[miningmx.com] — ALL is in place to achieve an output target of 950,000 ounces by 2015, says platinum producer Lonmin, as the group points to significant milestones achieved in “sweating’ its assets for optimal production.
Trying to shake off the side-effects of lowering its forecast for the current financial year, following illegal industrial action at Karee in May, Lonmin executive vice-president for mining Mark Munroe said the group now has the equivalent of 17 months of developed ore reserves, up 40% from 12 months in 2008.
“Mining is all about having enough face length available to support your production profile,’ said Munroe during a site visit by journalists on Tuesday, saying the continuous development of the assets would allow it the necessary production flexibility to avoid mining stoppages and bottlenecks.
Operational throughput and recoveries have over the past two years also increased by 10% and 6% respectively.
Lonmin’s shares are still trading down around 9% from levels prior to the work stoppage. No production took place at the K3 and 4B shafts between May 13 to 24, when around 9,000 workers downed tools as part of a spat between the branch and provincial offices of the National Union of Mineworkers.
The workers were subsequently dismissed, with Lonmin embarking on a hiring and training process. Production would to return to normal in August 2011, Lonmin said.
The company revised its production guidance down by 30,000 oz to 720,000 oz for the current financial year.
Most of the incremental growth for the 950,000 oz target would be delivered from the new K4 shaft, which would add 150,000 oz over the period, as well as Saffy (70,000 oz).
The company has earmarked capex of $2bn for the five-year period. JP Morgan analyst David Butler said the target appeared credible, considering all growth would be delivered from existing infrastructure and that none of shafts appeared to have capacity constraints.
“The risk therefore is more to a cost blowout than achieving the 950,000 oz target as management can always throw more resources at any potential problem,’ he said in a note following a site visit by analysts in June.
Lonmin’s executive vice-president of its processing division, Natascha Viljoen, said the construction and installation of Lonmin’s number 2 smelter was on track for first production in May 2012.
The 10 MW smelter would give Lonmin much-needed spare capacity to back up its 20 MW number 1 smelter – a long-time thorn in the flesh of the company due to the high chrome content in its concentrate derived from the UG2 reef.
Vice-president in charge of smelting Frans de Beer said the number 1 furnace has now operated for six month without a glitch, following a rebuild.
“We’re six months down the line, so we’ve got through the new wear pattern,’ he said. “Will it keep on for two years? We’ll have to wait and see, but the furnace so far acted in the way that we’ve predicted.’
He said the company would in the next 18 months decide on building a third furnace for additional smelting backup.
“Smelting is a risky business,’ he said. “That is why we are building number 2 because life happens.’
CREDIT FACILITIES
Lonmin said on Wednesday it has restructured its debt facilities, replacing an existing $875m with new facilities totalling about $1bn.
The new facilities extend the maturity profile of Lonmin’s debt, with $850m committed for five years.
The group said $700m would be consolidated within the company and offered improved pricing, margins and covenants.
“The facility will be used to support the longer term capital requirements of the group,’ an announcement read. Three R660m bilateral facilities were allocated to Western Platinum, to be used for day-to-day working capital requirements.
