Lonmin, the platinum miner that rebuffed a takeover from Xstrata this year, is to cut jobs at its head office in London and close mines in South Africa amid plunging prices and falling productivity.

The moves will threaten 2,600 jobs, although Lonmin said that 1,000 of these involved workers employed by contractors.

The world’s third-largest platinum producer has been trying to reassure shareholders after repeated cuts in sales targets and an attempted takeover bid, with plans for a sweeping restructuring.

It said that it had been performing below its potential and was suffering pressure on its margins and cashflow, after the collapse of platinum prices in the second half of the year. The company has scrapped its final dividend and deferred expansion projects. Capital spending will fall by 34 per cent to $250 million (£166 million).

Ian Farmer, the chief executive, who began six weeks ago, has undertaken a review of operations designed to maximise shareholder value. As well as falling productivity, he has found too many management layers and ineffective mining operations.

Lonmin increased underlying profits by 23 per cent in the year thanks to high sales prices in the first part, but it gave warning that the picture for next year looked very different. Platinum prices have fallen from an all-time high of $2,250 per ounce in March to around $850 as car production slowed and exchange-traded funds (ETFs) sold off their platinum. However, analysts believe that prices will rise again to about $1,350 in 2009. Lonmin shares closed down 41p, or 4.7 per cent, at 833p.

Xstrata walked away from a formal $10 billion bid for Lonmin on October 1 but increased its stake in the company, setting the scene for a possible future bid. It holds a 25 per cent stake.

- The European Commission is concerned that a BHP Billiton takeover of Rio Tinto would impede competition, especially in iron ore and coking coal markets, according to reports last night. A 300-page version of the Commission’s “statement of objections” to the merger was received yesterday by companies that contributed to the investigation.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts