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Lonmin share price update: Company Swings To Full-Year Loss After Long Miners Strike

John Adam
  • November 10th, 10:59
  • Last Updated: October 10th, 12:27


**UPDATE: Lonmin Swings To Full-Year Loss After Long Miners Strike**
LONDON (Alliance News) – Lonmin PLC saw its shares rise on Monday despite announcing it swung to a pretax loss after the longest strike in the platinum industry’s history halted production in South Africa for five months of the year.

Lonmin shares were up 3.4% to 193.82 pence per share Monday morning.
For the year ended September 30, the company swung to a pretax loss of USD326 million, compared to a USD140 million profit in 2013. Revenue also fell to USD965 million compared to USD1.52 billion a year earlier after being hit by the strike action by the Association of Mineworkers and Construction Union and also by subdued metal prices.

“The strike impact on production saw platinum group metal sales volume for the year decreasing by 31% compared to the volume sold in the prior year which contributed USD442 million to the total decline in revenue,” said Lonmin.
“The five month AMCU led strike, which started on January 23, and was eventually resolved on June 24, was the dominant event for the year and accounted for almost all of the under-performance for the year,” the FTSE 250 platinum miner said in a statement.

The agreement reached with employees in June is set to guarantee no further strike action for the next three years, Lonmin said.
During the full year, Lonmin mined 6.1 million tonnes of ore, a 48% decrease from the previous year. The company produced 380,359 ounces of saleable platinum in concentrate, down 49% from the previous year. Lonmin produced 882,094 ounces of platinum metal groups, down 34% from 2013.

Platinum sales reached 441,684 ounces during the full year. Platinum sales contributed 64% of the company’s turnover. Palladium was the second highest contributor to revenue, with the 212,500 ounces sold constituting 17% of Lonmin’s income. Combined sales of rhodium, ruthenium and iridium contributed a further 11%, and gold and base metals made up the balance.
The average price of platinum was USD1,426 per ounce in the year to September 30, compared to USD1,537 per ounce for 2013, representing a 7% reduction. Rhodium prices lost just USD7 per ounce on average and palladium prices rose by 11%, Lonmin said in a statement.

The cost of production per platinum group metal ounce for the 2014 financial year, which includes idle production costs, increased by 47% to ZAR13,538 compared to ZAR9,182 in 2013.
Lonmin’s guidance for the 2015 financial year calls for a return to normal rates of production, at 750,000 ounces of saleable platinum in concentrate, with sales expected to reach 730,000 platinum ounces. Unit costs are expected to fall to ZAR10,800 per platinum group metal ounce, but the company stressed that a stable operating environment is key to achieving these goals.
It has also reduced the amount of capital expenditure it expects to make in 2015 to USD250 million from the original target of USD400 million, mainly due to suppressed market conditions, it said.
Lonmin said it has identified potential savings totalling ZAR2.00 billion over the next three years. The company aims at saving ZAR600 million from freezing some recruitment and redeploying employees and contractors. The rest of the savings are due to come from increasing efficiencies and productivity at its processing operations.
Productivity measured as square meters per total mining employee was 2.57. This is a deterioration of 50% when compared to 2013, due to the strike action impacting total production. However, productivity in August and September exceeded the same period in the prior year.
“We have put a bold cost reduction and productivity improvement programme in place to ensure the business is sustainable through all cycles and profitable in the near term,” said Lonmin.
“The platinum-group metals continue to offer solid, captive demand through increasing global vehicle sales and tighter emissions standards, not to mention robust demand in industrial applications and strong emerging growth in platinum jewellery in India. Therefore, as the market continues to destock, platinum prices are expected to begin to appreciate and the platinum market to recover. The market and prices remain vulnerable to asynchronous global economic growth and further Rand weakness,” it added.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2014 Alliance News Limited. All Rights Reserved.

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John Adam
John Adam was one of the Invezz Founding Partners & Lead Editor's up until 2017. John has an unmatched breadth and depth of experience in all things investing, and we wish him the best in his pastures new.

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