Despite “pleasing” third-quarter production results, which showed an improved mining performance, reduced unit costs and increased net cash in July, platinum mining major Lonmin remains concerned about the persistent adverse macroeconomic conditions and the inflationary cost pressures confronting the platinum mining industry.

The company, headed by CEO and COO Ben Magara, would, therefore, implement further measures to ensure that operations generated sufficient cash to support a sustainable business, it noted in a statement earlier this month.

This follows the initial conclusion of an ongoing review of Lonmin’s operations with the primary objective of preserving value for shareholders and safeguarding the long-term interests of employees and all key stakeholders. The review is focused on enhancing the cash produced by the business – from its operations and through the release of capital from those activities where the company is bearing the cost of excess capacity and unrealised development potential.

“The review is also designed to position the company to benefit from any future improvement in the platinum-group metals (PGMs) pricing environment,” Lonmin stated.

Its immediate results include initiatives to generate cash through the monetisation of selected Lonmin assets and to preserve cash by reducing fixed costs.

Lonmin plans to implement several measures, which will be subject to receiving the necessary consent and approvals. These include pursuing all options to maximise cash from the high-quality downstream processing operations, which Lonmin plans to achieve by selling excess processing capacity of up to 500 000 oz/y of platinum.

This would not only release capital for Lonmin but also allow other South African PGMs producers currently operating on a sale-of-concentrate basis to access the profit margin benefits of an integrated beneficiation model, according to the company.

Lonmin will further implement a review of the company’s major development capital requirements over the next few years. In this regard, the company will consider selling for cash the operations at Limpopo and Akanani or introducing joint venture partners, together with exploring options to introduce funding partners into the K4 shaft.

Meanwhile, despite a consistent strong performance from the Rowland shaft, Lonmin notes that, given its current capital position, it will find it difficult to fund the MK2 project, which is necessary to extend Rowland’s economic life.

While Lonmin believes that the MK2 project will be value accretive, the company will explore options to introduce funding partners and preserve about 5 000 jobs.

Lonmin also aims to implement a reduction in yearly overhead costs by a minimum of R500-million by the end of the 2018 financial year. Substantial overhead reductions will come from nonproduction central functions as the company aims to right-size overheads.

Lonmin will also continue to identify further overhead and cost savings.

While it is too early to define the ultimate effect of the operational review, the overall aim remains for the business to be cash positive after capital investment.

Lonmin noted that further announcements would be made “when appropriate”.