www.miningmx.com | platinum Lonmin to build third furnace

Brad Mills, CEO, Lonmin

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Lonmin to build third furnace
Allan Seccombe
Posted: Tue, 13 Mar 2007

[miningmx.com] -- LONMIN plans to build a third furnace to diversify risk way from its heavy reliance on just one furnace, and it has tapped the first metal from its rebuilt Merensky furnace as part of that strategy, CEO Brad Mills said on Tuesday.

Lonmin is in the process of rebuilding its troublesome Number One furnace, which it said in February would be out of commission for 135 days, 80 days longer than expected. The first tap is expected at the end of April.

“The Merensky furnace was tapped yesterday so that’s up and running. It’s practically at full capacity. The Number One furnace is still scheduled for its first tap at the end of April,” Mills told Miningmx in an interview.

build more capacity as fast as we can

“It’s a long overdue step, but the important thing is to have another furnace going,” said a platinum analyst who declined to be named. The Merensky furnace was initially expected to come on line in February.

Lonmin has forecast reduced full-year platinum sales of between 980,000 and 1m oz, of which 835,000 refined oz will come from its own facilities, 125,000 oz of toll-refined platinum and a further 20,000 to 40,000 oz of semi refined platinum sales.

In 2006, the Number One furnace accounted for 60% of Lonmin’s smelting capacity, while its three Pyromet furnaces contributed 40%.

Lonmin rebuilt the Number One furnace in January 2006, replacing copper waffles and re-bricking the furnace. The R50m rebuild was completed within 27 days. In April a leak near the matte tap holes was detected, causing an 11-day shutdown for repairs.

On 18 December 2006, Lonmin told investors that there had been a leak near one of the matte tap holes at its Number One furnace. It estimated at the time it would take up to 40 days to repair the fault. It has now opted for a rebuild, which will take 135 days. It has brought into production its Merensky smelter,

“By bringing in the Merensky furnace, that adds another 20% capacity, which starts to balance the mix,” Mills said.

Lonmin would like to be able to move to each furnace rebuild without significantly cutting its cash flow for extended periods of time.

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“The solution to this is to build more capacity as fast as we can,” he said.

The end game is the construction of a third 20 megawatt (MW) furnace to give the company three furnaces with installed capacity of 60 MW and production capacity of two million ounces, he said.

The first step in the $350m strategy is to expand the eight MW Merensky furnace to 20 MW at a cost of $50m.

“We think we can double the capacity of the Merensky furnace with an upgrade and re-build and then you have two almost 20 MW furnaces plus the Pyromet furnaces,” Mills said. This would happen by next year at the earliest, possibly into 2009.

By adding copper cooling and increasing the box size, Lonmin will increase the plant to 20 MW and lift the level of chrome it can handle to 1.8% from 1.2%, he said.

“Then only 35% of capacity is with only one furnace and that reduces our vulnerability significantly. It will take a couple of years to complete that project,” he said.

Then, in 2009 or 2010, Lonmin could build an extra 20MW furnace to replace the Pyromet furnaces, he said.

“With the Merensky plant fully expanded we’re at 1.5 million ounces and it’s a simple step for us to go to two million ounces at that point,” he said.