[miningmx.com] — LONMIN’S shares went against the prevailing negative trend among platinum producers on Monday, following the release of significantly improved interim results and a positive adjustment of its long-term forecast.
The company’s Number One furnace, its traditional Achilles’ heel, has also been ramping up steadily without incident, following its recommissioning in December. The furnace was taken down at the end of October for a rebuild.
Lonmin succeeded in significantly ramping up platinum sales during the March quarter, posting figures of 318,306 ounces (up 9%) for the interim period. The bulk of this activity happened in the second quarter, as the figure stood at 66,426oz end-December and gave the company confidence that it could meet its full-year platinum sales figure of 750,000oz.
Total underground production increased by 6.4% to 5.5 million tonnes (mt) compared to 5.1 mt in the previous corresponding period. The greatest contribution was made by Karee, which mined 2.2 mt (1.9 mt H1 2010), with a significant contribution coming from the K3 shaft.
A telling contribution was also made by the Merensky open pit operations. This time last year Lonmin was just beginning to mine to pit; it has produced 336,000 tonnes in the current period against 7,000 in 2010.
Said CEO Ian Farmer: “We expect our production performance in the second half to continue to be supported by increased contributions from our major shafts K3 and Rowland as well as the continued ramping-up of Saffy and Hossy shafts.’
The ramp-up in production and sales, as well as the improved fortunes of the commodities market, resulted in a revenue increase of 42% to $938m and a 122% net operating hike of $144m. No interim dividend was declared, as the company decided previously to have one annual payout only.
Costs were up 12.8%, but the company expects full-year costs to be no more than 8% higher than in 2010. The projected capital expenditure for the full year was adjusted to $400m, up from $380m, attributed to providing for rand strength.
One blip on the radar screen for Lonmin has been safety concerns, with six fatalities reported.
“We are concerned by the uncharacteristically high level of fatalities that we have experienced, with each incident being different in nature,’ said Farmer. “We believe that a change in focus in our tactical approach is required.’
FUTURE PLANS
Lonmin said it has reviewed its growth options beyond 2013, with the most efficient growth coming from Marikana.
“This and our firm belief that the long-term fundamentals of the PGM (platinum group metals) market remain attractive gives us confidence to commit to invest in our Marikana operations to achieve 950,000 safe platinum ounces per annum by 2015 (from 850,000oz in 2013) and gradually move down the cost curve over the same period,’ said Farmer, adding the group would invest around $400m per year in capex.
Commenting on Lonmin’s results, Numis Securities described the figures as “overall in line numbers and an upbeat and positive update, tarnished by the safety issues’.
On Monday Lonmin shares were trading at R172.62, up 1.48%, on the JSE shortly before close at 17:00. Both Anglo Platinum and Impala were down, 2.41% and 2.38% respectively.
