Lonmin to meet platinum sales target

Brendan Ryan | Thu, 22 Jul 2010 14:21

[miningmx.com] -- LONMIN will meet its sales target of 700,000 ounces of platinum for the year to September - but only through having some of its concentrate production toll-smelted by other platinum firms.

The need to toll-smelt resulted from repeated problems Lonmin has experienced with its main No 1 furnace, which had to be shut down for repairs in April and again in May.

The smelter has now been brought back on line once more. It has been running “without incident” for a month, but will be shut down again in November so that further design changes can be made.

CEO Ian Farmer said the additional cost of the toll-smelting to Lonmin would be about $17.5m.

He did not provide the actual amount of platinum metal to be produced through toll-smelting in his review of Lonmin’s results for the June quarter, but JP Morgan Cazenove analysts Steve Shepherd and Allan Cooke estimated this at about 20,000 oz .

Lonmin has been running its older, back-up pyromet furnaces to try and compensate for the production losses from the No 1 furnace, but these only have about 40% of the No 1 one furnace’s capacity.

The JP Morgan Cazenove analysts pointed out that Lonmin intends building an additional 10MW “pyromet-like” furnace at a cost of $40m, to provide more back up “redundant” capacity.

This furnace is to be commissioned during Lonmin’s 2012 financial year.

The analysts said: “Lonmin is the only major producer that lacks this. All the major producers suffer smelting problems from time to time – we hear less about it than we do from Lonmin, purely because failures are mostly covered by the redundant capacity the other producers have.”

They estimated Lonmin’s sales for financial 2011 would be about 750,000 oz of platinum, and added management had stated during a recent site visit that Lonmin’s production and sales would stabilise at 850,000 oz of platinum in financial 2013.

The analysts said: “It has become increasingly clear to us from recent site visits that a focus on mining basics and the restoration of an appropriate level of discipline are becoming re-entrenched.

“Management has taken some tough but necessary decisions – the consequent restructuring has largely been completed now.

“Performance over the next three quarters and beyond should, in our view, demonstrate that Farmer and his team are getting it right.”