Confidence is waning that Swiss-based miner Xstrata will proceed with a formal £5bn offer for Lonmin, the platinum producer.

London-listed Xstrata, which made a £33-a-share proposal in early August, has until next Thursday, under “put up or shut up” rules, to formalise its bid for the world’s third-biggest platinum miner.

But shares in Lonmin, which traded higher than £33 soon after the Xstrata approach, have slumped in recent weeks, and closed down 53p yesterday at £25.40, a 23 per cent discount to the proposed offer price.

The initial jump in the Lonmin share price was fuelled by hopes of a sweetened offer or a white knight approach for the company after Sir John Craven, chairman, rejected robustly the proposal as an “opportunistic” attempt to “acquire Lonmin’s assets cheaply”.

But a sharp fall in the platinum price and uncertainty over Xstrata’s willingness to proceed with a full bid has depressed Lonmin’s shares.

Platinum, which traded above $2,200 an ounce earlier this year, has fallen back sharply over the past two months, trading yesterday at just over $1,200.

Xstrata, which built up a stake of 10.7 per cent in Lonmin in August, has since declined to add to that holding, even as Lonmin’s price has declined.

And with Lonmin’s shares trading as low as £22.17 ahead of the approach and the subsequent deterioration in the platinum price, analysts argue the current price points to an odds-on market expectation that Xstrata will not bid.

Michael Rawlinson, analyst at Liberum Capital, argued earlier this month that the market seemed to be anticipating a 30-40 per cent likelihood of Xstrata walking away at the then prevailing trading price of £29.29. Yesterday he said, “the pricing [now] suggests a more than 50 per cent chance that it won’t go ahead”.

His view was echoed by Tom Gidley-Kitchin, analyst at Charles Stanley, who said Lonmin’s share price suggested the market expected a formal offer would probably not proceed. But both argued that Xstrata, regardless of wider market turmoil, could yet buck the market view.

“There are few platinum assets available in the world,” said Mr Gidley-Kitchin. “If they [Xstrata] let it go now, they may not get the chance again.” Both analysts said that on balance they still expected Xstrata to proceed with a deal.

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