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Lonmin undertakes refinancing, delivers on results promise

Lonmin CEO Ben Magara

Lonmin CEO Ben Magara

Photo by Creamer Media

22nd October 2018

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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Platinum miner Lonmin has entered into a $200-million metal purchase agreement with Pangaea Investments Management (PIM), an associate company of Jiangxi Copper Company (JCC), which will provide the miner with improved liquidity and remove certain restrictive current lender conditions.

Of the $200-million, Lonmin will settle its pre-existing term loan of $150-million and cancel all its other pre-existing undrawn facilities with both its South African rand and dollar groups.

The facility will also remove certain restrictive current lender conditions, notably the tangible net worth covenants contained in the existing debt facilities, which were waived by the existing lenders subject to the anticipated successful completion of Sibanye-Stillwater’s buy-out of Lonmin.

Lonmin CEO Ben Magara said the improved funding arrangement immediately enhances Lonmin’s liquidity, but added that the new facilities did not address the fundamental business challenges facing Lonmin and did not offer an opportunity to avoid the announced retrenchments and shaft closures.

The miner, however, remains focused on completing the transaction with Sibanye, which it believes will provide a sustainable solution.

The Competition Tribunal is due to hold hearings to decide on whether or not to approve the merger on November 12 to 14.

The Competition Commission has recommended the tribunal approve Sibanye’s proposed acquisition of Lonmin, subject to certain conditions.

FULL YEAR PERFORMANCE

Lonmin on Monday reported on its performance for the financial year ended September 30.

The improvement in the company’s mining production performance and the mining rhythm established following the implementation of flatter management structures and other measures to improve performance since March 2017 has continued in the current year, with the miner’s key Generation 2 shafts producing 7.6-million tonnes – a 1.6% year-on-year improvment.

The company’s biggest shaft, K3, produced 2.9-million tonnes, an increase of 1% on the prior year.

The Saffy shaft produced 2.2-million tonnes, an increase of 1.7% on the prior year, which Lonmin said demonstrates the continued steady-state performance.

The Rowland shaft produced 1.9-million tonnes, down 1.1% on the prior year, notwithstanding a 4.6% year-on-year increase in the fourth quarter and the increase in the immediately available ore reserves to 14.3 months from 11.5 months in the third quarter of the financial year.

The combined E3 unit – E3 plus Pandora – produced 700 000 t for the year, representing an increase of 13.8% on the prior year, following the consolidation with E3 and the unlocking of synergies after the acquisition of 100% of Pandora.

Meanwhile, production from Lonmin’s Generation 1 shafts was at 2.3-million tonnes, 13.2% lower year-on-year. This is in line with the group’s rationalisation of the Generation 1 shafts, the miner said on Monday.

Lonmin’s Newman shaft was placed on care and maintenance in March 2017.

Production losses, owing to Section 54 safety stoppages, saw a significant drop to 20 000 t in the year under review, compared with 276 000 t in the prior year.

This, the miner enthused, emphasised its improving safety performance and its continued proactive engagement with all stakeholders including employees, organised labour, the Inspectorate of the Department of Mineral Resources and communities.

In terms of immediately available ore reservices, the Generation 2 shafts’ position as at September 30 was equal to 21 months average production versus 20 months as at September 30, 2017.

Rowland’s immediately available ore reserves increased to 14 months as at September 30, from 11.5 as at June 30, mainly owing to the first “raise holings” in the MK2 area, which has established additional mining faces.

Lonmin is progressing discussions to secure third-party funding for the MK2 extension project.

The ore reserve position of the Marikana mining operations is still at a level that provides the necessary flexibility required for efficient mining.

Total tonnes milled from mining operations for the year, at 9.8-million tonnes, were broadly flat on the prior year, despite reduced output from the depleting Generation 1 shafts.

Total metals-in-concentrate produced, at 653 969 platinum ounces, was broadly flat compared with the prior year.

Underground milled head grade at 4.57 g/t decreased marginally by 0.9% when compared with the 4.61 g/t achieved in the prior year.

Concentrator recoveries from underground mining for the quarter increased marginally to 87.3%, compared with 87.1% achieved in the prior year.

Total saleable refined platinum production at 678 588 oz was up 1.3% year-on-year, while total saleable PGMs produced were just over 1.3-million ounces, broadly flat on the prior year.

The smelter clean-up project and permanent release from the smelting and refining plants continued during the year and released a total of 6 000 oz of platinum, less than the 31 682 oz released in the prior year as expected.

Meanwhile, Thakadu Battery Materials is in the process of building a R250-million nickel purification plant at Lonmin’s base metals refinery.

The plant will convert Lonmin’s existing crude nickel sulphate into high-quality battery-grade nickel sulphate, which can be sold at a premium and create value for both Thakadu and Lonmin.

The plant is able to produce 25 000 t/y of high-purity nickel sulphate.

Commissioning of the plant is scheduled for 2019 and is expected to create over 60 permanent jobs once in operation.

Meanwhile, sales for the year were 681 580 platinum ounces, equal to about 1.3-million PGM ounces, exceeding the sales guidance of between 650 000 platinum ounces to 680 000 platinum ounces.

Additionally, Lonmin improved its immediately available ore reserves from 19 months to 21 months year-on-year, despite the unaudited capital expenditure (capex) being limited to R967-million.

This, the company said, is in line with its strategy of limiting capex to levels required to satisfy regulatory and safety standards, essential sustaining capex in the continuing shafts and ensuring that immediately available ore reserve positions, where applicable, are maintained at an acceptable level to sustain production at Lonmin’s Generation 2 shafts.

Capex was less than the company’s revised guidance of R1.2-billion.

The main deferrals were on K3, engineering, stay-in-business capital, design studies and regulatory compliance spending on smelting and refining.

Capital invested in the period included R121-million for the Rowland MK2 project.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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