[miningmx.com] – LONMIN is to rein in capital expenditure 40%, and
was weighing the refinancing of its balance sheet amid poor pricing conditions that
“may persist for longer than we had previously anticipated’ – a statement that
echoes the concerns of Anglo American Platinum (Amplats) and Aquarius Platinum,
which earlier this week made capital conservation a priority.
Lonmin said capital expenditure would be reduced to $250m for each of the 2013
and 2014 financial years; a 40% reduction on the capital expenditure of $430m in
the current financial year, which was in turn trimmed $20m.
As a result, planned production growth in the 2013 financial year would be deferred,
Lonmin said. Platinum production in the 2013 financial year would be static year-on-
year. With only three months of its current financial year remaining, Lonmin is on
course for platinum output of 750,000 oz.
Shares in Lonmin edged up slighty on the JSE to trade at R88.47/share, having shed
about a third of its value since April. All in all, the JSE’s platinum index has lost 24%
since the beginning of the year.
“Recognising that the PGM market at the moment is knackered, they [Lonmin] have
slashed this year’s capital spend by $20m to $430m, and have positively axed
2012/13 and 2013/14 spend down to $250m in each year. Fortunately this will
constrain output,’ said Libertas, a UK broker in a report.
However, given some analysts think that Lonmin’s full-year platinum production is
actually expected to come in at 790,000 oz, next year’s production guidance of
750,000 oz is a relatively modest cut. Said Libertas in its note: “With the platinum
price struggling to hold $1,400/oz, it is difficult to see what planet this industry is
on. Certainly not one that wants to make decent returns’.
Capital savings would be made by deferring spend on its Hossy, K4 and Saffy shafts.
It would also optimise some of its processing projects.
Lonmin said its debt remained “well within limits and terms of existing bank debt
facilities,’ but added it was reviewing certain financing options. This included
accessing international debt capital markets.
“The company will update its shareholders if it decides to access the international
debt capital markets or undertake alternative financing options,’ it said in its third
quarter and nine-month production update.
Total third-quarter platinum group metal (PGM) refined production came in 16.7%
higher year-on-year at 351,935 ounces. Refined platinum production from the same
period was 12% higher at 186,864 ounces, it said. Total PGM sales were 1.8%
higher at 299,292 ounces, while platinum sales were 6.3% higher at 150,376
ounces.
Costs were kept to about 8.5%, in line with wage increases as previously guided by
Lonmin. On the revenue side, the rand basket price for platinum in the quarter was
4.4% lower. The dollar platinum basket price was just over a fifth lower.
“This is another pointer towards a rather soggy platinum market and one we would
be wary of for now,’ said Numis Securities, a UK broker, in a note.
