE after five years including accrued interest. – IT HAS CLEARLY PAST ITS ‘SELL-BY DATE’.

IMPORTANT: By providing financing to Lexshell 806…

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