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Lonmin to maintain FY sales guidance, cut capex while job cuts loom

11th May 2015

By: Ilan Solomons

Creamer Media Staff Writer

  

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JOHANNESBURG (miningweekly) – Dual-listed platinum miner Lonmin reiterated on Monday that it had entered into consultations with labour unions to reduce labour costs by 10% through voluntary separation packages and early retirements, which the company forecast could result in a staff reduction of about 3 500 workers.

At a presentation of the company’s interim results for the six months to March 31, CEO Ben Magara said Lonmin expected to incur costs of about R400-million in the current financial year and subsequent ongoing yearly value benefits of about R840-million.

He noted that, since September 30, 2014, staff numbers had decreased by 432 and, as at March 31, were down 1 128 compared with staff numbers as at March 31, 2014.

“We are in close consultation with our unions, including our majority union, the Association of Mineworkers and Construction Union, over this issue. We are concerned about job losses but we are encouraged by interactions so far that our improving relationships should help all parties navigate this difficult issue,” Magara stated.

Further, Lonmin said it would maintain guidance for saleable metal-in-concentrate output at about 750 000 oz/y of platinum and for sales of about 730 000 oz/y platinum for the full financial year.

Magara added that Lonmin was pleased with the cost savings it had achieved to date, adding that the company would maintain its unit cost guidance of R10 800 per platinum-group metal (PGM) ounce for the full year.

“We are planning on the basis that the ongoing low dollar PGM prices persist for at least the next two years and, as a result, we are again reducing our expected capital expenditure (capex) for 2015, from $185-million, to $160-million,” he noted.

Magara further pointed out that Lonmin expected to continue limiting its capex over the next two financial years to about $150-million a year, while maintaining sales of around 750 000 oz/y.

“We are working well within our debt facilities and this position will improve further during the second half of this year as stockpiles unwind. We are doing all this against a background of fatality-free operations, although the lost-time injury frequency rate has increased.

“Lonmin’s operations and capex are scalable. Consequently we have been, and will continue to use the operational and capex levers within our control to reduce costs and preserve cash to navigate the effects of a low PGM price environment,” he stated.

H1 PRODUCTION
Total tonnes mined at Lonmin’s operations increased by 72% to 5.7-million tonnes in the six months to March 31, compared with 3.3-million tonnes in the first half of the prior financial year.

The Marikana underground mining operations produced 5.3-million tonnes in the six months under review, a 76.4% year-on-year increase, while production at the Saffy shaft increased by 114.4% year-on-year to 830 000 t.

Lonmin noted that it was pleased that the Saffy shaft was ramping up as expected, noting that the ramp-up was on schedule to reach full production by the end of the current financial year.

Further, the miner had completed a review of the Hossy shaft, where production increased by 81.1% year-on-year to 533 000 t, owing to the reduction in the number of mechanised fleets and the operation moving over to hybrid mining.

“Given the steady improvement, we will continue to operate Hossy and integrate the management infrastructure of this shaft with that of Newman in order to maximise on economies of scale and reduce the overall costs.

“We are now replacing the last mechanised fleets with hybrid crews, which will result in further production improvements and reduced operating costs. Cost containment initiatives at Hossy are part of our total cost of ownership project that are tracked monthly and we are pleased with the progress made,” Lonmin said in a statement.

Meanwhile, production at the Merensky opencast operation decreased by 30.3% year-on-year to 108 000 t, as the operation was reaching the end of its life.

Lonmin’s Pandora operation produced 310 000 t in the six months under review, a 98.8% year-on-year increase.

Saleable metal-in-concentrate output for the six months was 381 984 oz of platinum, while refined output reached 262 303 oz of platinum.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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