Lonmin maintains production forecast

[miningmx.com] — LONMIN has said it would still hit its revised production target of 720,000oz of platinum for the financial year to end-September, despite the string of problems it has just reported for the June quarter.

The group announced in a trading statement on Thursday that total refined production for the June quarter amounted to 166,832oz, which brought total platinum production for the nine months to end-June to 483,665oz.

That means Lonmin must produce 236,335oz of platinum during the current September quarter to reach guidance, which is equivalent to 48% of what the group managed to produce in the first nine months of its current financial year.

The original production forecast for financial 2011 was 750,000oz but CEO Ian Farmer knocked 30,000oz off this target on June 10 when he reported on the impact of the illegal strike action at the group’s Karee mine where most of the workforce was dismissed.

In addition to the strike action, production was also hit by Section 54 safety shutdowns; management induced safety stoppages; continuing “challenging ground conditions and mechanical breakdowns’ at the Saffy and Hossy shafts and the planned decline at Newman shaft.

The average grade reported also dropped 3.9%, mainly as the result of the processing of greater volumes of lower grade opencast ore.

But today’s reassurance on hitting the 720,000oz target did nothing to halt the slide in the Lomin share price which eased another 1.4% to a new 12-month low of R144.90. The 12-month high for the stock was R220.

Despite this JP Morgan analysts Steve Shepherd and Allan Cooke remain positive over the outlook for Lonmin.

They commented: “With new shaft infrastructure set to deliver more ore and smelter issues seemingly behind it the group is in a favourable position to grow production, in our view.

“Management remains confident of achieving its revised financial 2011 guidance of 720,000oz of platinum with unit cash cost inflation guided to 11%.

“Despite the June quarter setbacks the group continues to ramp production at Marikana as evidenced by the improved operating performance year to date.

“Based on our assessment of the operations we expect improving production and cost trends will benefit the stock.

“As the operations management continues to stabilise, we expect the group to focus increasingly on its strategic opportunities. We think it is in a favourable position to use its existing non-core assets to consolidate its interests in the Western Bushveld.”