[miningmx.com] – LONMIN declared itself ‘alert’ to production risks posed by safety and labour related stoppages at its Rustenburg mines, but added it was on course for full-year sales of 660,000 ounces.
Although the company said it was outpacing its renewal programme following the disruptions caused by strikes and on-mine violence that began in its last financial year, Lonmin said third quarter mining had been ‘hampered’.
This was owing to “… an increase in Section 54 safety stoppages and intermittent labour disruptions that we saw start to emerge during the second quarter”, it said. As a result, ore mined in the third quarter fell 3.6% to 2.1 million tonnes.
“Although our operations continue to exceed our renewal plan we remain alert to the risks to production associated with safety stoppages and the uncertain labour relations landscape,” it said in comments regarding the remainder of the financial year which ends on September 30.
Analysts said it was encouraging that Lonmin had kept to its sales guidance especially as refined production was affected by smelter capacity constraints at its number two furnace and the planned shutdown of its number one furnace.
“That guidance is being maintained is encouraging, particularly as the company may be anticipating further disruptions from wage negotiations and perhaps continued Section 54 incidences,” said Investec Securities.
Platinum production was consequently 45.9% down in the third quarter compared to second quarter output while unit costs increased 8%. The market was unhelpful in the period: the dollar basket price was 5.9% lower but nearly 9% strong in rand terms as a result of local currency weakness against the dollar.
“We will have to wait until the final results to see how much money they have lost this year and what level of debt they carry,” said Roger Bade, an analyst for Whitman Howard in the UK. “Overall with unit costs up 8%, those results should be pretty poor,” he added.
There is still uncertainty risk surrounding Lonmin – as with other South African platinum producers – as wage negotiations have to be completed over the coming months.
Lonmin also has to participate in arbitration proceedings ahead of binding the Association of Mineworkers & Construction Union (AMCU) to a sustainable recognition agreement.
