www.miningmx.com | platinum Lonmin studies potential 650,000 oz mine

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Brad Mills, CEO, Lonmin

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Lonmin studies potential 650,000 oz mine
Allan Seccombe
Posted: Wed, 02 May 2007

[miningmx.com] -- LONMIN Platinum is investigating whether its Akanani purchase could yield a 625,000 platinum ounce/year mine as it returns its focus to delayed growth projects after rebuilding its furnace that resulted in reduced first half sales, CEO Brad Mills said on Wednesday.

Lonmin maintained its production forecast of 980,000 to one million platinum ounces for the full-year to end-September given a few months ago. This is despite a very difficult first half in which platinum group metal (PGM) sales fell 35% to 517,218 oz due to the rebuilding of its troublesome Number One smelter.

Lonmin has bought TSX-listed AfriOre and its Akanani project for $413m in January. Lonmin has upgraded the resources at the South African project, where it has drilled the already explored southern portion of the property, as well as new drilling of the northern portion, confirming the ore body�s extension.

focus more strongly

Akanani forms part of Lonmin�s plans to grow its platinum production to two million ounces after 2012, at which point it intends to have output of 1.4m oz of refined platinum.

AfriOre conducted a study into a 400,000 tonnes/month, 250,000 platinum oz/year mine at Akanani, which would cost up to $700m, but Mills said Lonmin had just started a year-long pre-feasibility study into the project and could have very different numbers.

�We�ve just started a pre-feasibility study on the project looking at volume rates of 400,000 tonnes up to as much as a million tonnes a month,� he said. Platinum output in the upper end of that scenario would be 625,000 platinum oz a year.

�When we complete the pre-feasibility study that will give us absolute direction on the size of the project and capital numbers,� he said.

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It will take two years to win the necessary permits and complete the technical studies into a fully mechanise mining operation at Akanani.

The smelter rebuild and bringing the Merensky furnace on line during the interim period diverted management attention away from a number of smaller internal growth projects at its Limpopo and Marikana mines, which have been delayed.

This delay combined with the smelter problems are the reasons behind the reduced annual forecast given in December of 980,000 to a million ounces from previous estimates of a million to 1.02m oz.

Capital expenditure will double to $200m in the second half of the financial year from $100m in the first half.

�Focus on the smelter on the first half delayed some projects and we will focus more strongly on those in the second half,� Mills said.

Lonmin has built a stockpile of concentrate to feed through its furnaces to attain the highest possible margin for that material rather than toll treating it elsewhere. There are 185,000 oz of PGMS in the stockpile, which will be treated by September.

Lonmin has declared an interim dividend of $0.55. Turnover was down 11% at $631m and EBITDA was 20.5% lower at $272m. Net debt was 13% higher at $655m, including the purchase of AfriOre.

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