Lonmin Reports Drop in Quarterly Output

on Jul 25, 2013

iNVEZZ.com, Thursday, July 25th: London-based Lonmin Plc (LON:LMI), one of the world’s largest platinum producers, said today that its output in the quarter ended June 30, 2013, dropped as a result of safety stoppages and labour disruptions. Despite the reported quarterly decline, the platinum miner reiterated its full-year sales and production guidance. Lonmin’s share price was marginally down in intraday trading in London on Thursday.

**Lonmin Reports Q3 Production Drop but Sticks to Targets**
In its interim management statement and third quarter production report, London-listed Lonmin, whose operations are located in South Africa’s Bushveld Complex, reported that its output in the quarter ended June 30 was 2.39 million tonnes, down 3.6 percent as compared with the same quarter of 2012. The company produced 186,456 ounces of platinum in concentrate, down eight percent as compared with the prior-year quarter.

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The company said it lost a total of 234,000 tonnes of production during the quarter, with 123,000 tonnes lost due to labour disruptions. The remaining 112,000 were lost as a result of safety stoppages. This compares to a total of 81,000 tonnes lost in the prior-year period.
Lonmin’s quarterly platinum sales dwindled almost 46 percent to 81,382 ounces, whereas platinum group metal’s (PGM) sales dropped 34.5 percent to 195,999 ounces as a result of shutdowns of two of the company’s furnaces. Both furnaces are now back in full operation. Lonmin said that the average platinum price for the three months to June 30 was $1,450 an ounce, down from $1,468 in the prior-year period.

Despite the reported decline in output, Lonmin reiterated its production guidance of more than 700,000 ounces of metal in concentrate. The company expects to sell 660,000 ounces.
**“Uncertain Labour Relations Landscape”**
In its coverage of Lonmin’s results, Reuters quoted Ben Davis, an analyst at Liberuim, as noting that while that was a “a good result” it was “not what people are too concerned about at the moment”.

!m[Production Predictably Impacted by Labour Disruptions ](/uploads/story/4340/thumbs/pic1_inline.png)
“They’re concerned about labour relations and wage negotiations,” Davis added. “Increased disruption and absenteeism – that’s what people are worried about as we go into the next quarter.”
Last week, Lonmin moved closer to recognising the Association of Mineworkers and Construction Union (AMCU) as the main union at its South African operations. “NUM [National Union of Mineworkers] will formally be de-recognised as the majority union,” Lonmin spokeswoman Sue Vey said on July 15, as quoted by Reuters. “We are hoping that this will now lead to peace and stability at our mines.”

As Reuters has noted, in the last 18 months, AMCU has won over thousands of members from the previously dominant NUM. More than 50 people have died in the union turf war, which has cost platinum and gold miners billions in lost revenue.
Lonmin, whose Marikana operation was at the centre of last year’s labour unrest, said in today’s statement that it remained “alert to the risks to production” associated with “the uncertain labour relations landscape”.
**Lonmin’s share price was 0.83 percent down at 309.80p in London as of 13:54 BST on 25 July 2013.**


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