The proposed price represented a premium of 42% to Lonmin’s share price of £23.19 at the close of business on the London Stock Exchange on August 5. Xstrata said it would pay for Lonmin shares using cash on hand and bank debt, and that the offer was subject only to finalization of the bank debt necessary to implement it.

The Xstrata statement praised Lonmin’s producing assets, which are all located in South Africa; made disparaging remarks about Lonmin’s recent operating performance; and characterized the offer as an opportunity for Lonmin shareholders to realize a significant cash premium at a time of ongoing operational challenges.

On August 13, with Lonmin shares trading above £34, Lonmin’s board of directors advised its shareholders that Xstrata’s unsolicited offer was “an opportunistic attempt to acquire Lonmin at a price that undervalues its assets and business.” In the meantime, the Lonmin statement said, shareholders should appreciate that Lonmin has a total mine life in excess of 100 years, with 156.3 million oz of platinum group metals (PGM) in reserves and resources; that it is one of only three integrated mine-to-market PGM businesses (the others being Anglo Platinum and Impala Platinum); and that it benefits from an integrated business model with sophisticated downstream processing technology. A new and experienced Lonmin operational management team is in place and is improving performance, the statement said, and Lonmin will benefit from its recent investment in mechanization.

“This opportunistic proposal is an attempt to acquire Lonmin’s assets cheaply and capitalize on the expected improvement in our mining and processing performance. It comes immediately following the recent decline in the platinum price, and the offer, if and when made, represents no more than the price Lonmin’s shares traded at as recently as six weeks ago . . . Shareholders are urged to take no action in respect of the approach by Xstrata and are strongly advised to reject the offer,” Lonmin Chairman, Sir John Craven, said.

Xstrata’s statement had offered an opposing view of Lonmin’s recent operating performance, saying: “The performance of the Lonmin business has been impacted by numerous operational difficulties over the past two years, including underperformance of mining operations due to the challenges presented by a rapid mechanization strategy. This has resulted in inadequate reserve development and below budget production at a time of robust platinum prices; erratic processing performance due to inconsistencies in ore feed and smelter failures; a complex and enlarged management structure, dissociated from the operational teams in South Africa; and a significant loss of experienced operating personnel.

“Lonmin’s operations have consistently underperformed its own forecasts on expected platinum sales and have been subject to a declining sales and production profile at a time of robust prices. Current guidance of 765,000 to 770,000 oz of platinum for the year to September 30, 2008, is 15% lower than the initial guidance provided for this period of 900,000 oz and represents the fourth downward revision in this financial year. This indicates an anticipated 18% decline in sales of platinum from the levels achieved two years ago of 939,654 oz in the 12 months to September 30, 2006, reflecting ongoing unexpected operational difficulties and lower than anticipated production.

“These issues have not been resolved. Xstrata believes that Lonmin’s operations are attractive but that a significant transformation of operating and management practices is required to return Lonmin to its former growth trajectory over time. Xstrata believes it is uniquely positioned to realize the full potential of Lonmin’s long-life and high-quality but underperforming asset portfolio.

“Xstrata’s ferro-alloys business unit, Xstrata Alloys, has an excellent operational track record in building and operating similar operations in close proximity to Lonmin’s core operations and has developed significant and relevant technical mining and smelting skills through its South African chrome business. Xstrata Alloys’ chrome operations mine the same Bushveld geological complex as the South African platinum industry, with an industry- leading cost profile and use of similar smelting technology.”

As of August 18, the outcome of the Xstrata-Lonmin dustup remained unresolved.

Xstrata’s formal offer had not yet been made and press reports spoke of rumors that a rival bidder, perhaps Impala Platinum, might emerge to counter Xstrata’s offer.