JOHANNESBURG (Business Day) -- However, a source close to Xstrata immediately dismissed the latest public salvo from the world's third-biggest platinum producer as " nothing new".
Lonmin chairman John Craven listed seven reasons why the offer was rejected and said his group would continue exploring "all options" to maximise shareholder value.
He later said in an interview that Lonmin would be prepared to consider holding formal talks if Xstrata made an unconditional offer that was "in a range where we might be getting somewhere close to where a deal could get done".
Xstrata last month made an offer of lb33 a share for Lonmin as part of a wave of consolidation taking place in the metals sector amid rising demand from China that has sent commodity prices soaring.
Xstrata yesterday insisted it would not be swayed by Craven's dismissal of the offer, also repeating its earlier statement that the proposed purchase of Lonmin provided its shareholders with an opportunity to realise a cash premium for their investment.
Its offer would ensure Lonmin shareholders would get a return on their stake "which fully and fairly values Lonmin's operations and growth potential, while acknowledging the risks, time and investment involved in a turnaround of this scale and nature ".
The Anglo-Swiss mining group said it would fund the bulk of its offer through bank debt.
CE Mick Davis last month said he expected little problem in raising the funds, given the interest already shown by lenders. But Craven said his board had no hesitation in rejecting Xstrata's "entirely unsatisfactory approach" which he claimed failed to reflect proper value for Lonmin's assets and prospects. Neither did the offer show how Lonmin shareholders would benefit from combining the groups.
"The board of Lonmin will demonstrate through its defence that Xstrata's unsolicited, pre-conditional proposed offer does not reflect the fundamental value of Lonmin's assets. We continue to explore all options to maximise value for our shareholders," he said.
In a plea to shareholders, Craven said they should consider that Lonmin and the platinum group metals sector had historically traded at a premium to the bulk and base commodity sectors. It had also consistently ramped up production of more than 900,000 oz annually since 2003, only for it to be curtailed last year by, among other challenges, Eskom power cuts and safety-related stoppages.
"The board has every confidence in the production improvement plans being put in place by its new mining management team, which will improve performance in (financial year) 2009," he said.
But Craven seemed to accept the inevitability of Xstrata succeeding in its bid to create the world's largest platinum producer, hinting that Lonmin would consider a more reasonable offer.
"If Xstrata does come forward with an offer which is no longer conditional and one in a (suitable) range, I would hope they would find time in their busy schedules to meet... so that we could have a proper exploration about, among other things, synergies, the future of the business and the quality of our development assets," he said.