JOHANNESBURG (miningweekly.com) – Platinum producer Lonmin has appointed former chief strategic officer responsible for the company’s business development, Ian Farmer, as CEO with immediate effect, it announced on Monday.
Farmer’s appointment comes as former CEO Brad Mills stepped down “by mutual consent”, just days before Xstrata has to announce a formal offer for Lonmin.
The UK Takeover panel had given Xstrata until October 2 to announce its intentions to make an offer for Lonmin. In August, the Swiss-based company proposed a $10-billion, or £33-a-share offer, which Lonmin rejected.
Lonmin chairperson Sir John Craven commented that the company had decided that now was the right time to appoint a new CEO to lead the group.
“As one of his immediate priorities, Ian will lead a review of the group’s operations focused on improving performance and maximising value for Lonmin shareholders,” he stated.
Craven also added that Lonmin, which has been repeatedly criticised for cutting its production target, remained on track to achieve its previous guidance of platinum sales for 2008.
The platinum-miner, which has slashed its sales forecast three times this year, expects to produce 725 000 oz in 2008, from an initial forecast of 900 000 oz.
“We are pleased that Ian has become our new CEO. He brings with him many years of experience of the platinum industry, a detailed knowledge of Lonmin and significant experience within South Africa,” Craven added.
Cadiz Asset Management analyst Peter Major believes the appointment of Farmer has been a good one.
He told Mining Weekly Online that Farmer, who had been with Lonmin for a number of years, had a good knowledge of the people working for Lonmin, as well as the problems facing the company, and that his appointment was “probably a good start".
Major explained that it was difficult for companies in the platinum industry to find good CEOs, as “talent is really scarce out there". He added that Farmer’s appointment was similar to that of other financial directors who were now heading up Impala Platinum and Gold Fields, namely David Brown and Nick Holland, who were doing reasonably well. He said that Farmer also probably knew the “company, terrain and environment” better than Mills.
Further, Major said that, in terms of the timing of the appointment, given Xstrata’s offer, people within the company, as well as shareholders, were likely to give Farmer more of a benefit of the doubt, then they would have for Mills.
“Maybe [the board of directors] are hoping that bringing in a new CEO means shareholders will hold onto the company instead of selling out,” commented Major.
However, Vestact director Sasha Naryshkine commented that the timing of appointing a new CEO was “awful”, questioning the company’s intentions.
“If you are trying to repel a deal on more than one front, it seems, why get rid of the chief? What sort of message are you sending?” he asked.
Naryshkine added that there seemed to be some managerial disputes within the company, adding that it was not clear whether Mills had been given the “heave-ho” or whether he had decided to leave owing to the pressure of the job.
He also noted that this could encourage Xstrata to try and place pressure on Lonmin’s board of directors by getting shareholders on its side and convincing these shareholders that a £33-a-share price was a good price.
Bloomberg News quoted Michael Rawlinson, from Liberum Capital, as saying that the latest development was “hardly a robust defense”.
“It looks like they are rolling over for Xstrata and saying ‘Come and get me’,” he told the newswire.
Meanwhile, Craven thanked Mills for his “significant contribution in developing the company over the past four years”, adding that Mills had left the company in a strong position for the future.
London-based investment bank Fairfax said that Mills had overseen Lonmin through the introduction of mechanised mining in the company’s deepening platinum mines.
While mechanisation was intended to improve productivity and safety in the mines, it was still struggling to replace traditional mining methods.
In May, Mills said he believed that mechanisation was the future of mining in South Africa.
Lonmin's share price had dropped by nearly 16% at 17:00 on Monday.