Lonmin turns the corner on output
SHARES in Lonmin, the world’s third-biggest platinum producer, had risen more than 4%, or about R7, to R174 on the JSE by midday yesterday after it issued a production report indicating it was on target to produce 700000oz of platinum in the year to September. Under previous management, Lonmin regularly missed annual production guidance. The group was the object of a hostile bid by Xstrata last year after years of reporting processing problems and difficulties implementing mechanised mining at its Saffy and Hossy shafts. Two days before Xstrata withdrew its bid, Lonmin replaced CEO Brad Mills with Ian Farmer.In response to the downturn in prices and some of the operational issues, Farmer late last year announced an extensive restructuring of Lonmin’s Limpopo and Marikana operations, including terminating high-cost opencast mining at Marikana and closing the Baobab shaft at Limpopo, with the loss of up to 5500 jobs. Lonmin said yesterday it had almost completed restructuring and would give more details with its interim results on May 11.“We hope Lonmin’s new leadership will continue to make good progress and position the company well for a global economic recovery,” London-based investment house Fairfax said yesterday. “Platinum group metals (PGMs) prices are likely to continue to be highly volatile due to weak auto markets and exchange-traded fund buying/selling activity, but long term, platinum in particular should be strong and ensure healthy revenues.”Lonmin said it produced 13% more refined platinum at 318219oz and of total PGMs at 606145oz in the six months to March compared with the same period last year. This was partly because of an improved recent performance from the core Marikana underground mine. Last year’s comparative production was affected by a build-up of metals in process as the Number One furnace was repaired and Eskom electricity outages were experienced.The group’s process division had a good six months, processing most of the inventory that had accumulated while the Number One furnace was rebuilt, which was ahead of expectations, it said.Lonmin management would focus in the second half of the year on minimising production disruptions after the restructuring.