Another platinum smelter furnace shutdown for Lonmin hits stock price

22 June 2009 | 05:16 Code : 19306 Geoscience events
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Lonmin Plc, the world’s third-biggest platinum producer, said it shut down its...
Another platinum smelter furnace shutdown for Lonmin hits stock price

Lonmin Plc, the world’s third-biggest platinum producer, said it shut down its No. 1 furnace on Sunday due to a production incident, and started up three other furnaces with about half the capacity.Lonmin shares in London fell as much as 8.2 percent, making it the biggest loser in the FTSE 100 index.They were down 7.6 percent at 1,331 pence by 0853 GMT, compared with a 3.6 percent decline in the UK mining index. Lonmin’s shares in Johannesburg slid 8.5 percent to 176.20 rand.The London shares have jumped 53 percent this year on a rebound in platinum prices, but are still at less than half their level last September.Lonmin, which has a history of problems with smelters and missed production targets, said on Monday repairs were expected to take around 30 days."In order to mitigate the impact on production of this shutdown and repair, our three Pyromet furnaces have already been started up and are expected to tap matte in seven days," a statement said.Chief Executive Ian Farmer took the reins of the firm last October and immediately launched a strategic review to improve operations in both mining and processing."The news is a blow to the new management team who had made strides in regaining investor trust and in our view highlights that there are better ways to play the PGM (platinum group metals) cycle," analyst Michael Rawlinson at Liberum Capital said in a note.The No. 1 furnace has a capacity to process about 550 tonnes of matte per day, and the three Pyromet furnaces together have a capacity about half that, a spokesman said.Matte is a mixture of metals that is an intermediate product of a smelter.Further details about the impact would only be possible once a full inspection was made after the furnace had cooled down."Guidance regarding the impact of this incident on production and sales for the 2009 financial year will also be given at that time," said Lonmin, which has operations in South Africa.Last month the company reiterated its target of selling 700,000 ounces of refined platinum for the fiscal year to end-September.The Process Division performed better than expected during the first half of Lonmin’s financial year.During that period it managed to process the majority of a build-up of inventory when the No. 1 smelter was rebuilt during about two months from November 2008. A redesign was expected to make it more reliable.On May 11, the firm said it had swung to a loss in the first half, scrapped its dividend and launched a $457 million rights issue.(Additional reporting by Serena Chaudhry in Johannesburg; editing by Will Waterman and Rupert Winchester)


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