Lonmin positive of improvements after rationalisation

JOHANNESBURG (miningweekly.com) – As the disruption resulting from an employee and contractor rationalisation process eases, primary platinum producer Lonmin is expecting targeted levels of production and improved cash generation to follow.

Unpacking its third-quarter production results on Monday, the JSE-listed company noted that the quarter to June 30 was “marked by complex and competing themes”; however, “another good quarter” was achieved despite a challenging operating environment.

“While we are pleased with the implementation of our business plan, we have yet to fully harness the associated benefits and productivity gains,” CEO Ben Magara said.

Despite the group expecting a stronger finish to the 2016 financial year, it is carefully monitoring a number of events that have the potential to derail the upcoming quarter’s production targets, including local government elections, wage negotiations and various holidays.

“Historically, the fourth quarter of our financial year, which has the most uninterrupted working days, is our strongest, on the back of a smooth uninterrupted mining production run,” he pointed out.

Lonmin will work to reduce any impact on production and unit costs, which are expected to come in at between R10 400 and R10 700 per platinum group metal (PGM) ounce for the full 2016 financial year.

During the three months to June 30, Lonmin reduced its unit costs by 2.2% year-on-year to R10 596/oz, despite a consumer price index rise of 6.3% and increased safety stoppages, which demonstrated the success of the cost-cutting programme outlined in the group’s business plan, he explained.

“I am pleased that we continue to focus and execute on our committed strategy,” Magara commented.

Lonmin expects to achieve its platinum sales guidance of 700 000 oz for the full year, despite sales during the quarter under review declining to 162 725 oz, from the 231 778 oz reported in the prior corresponding quarter.

PGM sales reached 315 091 oz, down 27.9% on the comparatively high sales of 437 160 oz in the third quarter of 2015.

The average rand basket price was up 9.2% year-on-year at R11 864/oz, while the dollar basket price, at $796/oz, was down 12.2%, impacted by the rand weakness.

During the quarter ended June 30, mined saleable ounces increased by 3.3% to 166 581 oz, while platinum metal in concentrate production was 4.6% lower at 164 647 oz and the PGMs in concentrate 4.8% lower at 316 480 oz.

This was achieved notwithstanding the rationalisation of the workforce by 19%, following a reduction of 5 433 employees and contractors and the efficient reskilling and redeployment into vacant roles of 1 428 employees since the corresponding period last year.